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Wuluf

As Bad As 1929?

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As part of a new project I am having to familiarise myslf with the vagaries of insurance and assurance. .

The following extract from an article (attached) caught my eye and I though it would be of interest to HPC..

The cause of economic downturns is a subject of continuing debate. But no matter which theory of business cycles one adopts, the heart of the financial consequences of such downturns is the inability of borrowers to service their debt.

The debt load in the U.S. economy has reached truly astounding proportions.

Figure 1 presents total mortgage debt and consumer credit over the period 1961 to 2003.49 Since 1961, this debt has grown by a factor of 42.

Of course, the economy has also grown enormously over the same period.50 A better measure of the relative private debt load being born by real property purchasers is the ratio of mortgage and consumer debt to the gross national product. In terms of this metric, the current debt level is not unprecedented. Unfortunately, this is not a cause for rejoicing. Figure 2 presents the ratio of total mortgage debt and consumer credit to gross national product over the period 1916-2003. It is sobering to note that the last time that debt was as large compared to GNP was 1929.

We all know what happened next!!! :blink:

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What happened next?

Wasn't it a permanently high plateau?

  :D

No, it was a continual year-on-year doubling of house prices. Don't you know that houses cost 1d* in 1929?

* Since this is a flippant remark, I have not actually calculated what the price of an average house would be if you halved it from today's value for every year going back to 1929. This is left as an exercise for the reader. Please take into account pre-decimal currency adjustments.

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What about worse than 1929?

I've posted the article before under another thread, but here it is in full:

http://www.galmarley.com/framesets/fs_macr...stimulation.htm

i think that there is a very high chance that it could be as bad.

From what I have read protectionism made the situation worse last time around.

I really need to learn how to make money when stocks go down. Don't think the buy and hold strategy is gonna work for a few years.

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i think that there is a very high chance that it could be as bad.

i think you guys should go and see a doctor and get some happy pills because you are all so depressing, wtf 1920 depression ??

living in crapo houses eating potatoews and rats and no shoes doctors and stuff like that ??

get real you lot ity will never happen and if it does you lot will come out worse all clever and stuff but no practical skills, why you lot want a dpression like 1929 i dont know, you guys wont be happyi until it actually happens, for christ sakes get out and enjoy yourselfs you manics, you only yuoung once, uypou lot like grumpy old men

drink beer and stuff. get laid and have a good time, spend moneyt dont save iot all and look at your bank balance all day lonmg and all that crap about gold bars, you lot are clever but stupid.

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i think you guys should go and see a doctor and get some happy pills because you are all so depressing, wtf 1920 depression ??

living in crapo houses eating potatoews and rats and no shoes doctors and stuff like that ??

get real you lot ity will never happen and if it does you lot will come out worse all clever and stuff but no practical skills, why you lot want a dpression like 1929 i dont know, you guys wont be happyi until it actually happens, for christ sakes get out and enjoy yourselfs you manics, you only yuoung once, uypou lot like grumpy old men

drink beer and stuff. get laid and have a good time, spend moneyt dont save iot all and look at your bank balance all day lonmg and all that crap about gold bars, you lot are clever but stupid.

Can you support that statement with some graphs and trends please :lol:

tbh though I think an HPC will happen and there is a chance of a recession. But personally I'm not expecting anything like the 20's depression.

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i think you guys should go and see a doctor and get some happy pills because you are all so depressing, wtf 1920 depression ??

living in crapo houses eating potatoews and rats and no shoes doctors and stuff like that ??

get real you lot ity will never happen and if it does you lot will come out worse all clever and stuff but no practical skills, why you lot want a dpression like 1929 i dont know, you guys wont be happyi until it actually happens, for christ sakes get out and enjoy yourselfs you manics, you only yuoung once, uypou lot like grumpy old men

drink beer and stuff. get laid and have a good time, spend moneyt dont save iot all and look at your bank balance all day lonmg and all that crap about gold bars, you lot are clever but stupid.

Nice try but you are clearly a wind up merchant.

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Guest wrongmove
No, it was a continual year-on-year doubling of house prices.  Don't you know that houses cost 1d* in 1929?

* Since this is a flippant remark, I have not actually calculated what the price of an average house would be if you halved it from today's value for every year going back to 1929.  This is left as an exercise for the reader.  Please take into account pre-decimal currency adjustments.

Average price today is say £160k.

Price in 1929 would have been £160k divided by 2 raised to the power 76 (76 years have passed).

This is about 0.0000000000000002 decimal pence ! (That is 15 zeros)

The joys of an engineering education ! :lol:

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Average price today is say £160k.

Price in 1929 would have been £160k divided by 2 raised to the power 76 (76 years have passed).

This is about 0.0000000000000002 decimal pence ! (That is 15 zeros)

The joys of an engineering education !  :lol:

Now can you tell us what average house price inflation is over that time if the value of a house was a shilling (I think thats what a d stands for) in 1929? hmmm... :unsure:

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Guest wrongmove
Now can you tell us what average house price inflation is over that time if the value of a house was a shilling (I think thats what a d stands for) in 1929? hmmm... :unsure:

Here, the inflation = (final amount divided by inital amount) raised to the power of 1 over the number of years. Then subtract 1 and multiply by 100 to get a percentage.

A d actually stands for a penny, but assuming a shilling, or 5 new pence, to increase to £160k over 76 years, the inflation required is around 22%.

If prices started at 1d, or 0.42 new pence, interest required would be about 26%

We have seen HPI at or around these figures recently. The calculation above shows how unsustainable this really is.

Edited by wrongmove

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Here, the inflation = (final amount divided by inital amount) raised to the power of 1 over the number of years. Then subtract 1 and multiply by 100 to get a percentage.

A d actually stands for a penny, but assuming a shilling, or 5 new pence, to increase to £160k over 76 years, the inflation required is around 22%.

If prices started at 1d, or 0.42 new pence, interest required would be about 26%

We have seen HPI at or around these figures recently. The calculation above shows how unsustainable this really is.

Thanks wrongmove. I really couldn't have got my head around that without you. 26% Thats an awful lot. <_< What is the underlying rate of inflation over that period (don't worry I will try to find out myself)

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  • 301 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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