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not your average bear

Why Doesn't The Boe And G Brown See It This Way

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Why is it in the US they see higher house prices as a threat that needs to be contained for the general well-being of the economy and that and if house prices drop then its inevitable as per todays article from Reuters regarding recent statements from the Fed.

http://news.moneycentral.msn.com/provider/...1019&ID=5205354

"We are considerably closer to where policy needs to be than we were sixteen months ago, but we are not yet at a point where we can stop and watch the economy evolve for a while," Fed Governor Donald Kohn said in a speech at Carnegie-Mellon University in Pittsburgh.

...

"I will not waver from advocating policy that discourages expectations of higher core inflation. The object will always be to keep inflation at bay, so that the American business machine can keep on humming"

...

"A measured firming of policy should forestall added cost and price pressures and keep inflation contained," Kohn said.

...

In detailing his view of the outlook, Kohn said he expected consumer spending to slow in response to higher interest rates and a cooler housing market, adding that a "substantial slowdown" in the pace of home price gains appeared inevitable.

However here in the UK it seems the general opinion is that if the unsustainable HPI slows or even worse goes negative that would bring the economy to it's knees. Instead of the fact high house prices and low interest rates is one of the main reasons of the consumer slowdown, as few people can now afford to go out and spend money because they are servicing so much debt brought on by an accomodative fiscal policy.

Edited by not your average bear

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It's amazing what messages people take from the press here.

A middle-aged lady I was talking to this week said the consumer slowdown was because, 'People aren't moving house. If people aren't moving house they don't buy all the furniture, DIY materials, carpets, etc'.

I said, 'I think it's because house prices are too high, people have got themselves into masssive debt, and first time buyers and many of those trading up are so overmortgaged they probably don't have much to spend on anything else. This, for me, is the reason why high house prices have done nothing but transfer of wealth from one group of people to another. One group feels richer, while another feels poor and enslaved to debt. We ourselves are spending nothing much in the economy, as we are saving up a big deposit to buy a house when prices are more sensible'.

'I never though of that', she said.

Most people in this country have NO CLUE that high houise prices are causing major hardship and tumbling quality of life for many. For once, perhaps the government is actually reflecting the mood of the population.

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Why is it in the US they see higher house prices as a threat that needs to be contained for the general well-being of the economy and that and if house prices drop then its inevitable as per todays article from Reuters regarding recent statements from the Fed.

http://news.moneycentral.msn.com/provider/...1019&ID=5205354

However here in the UK it seems the general opinion is that if the unsustainable HPI slows or even worse goes negative that would bring the economy to it's knees instead of the fact high house prices and low interest rates is one of the main reasons of the consumer slowdown as few people can afford to go out and spend money because they are servicing so much debt brought on by an accomodative fiscal policy.

In short, the government are terrified that they'll lose the feel-good factor they have helped to create through rampant HPI. They know a correction is the sensible thing to stimulate the market and enable FTBs a chance to buy, but it'll make Mondeo man mad :angry: !!!

;)

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The reason why the US can "entertain" a crash is simple, because they have an economy that does not 100% depend on house price inflation.

In a crash, in the US, people still go to work.

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but it'll make Mondeo man mad :angry: !!!

;)

And we all know about about Mondeo man. He would sell his own mother to continue living his own greedy lifestyle that hes been paying for on borrowed money.

Makes me wonder where they expect their kids to live when they leave home? Or do they just not care?

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The reason why the US can "entertain" a crash is simple, because they have an economy that does not 100% depend on house price inflation.

In a crash, in the US, people still go to work.

I think a few people have woken up in the US to what is really happening to the future of their economy.

Still may be too late, once you start rolling the boulder down the hill it can be incredibly difficult to stop.

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Some people think the potential US meltdown will be a peculiarly US thing - it won't - if anything the UK is, in relative terms, in just as bad shape in terms of consumer borrowing etc and worse for HPI. Our own boulder has started rolling too, its not quite as big as theirs - but then there are less of us to stop it rolling (and historically we don't push as hard to get it to do so)...

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I said, 'I think it's because house prices are too high, people have got themselves into masssive debt, and first time buyers and many of those trading up are so overmortgaged they probably don't have much to spend on anything else. This, for me, is the reason why high house prices have done nothing but transfer of wealth from one group of people to another. One group feels richer, while another feels poor and enslaved to debt. We ourselves are spending nothing much in the economy, as we are saving up a big deposit to buy a house when prices are more sensible'.

Blimey! Did you pause for breath?

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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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