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Fsa Determined To Reduce Boom And Bust Of Credit & Assets

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A good Telegraph article on commercial property, but also relevant for residential properties, credit & bubbles:

"(...) Adair Turner, chairman of the Financial Services Authority, made abundantly clear in a speech last week, regulators are determined to put a stop to the boom and bust of credit markets, (...) he's going to attempt to prevent "excessive" property speculation.

The causes of the financial crisis were many and varied, but the underlying factor was simple enough – too much credit, too easily available at too low a price. This in turn drove unsustainable asset price bubbles.

Turner and other international regulators are therefore putting in place new policy tools which will reduce leverage in the financial system and constrain it in the real economy.

(...)

So don't bank on a rapid recovery in commercial property prices any time soon. It may be many years before we are away to the races again, and if Turner gets his way, it will be never.

http://www.telegraph.co.uk/finance/comment/jeremy-warner/7903205/Watch-out-the-great-50bn-property-unload-is-about-to-begin.html

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It's all a bit horse though isn't it?

It is not just the credit bubble though is it - it is its linkage with the global trading system that has been developed that is so pernicious.

It's a good move but we may be suffering decades more yet as we are financially unable to compete in a globalised, free market world with people willing to work for next to zilch.

On the surface prices may stabilise and most people will be in jobs, but underneath a huge deprived underclass will continue to grow where formerly they contributed actively to society and were proud to do so.

It doesn't have to be like that. Suppose we manage to push property prices - costs - down by 30% or more. That will be a huge cost saving, not only for households but for companies too, and governments (local and central).

Germany's international competitiveness is in great part explained by its very low property costs. Property costs are usually one of the main component of everybody's costs. But here in Britain high costs have been hindering our quality of life and our competitiveness for almost a decade. A fall would help a lot.

Credit regulation will help in the short term. And in the long term we need less strict planning restrictions.

Please see my sig:

.

Edited by Tired of Waiting

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It doesn't have to be like that. Suppose we manage to push property prices - costs - down by 30% or more. That will be a huge cost saving, not only for households but for companies too, and governments (local and central).

Germany's international competitiveness is in great part explained by its very low property costs. Property costs are usually one of the main component of everybody's costs. But here in Britain high costs have been hindering our quality of life and our competitiveness for almost a decade. A fall would help a lot.

Credit regulation will help in the short term. And in the long term we need less strict planning restrictions.

Please see my sig:

.

Can you explain why lower property costs in Germany makes it more internationaly competitive?

and internationaly competitive in what?

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A good Telegraph article on commercial property, but also relevant for residential properties, credit & bubbles:

http://www.telegraph.co.uk/finance/comment/jeremy-warner/7903205/Watch-out-the-great-50bn-property-unload-is-about-to-begin.html

The causes of the financial crisis were many and varied, but the underlying factor was simple enough – too much credit,

But, at the risk of appearing to be playing word games, the cause was not credit rather those that allowed credit. After all, credit has no will, credit doesn't understand the risk it causes.

To blame credit is to allow those who caused it to live and lend another day.

Those who allowed this to happen are bad people and should be punished...... to discourage the others.

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Can you explain why lower property costs in Germany makes it more internationaly competitive?

and internationaly competitive in what?

It reduces not only living costs for the population, but also production costs, across the board, for all companies, and governments.

Edit: In what - With lower production costs Germany products become more price competitive, helping exports and reducing imports. (I have to go now, sorry.)

Edited by Tired of Waiting

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It doesn't have to be like that. Suppose we manage to push property prices - costs - down by 30% or more. That will be a huge cost saving, not only for households but for companies too, and governments (local and central).

Germany's international competitiveness is in great part explained by its very low property costs. Property costs are usually one of the main component of everybody's costs. But here in Britain high costs have been hindering our quality of life and our competitiveness for almost a decade. A fall would help a lot.

Credit regulation will help in the short term. And in the long term we need less strict planning restrictions.

Please see my sig:

.

Ah yes. The halycyon days of 2003, when our 30% reduced property costs caused us to be a global manufacturing powerhouse.

Interesting to see a libertarian advocating credit regulation and less strict planning regs in the same paragraph though. Nice one!

I wonder how Adair (let's bolt the stable door after the rich stole all the money to stop anyone else getting their hands on the assets) Turner intends to prevent credit flooding into the UK from the US, China, Canada, Europe, India, Brazil or wherever else it feels like it if it wants to? That's the whole point of globalised libertarianism right? Or will the FSA's wonderful new notions of some sort of domestic credit regulation stop the globalised credit markets dead in their tracks?

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Ah yes. The halycyon days of 2003, when our 30% reduced property costs caused us to be a global manufacturing powerhouse.

Interesting to see a libertarian advocating credit regulation and less strict planning regs in the same paragraph though. Nice one!

I wonder how Adair (let's bolt the stable door after the rich stole all the money to stop anyone else getting their hands on the assets) Turner intends to prevent credit flooding into the UK from the US, China, Canada, Europe, India, Brazil or wherever else it feels like it if it wants to? That's the whole point of globalised libertarianism right? Or will the FSA's wonderful new notions of some sort of domestic credit regulation stop the globalised credit markets dead in their tracks?

Hi, Red Kharma / Le Karma Rouge. I am a liberal, not a libertarian. Since Adam Smith, Ricardo, and all of them, we all (sensible people) agree that some good regulation is essential. For the rest of your post: Germany - huge trade surplus.

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Needless to say, we can't all be Germany or China for that matter.

And if you are trying to compete in an open and honest way with countries culturally disposed to surpluses you will suffer a deficit regardless of base prices.

That is not the problem. And even IF it were, in the long term the currency would adjust to compensate that, eventually, always, unavoidably. If we have low productivity, our international balance of payments will be negative, we will accumulate debt, and our currency will fall.

(...)

And as I said before, the German word for 'guilt' and 'debt' is the same. SCHULD. Try competing with that basic thought process.

German workers work less hours per year than British workers - check "working time" international comparisons. And thanks to very low housing costs, they have more disposable income than British workers.

No - a new system that brings in balance, one that brings the means of production closer to the point of consumption where possible, is required for sustainability and balance.

Protectionism will reduce your right to buy what you think best. You are asking to be captive market for British companies.

Besides, it will reduce market efficiency. All will lose. Including you.

Edited by Tired of Waiting

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Ah yes. The halycyon days of 2003, when our 30% reduced property costs caused us to be a global manufacturing powerhouse.

Interesting to see a libertarian advocating credit regulation and less strict planning regs in the same paragraph though. Nice one!

I wonder how Adair (let's bolt the stable door after the rich stole all the money to stop anyone else getting their hands on the assets) Turner intends to prevent credit flooding into the UK from the US, China, Canada, Europe, India, Brazil or wherever else it feels like it if it wants to? That's the whole point of globalised libertarianism right? Or will the FSA's wonderful new notions of some sort of domestic credit regulation stop the globalised credit markets dead in their tracks?

As long as we have a central bank fulfilling a lender of last resort function at no cost to banks and a potential large cost to the public along with mispriced, state backed deposit insurance, credit regulation makes sense. Credit regulation minimzes the potential cost of the lender of last resort function and potential cost of mispriced deposit insurance.

Absent a lender of last resort and state backed deposit insurance, credit regulation would not be required assuming a reasonable level of financial education in the population.

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That is not the problem. And even IF it were, in the long term the currency would adjust to compensate that, eventually, always, unavoidably. If we have low productivity, our international balance of payments will be negative, we will accumulate debt, and our currency will fall.

Germany workers work less hours per year than British workers - check "working time" international comparisons. And thanks to very low housing costs, they have more disposable income than British workers.

Protectionism will reduce your right to buy what you think best. You are asking to be captive market for British companies.

Besides, it will reduce market efficiency. All will lose. Including you.

You can always tell you are an economist by your startling ability to state theories and completely ignore human action/reaction that dictate the complete opposite to your theories nearly always has to happen

Edited by Tamara De Lempicka

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That is not the problem. And even IF it were, in the long term the currency would adjust to compensate that, eventually, always, unavoidably. If we have low productivity, our international balance of payments will be negative, we will accumulate debt, and our currency will fall.

Germany workers work less hours per year than British workers - check "working time" international comparisons. And thanks to very low housing costs, they have more disposable income than British workers.

Protectionism will reduce your right to buy what you think best. You are asking to be captive market for British companies.

Besides, it will reduce market efficiency. All will lose. Including you.

I agree with you ToW -- It is simple logic. High & unsustainable property "prices" are RUINING the UK BIG TIME. UNLESS AND UNTIL this stops - we're b*ggered. End of.

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(...) its linkage with the global trading system (...)

The OECD published a study linking the increase in property prices in france with its loss of international competitiveness. We had a thread about that a few weeks ago. The OECD article is linked there too:

LINK: http://www.housepricecrash.co.uk/forum/index.php?showtopic=144283&view=findpost&p=2552101

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I agree with you ToW -- It is simple logic. High & unsustainable property "prices" are RUINING the UK BIG TIME. UNLESS AND UNTIL this stops - we're b*ggered. End of.

Exactly!

Please see my post above, #14. There is a link there to a solid OECD study linking property prices and competitiveness (well, as if we needed a "study" for such an obvious thing, but there you go.)

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I agree with you ToW -- It is simple logic. High & unsustainable property "prices" are RUINING the UK BIG TIME. UNLESS AND UNTIL this stops - we're b*ggered. End of.

But it's a Catch 22 situation.

A fall of 30%+ in the value of residential and commercial property will probably be accompanied by UK banks going under and therefore a likelihood of still being b*ggered.

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It doesn't have to be like that. Suppose we manage to push property prices - costs - down by 30% or more. That will be a huge cost saving, not only for households but for companies too, and governments (local and central).

Germany's international competitiveness is in great part explained by its very low property costs. Property costs are usually one of the main component of everybody's costs. But here in Britain high costs have been hindering our quality of life and our competitiveness for almost a decade. A fall would help a lot.

Credit regulation will help in the short term. And in the long term we need less strict planning restrictions.

Please see my sig:

.

You can add to your sig. that banks cause the whole of UK to pay a hidden Xtra 5-8% on all their purchases - just for the benefit of credit card users!

These prices should be forcibly separated and credit card users forced to pay ALL the xtra charges only. See how long credit card use lasts then!

Again, xtra cost attacks the poor most, because most are not allowed access to an (access) MASTER-card - yet the poor pay for/subsidise richer people to use credit cards!

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But it's a Catch 22 situation.

A fall of 30%+ in the value of residential and commercial property will probably be accompanied by UK banks going under and therefore a likelihood of still being b*ggered.

I read somewhere that the UK banks can absorb a property crash of up to 15% now. This number is growing, but I don't know how fast. I mean, will they be able to absorb another 5% next year? 10%? I don't know. There must be some estimates around about that.

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I read somewhere that the UK banks can absorb a property crash of up to 15% now. This number is growing, but I don't know how fast. I mean, will they be able to absorb another 5% next year? 10%? I don't know. There must be some estimates around about that.

So what you are saying is that property drops 30% and the banks are going to absorb the losses.

Imagine how many people there are going to be struggling with mortgages that find themselves in NE , Last time around the figure for voluntary repos was somewhere like 40% , many who could afford their mortgages just chucked the keys back and walked. This time around the debts are going to be much bigger and low wage rises are going to keep them bigger for a lot longer.

I think property will drop 30% if not more , but it will be decades before the financial fall out is sorted and we can become a financially stabel nation again. The trick with countries like Germany was that they never let a propety bubble happen , we have and there is going to be carnage as it bursts.

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So what you are saying is that property drops 30% and the banks are going to absorb the losses.

It meant that if properties drop more than 15% now, fast, some banks will go under - again.

Imagine how many people there are going to be struggling with mortgages that find themselves in NE , Last time around the figure for voluntary repos was somewhere like 40% , many who could afford their mortgages just chucked the keys back and walked. This time around the debts are going to be much bigger and low wage rises are going to keep them bigger for a lot longer.

I think property will drop 30% if not more , but it will be decades before the financial fall out is sorted and we can become a financially stabel nation again. The trick with countries like Germany was that they never let a propety bubble happen , we have and there is going to be carnage as it bursts.

It looks like the new government knows that property prices are too high. "Treasury sources" have indicated that they would like to see a slow correction downwards, of around 25% in total from current prices, spread in a few years. The BIG question is if they will manage to control this fall.

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So what you are saying is that property drops 30% and the banks are going to absorb the losses.

Imagine how many people there are going to be struggling with mortgages that find themselves in NE , Last time around the figure for voluntary repos was somewhere like 40% , many who could afford their mortgages just chucked the keys back and walked. This time around the debts are going to be much bigger and low wage rises are going to keep them bigger for a lot longer.

I think property will drop 30% if not more , but it will be decades before the financial fall out is sorted and we can become a financially stabel nation again. The trick with countries like Germany was that they never let a propety bubble happen , we have and there is going to be carnage as it bursts.

Fear not, you WILL get your HPC.

But at a price.

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It looks like the new government knows that property prices are too high. "Treasury sources" have indicated that they would like to see a slow correction downwards, of around 25% in total from current prices, spread in a few years. The BIG question is if they will manage to control this fall.

Thats the big problem they are not going to be able to control this fall, the market will determin the fall and the govenment will not be able to control it.

What would they do if they see the prices tumbling much faster and harder than that which would lead to a nice steady fall of 25% over a few years, will they force people to buy houses at x prices to slow the fall down.

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The OECD published a study linking the increase in property prices in france with its loss of international competitiveness. We had a thread about that a few weeks ago. The OECD article is linked there too:

LINK: http://www.housepricecrash.co.uk/forum/index.php?showtopic=144283&view=findpost&p=2552101

Well I have read this report and it quite clearly does not say that in general high house prices cause a loss of international competitiveness. Think of Hong Kong, Singapore, Switzerland, etc all of which have very high house prices and are very competitive in terms of export of manfactured goods. It is a very specific analysis of what has happened in France over the last 10 years.

To summarise for people that do not have the time to read it.

What happened is that Germany outsourced the unskilled work to eastern europe but kept the skilled work in Germany often using components shipped in from EE. They call it the "Bazaar Economy". France did the opposite it outsourced 100% of manufacturing process of a product including the supply chains (note not 100% of French manfacturing) - the reports states that unlike Germany France car manufacturers now make cars for domestic demand in EE.

What this resulted in was spare capital in the French system. Whereas in Germany there was demand for capital from manufacturers to invest in plant and machinery and also to fund exprots by lending to foreign companies and nations to buy German goods (so limiting credit for real estate and mortgages). The spare capital in the French system was deployed by the banks into construction (otherwise the bankers would not get there bonuses) and because France had introduced a 35 hour week and restricted immigration from EE they had a labour shortage which pushed up wages, which pushed up house prices.

It was the decision to outsource whole sections of manufacturing by the French that caused the loss in Industrial competitiveness i.e exports as defined in this report not high house prices causing a lack of exports. There was no will to fund manfacturing in France so the hot money just created another real estate boom like in UK, Ireland, Spain, etc.

The high house prices came after the loss of industrial competitiveness (exports) as hot money found a home.

The moral of this report is make sure you have a balanced level of investment in your economy between productive capability and infrastructure.

The question that it also should ask is that once a country has high house prices can it get manfacturing back.

Edited by ralphmalph

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With all this new stuff coming out from the FSA, it makes you wonder - what the ****** were they doing (****** all :rolleyes: ) under NuLabour?

Yes the threat of being disbanded is a very powerful motovation for doing your job right.

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Well I have read this report and it quite clearly does not say that in general high house prices cause a loss of international competitiveness. Think of Hong Kong, Singapore, Switzerland, etc all of which have very high house prices and are very competitive in terms of export of manfactured goods. It is a very specific analysis of what has happened in France over the last 10 years.

To summarise for people that do not have the time to read it.

What happened is that Germany outsourced the unskilled work to eastern europe but kept the skilled work in Germany often using components shipped in from EE. They call it the "Bazaar Economy". France did the opposite it outsourced 100% of manufacturing process of a product including the supply chains (note not 100% of French manfacturing) - the reports states that unlike Germany France car manufacturers now make cars for domestic demand in EE.

What this resulted in was spare capital in the French system. Whereas in Germany there was demand for capital from manufacturers to invest in plant and machinery and also to fund exprots by lending to foreign companies and nations to buy German goods (so limiting credit for real estate and mortgages). The spare capital in the French system was deployed by the banks into construction (otherwise the bankers would not get there bonuses) and because France had introduced a 35 hour week and restricted immigration from EE they had a labour shortage which pushed up wages, which pushed up house prices.

It was the decision to outsource whole sections of manufacturing by the French that caused the loss in Industrial competitiveness i.e exports as defined in this report not high house prices causing a lack of exports. There was no will to fund manfacturing in France so the hot money just created another real estate boom like in UK, Ireland, Spain, etc.

The high house prices came after the loss of industrial competitiveness (exports) as hot money found a home.

The moral of this report is make sure you have a balanced level of investment in your economy between productive capability and infrastructure.

The question that it also should ask is that once a country has high house prices can it get manfacturing back.

Thats the crux, cant speak for Hong Kong but Switzerland has high houseprices (although theyve only risen about 10% in the last decade) but it discourages malinvestment, prices are high because the buyers tend to be wealthy, property speculation is massively discouraged through Wealth/LVTes that make it a poor investment (Switzerland learnt from the 80s mini bubble, the only shame for Switzerland economically is they never held back UBS and Credit Suisse from banking leverage to the hilt over the decades). For the last 20 years the UK has actively encouraged people to speculate on property through a perverse taxation system that encouraged it so people naturally complied. By the time this economic carnage is over i would expect UK property will be so heavily taxed against speculation to avoid a repeat that as investment it will be return losses for decades, the same way its just returned profits for decades, its the way asset cycles work action and reaction

Edited by Tamara De Lempicka

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Well I have read this report and it quite clearly does not say that in general high house prices cause a loss of international competitiveness. Think of Hong Kong, Singapore, Switzerland, etc all of which have very high house prices and are very competitive in terms of export of manfactured goods. It is a very specific analysis of what has happened in France over the last 10 years.

To summarise for people that do not have the time to read it.

What happened is that Germany outsourced the unskilled work to eastern europe but kept the skilled work in Germany often using components shipped in from EE. They call it the "Bazaar Economy". France did the opposite it outsourced 100% of manufacturing process of a product including the supply chains (note not 100% of French manfacturing) - the reports states that unlike Germany France car manufacturers now make cars for domestic demand in EE.

What this resulted in was spare capital in the French system. Whereas in Germany there was demand for capital from manufacturers to invest in plant and machinery and also to fund exprots by lending to foreign companies and nations to buy German goods (so limiting credit for real estate and mortgages). The spare capital in the French system was deployed by the banks into construction (otherwise the bankers would not get there bonuses) and because France had introduced a 35 hour week and restricted immigration from EE they had a labour shortage which pushed up wages, which pushed up house prices.

It was the decision to outsource whole sections of manufacturing by the French that caused the loss in Industrial competitiveness i.e exports as defined in this report not high house prices causing a lack of exports. There was no will to fund manfacturing in France so the hot money just created another real estate boom like in UK, Ireland, Spain, etc.

The high house prices came after the loss of industrial competitiveness (exports) as hot money found a home.

The moral of this report is make sure you have a balanced level of investment in your economy between productive capability and infrastructure.

The question that it also should ask is that once a country has high house prices can it get manfacturing back.

Bingo.

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  • 145 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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