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Boe Meeting Today. -- multiple threads merged


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I reckon that prices will have dropped 30% to 40% by the end of the decade, perhaps they'll be down 50% or 60% by 2027.

Pretty much the sentiment that was expressed on this site in 2004 when I first started reading these pages. How wrong we were!

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Pretty much the sentiment that was expressed on this site in 2004 when I first started reading these pages. How wrong we were!

Not so wrong, the housing market was seriously overvalued in 2004 and still is.

Had I bought a house at any time between 2004 and now I would have been seriously out of pocket.

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Sky reports economists think Gorgeous Mark's possible QE or further ludicrous cutting of interest rates would "pull Britain out of the doldrums".

http://news.sky.com/story/1111397/stronger-economy-puts-brakes-on-carney

Like another line will help the addict.

So the economy is just some central banker pulling levers ... Nothing whatsoever to do with people producing things of value... How did it ever get to this?

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Money can be, and is still, a store of value. Money can never be a store of an absolute amount of value. As you note saved money is a request on future value (and debts the reverse), but without knowing the amount of future value in existence (i.e. population x average value production per capita) then in an ideal non-money printing world the value of your saved money can only ever be a percentage of the overall value and not a fixed absolute value. In a money-printing system obviously your percentage diminishes with time.

It's the root of the "but I've paid in all my life for a comfy retirement" pensioner entitlement problem. People expect guaranteed value rather than guaranteed money. You can't have guaranteed value (e.g. 'comfy' retirement) only, in the best case scenario, a level of value commensurate with the overall amount of value knocking about. Anything else involves stealing value somehow or another from someone else.

Welcome aboard.

I think that you're correctly pulling on a thread, but you've stopped too soon, and then forgotten your original point. There is really nothing that can be meaningfully defined as "value", it's a helpful but quicksilver notion, like beauty and truth. That's why I talk about "wealth", because then everyone can have some idea of what I mean, and it's still clear that I don't mean money. But I don't suppose that wealth is something that can be fed into a mathematical model, of any kind, much less a friendly little equation, as you propose. Furthermore, what use is guaranteed money unless money is associated in a straightforward way, dependable over reasonable timescales, with value/wealth. What use is a £1m Zim dollars today, as a day's wage, if tomorrow it won't even buy me a banana?

What is the root of the "entitlement problem"? It is surely an emergent property of democracy. A robust, sustainable democracy must address this problem. I don't think that we are managing it in the UK at the moment, and the extent of our failure is the extent to which we are becoming a plutocracy. As to "stealing value", nothing that is legal is stealing. Morally questionable, perhaps. As easy2012 was pointing out to me, correctly, just the other day, the stock in trade of government is so pick winners by stealing/transferring value/wealth from one group to another. Same as it ever was.

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Apologies if this is stating the bleedin' obvious, but are you referring to this new fangled Nominal Level GDP Targeting smoke & mirrors http://www.saveoursavers.co.uk/bank-of-england/the-next-governor-of-the-bank-of-england-brought-to-you-by-loreal/

Exactly. First, policy was to target inflation. Then when HPI made those numbers ugly we moved to targeting an inflation measure which didn't include house prices, (switch from RPIX to CPI in 2003). Now when CPI is above target but bank solvency is threatened by HPI going negative, we'll shift to "intermediate thresholds". All the while real incomes are under attack from rampant inflation which is measured with hedonic regression, meaning that when you have to pay £250k to buy a south facing bin you have to share with a mangy fox, there has been no inflation compared to 10 years ago when a £250k bought you a semi-detached 3-bed, because a house is a house, and if the price of beef goes up, you'd buy chicken because all you really want is meat.

For my money, a period of deflation means "You broke your banks and your ability to convince people that you haven't has run out of steam" and a period of inflation means "There is something wrong with your economy that is not going to fix itself, and your attempt to ignore the problem by monkeying with your money is about to run out of steam". The fact that we appear to be trying to steer our banks and economy between the Scylla and Charybdis of inflation and deflation should be taken as good evidence that we've broken our economy and our banks. Popcorn, please.

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Whoever said they have no sympathy with savers is an idiot of the first order...

I believe that was Keynes.

I see Carney is another genius, like Mervyn. Low interest caused the worst depression in British history. So this guy has decided to impose eternal low interest rates on us. Marvelous. I could go into another rant about why low interest rates cause overconsumption and prevent capital creation. But why bother? I will never get a say in how my life is run.

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Not everyone has the ability, expertise or courage to do so. Would you also not agree asking savers to do forex, the ftse, pms etc, is asking them to switch from being risk averse to far more adventurous and potentially seriously loss-making activities? People who have saved a nest egg are not going to want to chuck it all on some shares or PMs, those investment or speculative vehicles are a whole different animal to the safety of seeing an above or equal inflation return from a savings bank.

But my point is that their reward is their utility described by yourself . Cash gives them security, liquidity and insurance .

Cash is also a credit note. We can't go on describing sheeple as stupid for investing in property without considering the risk and simultaneously forgive cash savers for not considering or understanding their own risk profile .

As I stated , I agree that it is folly NOT to incentivise storage of cash ( savings) or at least it is folly to distort the incentives .

However , there are plenty on here who FULLY understand the risks of holding cash and lending GBP ( savings) and yet they appear to insist on being bailed out ( £85k guarantees) , rewarded for risk ( desiring higher rates), whilst continuing to lend to insolvent entities ( banks, hmg).

I agree its bad for the economy but the risk / rewards are clear to see so individuals can't insist on having safety, liquidity , insurance AND return

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Welcome aboard.

I think that you're correctly pulling on a thread, but you've stopped too soon, and then forgotten your original point. There is really nothing that can be meaningfully defined as "value", it's a helpful but quicksilver notion, like beauty and truth. That's why I talk about "wealth", because then everyone can have some idea of what I mean, and it's still clear that I don't mean money. But I don't suppose that wealth is something that can be fed into a mathematical model, of any kind, much less a friendly little equation, as you propose. Furthermore, what use is guaranteed money unless money is associated in a straightforward way, dependable over reasonable timescales, with value/wealth. What use is a £1m Zim dollars today, as a day's wage, if tomorrow it won't even buy me a banana?

What is the root of the "entitlement problem"? It is surely an emergent property of democracy. A robust, sustainable democracy must address this problem. I don't think that we are managing it in the UK at the moment, and the extent of our failure is the extent to which we are becoming a plutocracy. As to "stealing value", nothing that is legal is stealing. Morally questionable, perhaps. As easy2012 was pointing out to me, correctly, just the other day, the stock in trade of government is so pick winners by stealing/transferring value/wealth from one group to another. Same as it ever was.

wealth is a great term to use.

An hour of effort 100 years ago and saved as a payment in cash, should buy MORE than one hour of effort today...because we are moreefficient, there are more of us and the unit of wealth is not itself an investment pledge.

But, we have two people skimming from our 100 year old pledge...banks, and Government.

Banks take our pledge and pay us interest....they can do this if they invest the pledge (Capital) in something that hopefully will produce more wealth...They cant do this if they take our pledge and use it to increase asset prices by leverage...

Government takes a cut of our pledge and gives it to someone else.

As bankers have Ponzied their way to reducing our pledge of 100 years ago to 1/300th of its former value, so governments have decided to assist them and set inflation at 2%....

with inflation for necessities now at way beyond that, the bankers are as usual, paying us less than the inflation to prop up their Ponzi.

We dont have most people in wealth productivity, but we do have a banking system that doesnt have the cash to meet all its debts, we have a Government that cant take enough tax to meet all its debts, and we have a quasi Government Central Bank merrily absorbing the bad assets created and printing to keep the government solvent.

Its a mess and no-one has a broom

All Carney can do is what he can do...which is more of the same.....

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wealth is a great term to use.

An hour of effort 100 years ago and saved as a payment in cash, should buy MORE than one hour of effort today...because we are moreefficient, there are more of us and the unit of wealth is not itself an investment pledge.

But, we have two people skimming from our 100 year old pledge...banks, and Government.

Banks take our pledge and pay us interest....they can do this if they invest the pledge (Capital) in something that hopefully will produce more wealth...They cant do this if they take our pledge and use it to increase asset prices by leverage...

Government takes a cut of our pledge and gives it to someone else.

As bankers have Ponzied their way to reducing our pledge of 100 years ago to 1/300th of its former value, so governments have decided to assist them and set inflation at 2%....

with inflation for necessities now at way beyond that, the bankers are as usual, paying us less than the inflation to prop up their Ponzi.

We dont have most people in wealth productivity, but we do have a banking system that doesnt have the cash to meet all its debts, we have a Government that cant take enough tax to meet all its debts, and we have a quasi Government Central Bank merrily absorbing the bad assets created and printing to keep the government solvent.

Its a mess and no-one has a broom

All Carney can do is what he can do...which is more of the same.....

Whilst I still remain critical of individual savers' bleating I congratulate you on the above post . Absolutely spot on summary of where we are and why it's folly for governments to incentivise the disconnection of wealth and money.

A free market with no lender of last resort would sort the system out but I do agree the initial carnage would be awful and probably not possible in a democracy

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wealth is a great term to use.

An hour of effort 100 years ago and saved as a payment in cash, should buy MORE than one hour of effort today...because we are moreefficient, there are more of us and the unit of wealth is not itself an investment pledge.

But, we have two people skimming from our 100 year old pledge...banks, and Government.

Banks take our pledge and pay us interest....they can do this if they invest the pledge (Capital) in something that hopefully will produce more wealth...They cant do this if they take our pledge and use it to increase asset prices by leverage...

Government takes a cut of our pledge and gives it to someone else.

As bankers have Ponzied their way to reducing our pledge of 100 years ago to 1/300th of its former value, so governments have decided to assist them and set inflation at 2%....

with inflation for necessities now at way beyond that, the bankers are as usual, paying us less than the inflation to prop up their Ponzi.

We dont have most people in wealth productivity, but we do have a banking system that doesnt have the cash to meet all its debts, we have a Government that cant take enough tax to meet all its debts, and we have a quasi Government Central Bank merrily absorbing the bad assets created and printing to keep the government solvent.

Its a mess and no-one has a broom

All Carney can do is what he can do...which is more of the same.....

Have to confess that is rather good. But I'm an ironic housing bull now, and I think you should buy.

Edited by Secure Tenant
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I don't think he's saying that at all.

It's also a completely different thing to suggest that saving is generally good for society and deserving of encouragement and another completely to request that savers stop bleating about rates being low . I subscribe to both .

My rationale is that the governments can only suppress rates for as long as sufficient people ( savers) continue to keep sufficient cash at hand at those rates .

I'm assuming that people saving in our environment are doing so because they need or desire liquidity . Tptb have set the price and savers are freely taking it.

If savers are annoyed then they should move into assets, pm's , equities , foreign currency etc etc . If they don't like the risk reward then they should stop bleating .

I agree that it's a sorry state of affairs to discourage saving but the rates are being allowed to stay low because there is not sufficient capital flow away from gilts or cash ( both credit notes issued by UK plc)

When there is sufficient outflow then tptb will have to turbo charge the printers or raise rates , both will ultimateky lead to a correction with different groups feeling pain. Savers are preventing this from happening by freely lending cash to the system at these low rates .

So what do you suggest people spend their savings on, the money built up over a lifetime of working designed to see them through the not so prosperous times?....buy a property with it? go on holiday abroad with it?.....then go cap in hand to the state to bail them out of their council tax, housing and old age care home costs.......hey ho, live it up then get the rest to pay for tomorrows rainy day.

Anyway they don't want the economy to start improving, QE to start to be unwound, interest rates to start rising.......no they want bad news good excuse to print more and get free handouts of free borrowed money. ;)

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My rationale for going back to cash is that global volatility makes me fearful of a stock market crash!

You have things back-to-front, the market sets the price for everything - not Bernanke, not Abe, not the BoE. If the market determines that QE has been overdone (i.e. if China's shadow banking system has reached a point of maximum expansion) then the market will force Bernanke's hand and make him desist.

.

Once the addiction money is withdrawn.....it will be cold turkey time, see then what companies are not wearing any reinforcements.

Anyway to speculate is to pay fees for every transaction, win or lose.....many livelihoods are maintained by people who don't know what they are doing gambling against computers that are far faster than anyone could press the buy or sell button, blink and its gone.....a bookmaker is never poor. ;)

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Exactly. First, policy was to target inflation. Then when HPI made those numbers ugly we moved to targeting an inflation measure which didn't include house prices, (switch from RPIX to CPI in 2003). Now when CPI is above target but bank solvency is threatened by HPI going negative, we'll shift to "intermediate thresholds". All the while real incomes are under attack from rampant inflation which is measured with hedonic regression, meaning that when you have to pay £250k to buy a south facing bin you have to share with a mangy fox, there has been no inflation compared to 10 years ago when a £250k bought you a semi-detached 3-bed, because a house is a house, and if the price of beef goes up, you'd buy chicken because all you really want is meat.

For my money, a period of deflation means "You broke your banks and your ability to convince people that you haven't has run out of steam" and a period of inflation means "There is something wrong with your economy that is not going to fix itself, and your attempt to ignore the problem by monkeying with your money is about to run out of steam". The fact that we appear to be trying to steer our banks and economy between the Scylla and Charybdis of inflation and deflation should be taken as good evidence that we've broken our economy and our banks. Popcorn, please.

Very interesting for me, thank you

But my point is that their reward is their utility described by yourself . Cash gives them security, liquidity and insurance .

Cash is also a credit note. We can't go on describing sheeple as stupid for investing in property without considering the risk and simultaneously forgive cash savers for not considering or understanding their own risk profile .

As I stated , I agree that it is folly NOT to incentivise storage of cash ( savings) or at least it is folly to distort the incentives .

However , there are plenty on here who FULLY understand the risks of holding cash and lending GBP ( savings) and yet they appear to insist on being bailed out ( £85k guarantees) , rewarded for risk ( desiring higher rates), whilst continuing to lend to insolvent entities ( banks, hmg).

I agree its bad for the economy but the risk / rewards are clear to see so individuals can't insist on having safety, liquidity , insurance AND return

Of course, good points, thank you

Its a mess and no-one has a broom

All Carney can do is what he can do...which is more of the same.....

Why did he spout off about raising rates last week (assuming he did, as reported) ?

Is it for the same reason as he previously (allegedly!) ruled himself out as BofE governor and then took the job ?

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Very interesting for me, thank you

Of course, good points, thank you

Why did he spout off about raising rates last week (assuming he did, as reported) ?

Is it for the same reason as he previously (allegedly!) ruled himself out as BofE governor and then took the job ?

for a man with over half a million coming in...he has little he can do...adjust the rate, print some, sell some, talk the talk and the code, which includes words like should, might, maybe, if and projected.

Not one potato can he grow.

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So what do you suggest people spend their savings on, the money built up over a lifetime of working designed to see them through the not so prosperous times?....buy a property with it? go on holiday abroad with it?.....then go cap in hand to the state to bail them out of their council tax, housing and old age care home costs.......hey ho, live it up then get the rest to pay for tomorrows rainy day.

Anyway they don't want the economy to start improving, QE to start to be unwound, interest rates to start rising.......no they want bad news good excuse to print more and get free handouts of free borrowed money. ;)

+1

at a time when the government continuously complains about benefit scroungers and the feckless.

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  • 418 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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