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Firstrung Calls The Top.

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I haven't found the link on the firstrung website, but here it is at Confused.com:

http://www.confused....next-4231275428

Paul Holmes, CEO at Firstrung – a mortgage broker aimed at first-time buyers – doubts the changes will really have the impact that is being suggested; particularly as HMRC figures show that only 270,000 people in the country paid capital gains tax at all during the 2006-7 tax year.

Instead, he predicts that the rise in CGT may "[burst]* the bubble" of casual landlords buying proporties opportunistically – meaning some good news at least for those looking to own their first home.

On the subject of prices, Holmes believes that more pain is on the way.

"This Con-Dem government is going to introduce an awful lot of short, sharp, shock measures in order to get the medicine into the economy as quickly as it can," he says. As a result, he expects to see a steady fall in prices of around 20 to 25 per cent over the next two years.

*PS. How silly is it that one can't say "***** the bubble" on this site?

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Steve Keen

The US double-dip is under way

The market was again ‘shocked’ by news late last week that US CPI had fallen. Why was this a shock? Because economic commentators continue to stick to the US growth story that emerges if you ignore what’s happening to money supply and debt.

In my last article I explained why Fed Chairman Ben Bernanke only thinks he can reflate the US economy – the data from the Great Depression (a period he supposedly knows a great deal about) shows clearly how little impact Fed policy had on markets undergoing massive post-bubble deleveraging.

Sadly, the data is saying the same thing again – only for this crisis, in which the Fed has already quantitatively eased at four times the pace seen during the Depression, things look much worse.

Most commentators still have faith that Bernanke has things under control. Adam Carr summed up the prevailing wisdom pretty neatly last week after the unexpectedly low CPI print: “…this is not deflation, we’re not even close and it won’t take much to see a sharp turnaround. That said, we know that the Fed isn’t going to tighten any time soon. A ‘healthy’ dose of unanticipated inflation is the target here.”

He’s right to say that Bernanke’s goal is a ‘dose of inflation’. If only that could be achieved – inflation is not pretty, but it’s better than the deflationary bust that’s underway.

So at the risk of repetition, keep in mind when looking at the charts below that Bernanke’s Fed has already taken unprecedented steps to increase the money supply, backed up by US government stimulus spending to keep prices positive and kick-start growth. The Fed doubled MO money supply between August and December 2008 and has continued easing since then – the idea being to kick-start borrowing/lending and get companies growing once more. Yet the data shows it has all but failed.

The first chart below compares the deleveraging process during the Great Depression and during the current crisis, with the starting point being the peak of the respective credit bubbles (for it was bubbles that caused both, not some accident of Fed policy as many, including Bernanke, claim). This data took my breath away the first time I put it into a chart – I thought rapid deleveraging was underway (the two blue lines), but not that rapid.

As I have previously explained (Why a fifth of our income is vanishing, May 25), during a credit bubble a large part of GDP is funded by increasing debt year after year. When individuals and businesses decide that’s a bad idea, and start paying down debt to return to healthier balance sheets, aggregate demand plunges and prices fall. The bad CPI print last week was the first sign of what’s to come.

As the percentage of GDP funded by debt vanishes (the lower of the two blue lines on the chart above), the Fed prints large sums of money to lend out at zero interest rates to encourage borrowing, and the government pumps up demand with stimulus spending.

The upper blue line shows that this process has had some success in slowing the fall in debt-funded aggregate demand (ie. the government’s borrowing and spending has made the overall decline less steep) – but remember that the Fed is trying to create some inflation, not just slow the pace of the rapid deleveraging that will lead to deflation.

Whether you look at the private fall in debt-funded demand, or the government-slowed fall, both indicate that, compared to the Great Depression, we are not only coming off a more-indebted base, but the plunge in debt-funded demand will be deeper, and potentially longer, than the long, painful slump in the 1930s.

The second chart shows the two versions of reality on offer right now (though before long, the rosy version will become impossible to maintain). In the past 20 years, aggregate income in the US (non-debt-funded GDP growth – the red line) grew steadily and only dipped when the GFC hit with full force after the Lehman Brothers collapse. But over the same period, total aggregate demand grew more rapidly (the blue line) as increasing amounts of debt were taken on and spent in the economy.

[Click to enlarge the image]

click the image to enlarge

Now, with the debt-funded component falling off a cliff, it will not be long before the non-debt-funded aggregate demand also starts to fall – if individuals and companies will not borrow and spend, the ‘incomes’ of the businesses that did so well in the bubble years must fall. That’s the ‘double dip’ the US economy is inevitably heading into. The terrible truth is that the US economy will not start to grow in any meaningful, sustainable way until the long, painful deleveraging process in complete.

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HPI was artificially boosted in 2004/2005 by dropping Interest Rates at a time which

Mervyn King later admitted (he voted against it) was bad economics.

Now, IRs cannot be adjusted any further downwards.

In 2008/9, Labour artificially boosted FTBs hopes with various schemes.

Now, there is simply no money left to operate any schemes.

BTL involvement is being slightly modified by CGT increase. (to 50%?)

The last thing propping up HPI is Housing Benefit.

And benifits will now be curbed.

Gradually, every single thing that Labour did to desperately keep the pot boiling

is being taken away or at least reduced.

I firmly believe that, now, we will see the proper correction of HPI that has long been

needed..... since about 2002.

Bring it on, I say.

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Steve Keen

The US double-dip is under way

The market was again ‘shocked’ by news late last week that US CPI had fallen. Why was this a shock? Because economic commentators continue to stick to the US growth story that emerges if you ignore what’s happening to money supply and debt.

In my last article I explained why Fed Chairman Ben Bernanke only thinks he can reflate the US economy – the data from the Great Depression (a period he supposedly knows a great deal about) shows clearly how little impact Fed policy had on markets undergoing massive post-bubble deleveraging.

Sadly, the data is saying the same thing again – only for this crisis, in which the Fed has already quantitatively eased at four times the pace seen during the Depression, things look much worse.

Most commentators still have faith that Bernanke has things under control. Adam Carr summed up the prevailing wisdom pretty neatly last week after the unexpectedly low CPI print: “…this is not deflation, we’re not even close and it won’t take much to see a sharp turnaround. That said, we know that the Fed isn’t going to tighten any time soon. A ‘healthy’ dose of unanticipated inflation is the target here.”

He’s right to say that Bernanke’s goal is a ‘dose of inflation’. If only that could be achieved – inflation is not pretty, but it’s better than the deflationary bust that’s underway.

So at the risk of repetition, keep in mind when looking at the charts below that Bernanke’s Fed has already taken unprecedented steps to increase the money supply, backed up by US government stimulus spending to keep prices positive and kick-start growth. The Fed doubled MO money supply between August and December 2008 and has continued easing since then – the idea being to kick-start borrowing/lending and get companies growing once more. Yet the data shows it has all but failed.

The first chart below compares the deleveraging process during the Great Depression and during the current crisis, with the starting point being the peak of the respective credit bubbles (for it was bubbles that caused both, not some accident of Fed policy as many, including Bernanke, claim). This data took my breath away the first time I put it into a chart – I thought rapid deleveraging was underway (the two blue lines), but not that rapid.

As I have previously explained (Why a fifth of our income is vanishing, May 25), during a credit bubble a large part of GDP is funded by increasing debt year after year. When individuals and businesses decide that’s a bad idea, and start paying down debt to return to healthier balance sheets, aggregate demand plunges and prices fall. The bad CPI print last week was the first sign of what’s to come.

As the percentage of GDP funded by debt vanishes (the lower of the two blue lines on the chart above), the Fed prints large sums of money to lend out at zero interest rates to encourage borrowing, and the government pumps up demand with stimulus spending.

The upper blue line shows that this process has had some success in slowing the fall in debt-funded aggregate demand (ie. the government’s borrowing and spending has made the overall decline less steep) – but remember that the Fed is trying to create some inflation, not just slow the pace of the rapid deleveraging that will lead to deflation.

Whether you look at the private fall in debt-funded demand, or the government-slowed fall, both indicate that, compared to the Great Depression, we are not only coming off a more-indebted base, but the plunge in debt-funded demand will be deeper, and potentially longer, than the long, painful slump in the 1930s.

The second chart shows the two versions of reality on offer right now (though before long, the rosy version will become impossible to maintain). In the past 20 years, aggregate income in the US (non-debt-funded GDP growth – the red line) grew steadily and only dipped when the GFC hit with full force after the Lehman Brothers collapse. But over the same period, total aggregate demand grew more rapidly (the blue line) as increasing amounts of debt were taken on and spent in the economy.

[Click to enlarge the image]

click the image to enlarge

Now, with the debt-funded component falling off a cliff, it will not be long before the non-debt-funded aggregate demand also starts to fall – if individuals and companies will not borrow and spend, the ‘incomes’ of the businesses that did so well in the bubble years must fall. That’s the ‘double dip’ the US economy is inevitably heading into. The terrible truth is that the US economy will not start to grow in any meaningful, sustainable way until the long, painful deleveraging process in complete.

Can you supply the link, bs, so that I can see the charts, please ?

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America's economic cliff-hanger

Wall Street put on a classic nail-biter performance last night, soaring at the outset over China’s move to free up its currency, only to plummet as fears over European debt resurfaced, before reaching unsatisfying denouement at the close.

But while we’ve now come to expect hugely volatile trading sessions where strong reversals can happen in a matter of hours, some analysts argue that these wild gyrations are pointing to the huge uncertainty clouding our economic future.

John Hussman of Hussman Funds says that the US economy is in a real “cliff-hanger” situation. In fact, if this were an action novel, we’d be at the point where our hero – the US economy – was hanging over a steep precipice, clutching onto a rock of uncertain strength. We readers would be hoping that things would turn out well for our hero, but we’d be fearing the worst.

As Hussman notes, “it's possible that things will resolve sufficiently well, but we have to consider the possibility that they will not”.

Hussman says the latest reading from the Economic Cycle Research Institute (ECRI) reinforces this uncertainty.

The ECRI weekly leading index – which points to where the economy is heading – fell last week to a -5.7 per cent annual growth rate. The decline in the ECRI index is worrying, because it suggests the economy is rolling over. But, at the same time, it’s too early to start predicting a recession, because the decline in the index hasn’t lasted long enough.

Hussman also believes that the US sharemarket market is at a crucial inflection point, now that it has rebounded from its recent oversold condition.

He sees two possible outcomes. The first, relatively benign development is that “a further recovery in market action would most likely create modest further demand from already well-invested speculators and trend followers, and modest offsetting supply from already defensive value-oriented investors, allowing a dull but moderate continuation of upside progress.”

But there’s another, more worrying possibility – “a deterioration in market action would likely trigger a substantial amount of liquidation by speculators, into a market where fundamentally-oriented investors would require large price adjustments in order to absorb it. “

But David Rosenberg, chief economist at Gluskin Sheff, is more confident in predicting how the story is going to end.

He argues that there’s only been one previous occasion when a fall in the ECRI to -5.7 per cent failed to signal a recession. And that was back in 1987, when the US Federal Reserve was still in a position where it could cut interest rates to stimulate economic activity.

What’s more, Rosenberg notes that “a -5.7 per cent print accurately signalled a recession in the lead-up to all of the past seven downturns”.

In any case, Rosenberg points out that the steep drop in the ECRI is likely to mean that US economic growth will be much slower than most economists are forecasting in the second half of this year.

At present, the consensus forecast is for 3 per cent real GDP growth in the second half of the year. But Rosenberg notes that whenever the ECRI dips to between -5 and -10, the average growth rate in the next six months is 0.8 per cent.

Rosenberg points out that in early 2002, the consensus forecast was for 3 per cent growth in the second half of the year, and instead economic growth came in close to zero.

“So right now the choice is really either a 2002-style growth relapse or an outright double-dip recession – pick your poison. “

He adds the uncomfortable reminder that back in 2002, disappointment over economic growth undermined the US sharemarket.

“If memory serves us correctly, the S&P500 went on to do the inexplicable and make new lows before the year was out.“

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Steve Keen

He is one of the few who predicted the global crash.

He is a educated bloke and a Australian.

who backs up his statements with hard facts.

I put a value on what he reconds

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HPI was artificially boosted in 2004/2005 by dropping Interest Rates at a time which

Mervyn King later admitted (he voted against it) was bad economics.

Now, IRs cannot be adjusted any further downwards.

In 2008/9, Labour artificially boosted FTBs hopes with various schemes.

Now, there is simply no money left to operate any schemes.

BTL involvement is being slightly modified by CGT increase. (to 50%?)

The last thing propping up HPI is Housing Benefit.

And benifits will now be curbed.

Gradually, every single thing that Labour did to desperately keep the pot boiling

is being taken away or at least reduced.

I firmly believe that, now, we will see the proper correction of HPI that has long been

needed..... since about 2002.

Bring it on, I say.

The important point for me is .. when you say gradually.... my own view is that this is going to be a very slowly deflating bubble rather than a quickly deflating one... we are now about two and a half /three years into the correction and so far its been a story of ups and downs, and an adjustement from national falls to some pretty widespread regional differences. Going forward generally ( at the national level) I am pretty sure the market has only one way to go, but the important thing is this won't be the case for everyone or every house.... some will fall very fast and hard and others perhaps not at all.... the mix overall will be down but peoples individual experiences are likely to be very different .

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  • 138 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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