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fru-gal

When Will The Bubble Burst?

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The Bank of England seems to be giving the clearest possible sign that it thinks the UK housing bubble will burst, and it thinks that a 'soft landing' for those affected by the fall out is unlikely. That, after all, is the invariable historical precedent of such crashes. Negative equity and excessive credit burdens always follow and take years to clear from the system.

And why is this happening? All because George Osborne deliberately and wholly inappropriately blew the bubble up.

That will be what he is remembered for. We once had a Lawson boom and crash. Amazingly Osborne will have a recession and crash.

The worst Chancelllor beyond living memory, anyone?

Yes, indeed.

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The consensus view is that some 'exogenous' event (to use the bullshite vernacular of our economist friends) is required to burst a bubble- so we await a black swan delivery.

But I'm not sure that's always true. To me it's like a giant game of chicken in which the players push the envelope of risk further and further toward the improbable until some kind of innate intelligence reasserts itself, at which point there is the kind of spontaneous unplanned moment where the mood of the herd shifts and the stampede begins.

I have this image of a vast sweeping plain in which the happy herbivores spend their days munching on the green shoots of expanding bubbleness- but the herd knows that the predator of risk is out there, somewhere, stalking them.

So they continue to feed but keep one eye on the long grass, poised to flee at the first sign of threat. It might only take the slightest breeze in that grass to unleash the pent up anxiety and transform that grazing mass into a panicked melee. So no actual predator is required, no black swan event, just the unbearable tension of knowing that sooner or later the good times must end combined with the knowledge that he who exits first is most likely to save his skin.

Yes folks it's Attenboroughnomics!

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Bubbles end when nobody is left willing, or able to play. I'd say we've reached that point currently due to the obscene prices making them simply unaffordable, and the new mmr rules preventing people that cannot afford them gaining the ability to.

The fall is then self perpetuating akin to deflation where nobody steps in due to prices expected to fall further which is often why there is an overshoot.

I'm expecting a crash similar to the levels in Ireland and will buy when nobody would dare to. Buy when you can see the whites in their eyes.

Edited by honkydonkey

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The consensus view is that some 'exogenous' event (to use the bullshite vernacular of our economist friends) is required to burst a bubble- so we await a black swan delivery.

But I'm not sure that's always true. To me it's like a giant game of chicken in which the players push the envelope of risk further and further toward the improbable until some kind of innate intelligence reasserts itself, at which point there is the kind of spontaneous unplanned moment where the mood of the herd shifts and the stampede begins.

I have this image of a vast sweeping plain in which the happy herbivores spend their days munching on the green shoots of expanding bubbleness- but the herd knows that the predator of risk is out there, somewhere, stalking them.

So they continue to feed but keep one eye on the long grass, poised to flee at the first sign of threat. It might only take the slightest breeze in that grass to unleash the pent up anxiety and transform that grazing mass into a panicked melee. So no actual predator is required, no black swan event, just the unbearable tension of knowing that sooner or later the good times must end combined with the knowledge that he who exits first is most likely to save his skin.

Yes folks it's Attenboroughnomics!

The authorities have been 'doubling down' on upping debt in order to stave off what they consider the disastrous consequences of a default/crash.

All the time that they keep piling on the debt, the consequences of stopping doing so get worse.

If it hasn't been acceptable thus far (since 2008) to allow a correction (most likely, a catastrophic crash) to happen, what makes you think they'll be willing to chicken out now that the consequences are even greater?

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The authorities have been 'doubling down' on upping debt in order to stave off what they consider the disastrous consequences of a default/crash.

All the time that they keep piling on the debt, the consequences of stopping doing so get worse.

If it hasn't been acceptable thus far (since 2008) to allow a correction (most likely, a catastrophic crash) to happen, what makes you think they'll be willing to chicken out now that the consequences are even greater?

Because if they don't the consequences will be even greater?

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The authorities have been 'doubling down' on upping debt in order to stave off what they consider the disastrous consequences of a default/crash.

All the time that they keep piling on the debt, the consequences of stopping doing so get worse.

If it hasn't been acceptable thus far (since 2008) to allow a correction (most likely, a catastrophic crash) to happen, what makes you think they'll be willing to chicken out now that the consequences are even greater?

What do you think would be their course of action if they decide to 'chicken-out'?

I think they're pretty much out of options, and the chickens are about to come home to roost..........

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Interesting that Richard Murphy of the brilliant Tax Research UK blog thinks the Bank of England is signaling that the housing bubble is going to burst;

http://www.taxresearch.org.uk/Blog/2014/05/02/when-will-the-bubble-burst/

I liked this comment:

May 3 2014 at 9:01 am

Does anyone still think the inevitable ‘bust’ is indicative of ‘failure’… I rather hope not.

It will be a failure of course for our economy and the millions of people who will be adversely affected by it. But in terms of Osborne and the Global Nation of Wealth he really represents, it is all part of the plan.

‘Boom’ is the period when Government assets are transferred to Private equity, ‘Bust’ is when the public themselves are asset stripped (usually through repossession, as in the 80′s and 90′s), and ‘Recovery’ is when Government debt is transferred to the finances of the private individual.

How many times does a Neo-Liberal Government have to repeat this cycle before the Country finally realises that there is nothing accidental in any of this?

I, like many commentators on this page, typify Osbornomics as morally bereft, intellectually bankrupt and economically illiterate but that is only true if you start from the perspective that this Government wants Britain to thrive. This Government doesn’t give a damn about Britain or its people.

Every boom-bust-recovery cycle brings the Neo-lib dream of Neo-feudalism a step closer. And that’s the real agenda.

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The authorities have been 'doubling down' on upping debt in order to stave off what they consider the disastrous consequences of a default/crash.

All the time that they keep piling on the debt, the consequences of stopping doing so get worse.

If it hasn't been acceptable thus far (since 2008) to allow a correction (most likely, a catastrophic crash) to happen, what makes you think they'll be willing to chicken out now that the consequences are even greater?

Maybe it's not whether they're chickening out, but whether are able & willing to prop it up further. In Ireland they attempted the fabled soft landing, and failed spectacularly. In fact no country has successfully deflated a bubble without a crash.

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In fact no country has successfully deflated a bubble without a crash.

Except japan, who managed a gradual long running decline ... but japan has a an actual economy that makes useful things people that world over want to buy so that probably helped.

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I think all it takes is someone to see the bubble we see, get nervous and sell up. If it's a big player, then all the better (Duke of Westminster sold a chunk of property recently I believe). Others then do the same and it snowballs into a full-blown crash.

Perhaps it doesn't need an external trigger. Did the South Sea Bubble?

Edited by Eddie_George

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Except japan, who managed a gradual long running decline ... but japan has a an actual economy that makes useful things people that world over want to buy so that probably helped.

Depends on your definition of successful, I suppose. I'm not sure 2 decades of grinding decline springs to mind when I think of success.

Edit for clarity & accuracy.

Edited by John The Pessimist

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The consensus view is that some 'exogenous' event (to use the bullshite vernacular of our economist friends) is required to burst a bubble- so we await a black swan delivery.

But I'm not sure that's always true. To me it's like a giant game of chicken in which the players push the envelope of risk further and further toward the improbable until some kind of innate intelligence reasserts itself, at which point there is the kind of spontaneous unplanned moment where the mood of the herd shifts and the stampede begins.

I have this image of a vast sweeping plain in which the happy herbivores spend their days munching on the green shoots of expanding bubbleness- but the herd knows that the predator of risk is out there, somewhere, stalking them.

So they continue to feed but keep one eye on the long grass, poised to flee at the first sign of threat. It might only take the slightest breeze in that grass to unleash the pent up anxiety and transform that grazing mass into a panicked melee. So no actual predator is required, no black swan event, just the unbearable tension of knowing that sooner or later the good times must end combined with the knowledge that he who exits first is most likely to save his skin.

Yes folks it's Attenboroughnomics!

Nice.

Edited by shindigger

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Depends on your definition of successful, I suppose. I'm not sure 2 decades of grinding decline springs to mind when I think of success.

Edit for clarity & accuracy.

take out population growth, measure things in per capita terms and the japs have done better since the mid 90s than the US or EU...

We've just papered over the truth by importing poverty since 1997.

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Maybe it's not whether they're chickening out, but whether are able & willing to prop it up further. In Ireland they attempted the fabled soft landing, and failed spectacularly. In fact no country has successfully deflated a bubble without a crash.

Britain was doing OK at deflating the bubble until Gidiot/Camoron went and re-inflated it.

Edited by Corruption

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Starting to think it might actually.

Trouble with bubbles is they always get a lot bigger than you could possibly imagine and then they burst a lot louder than you ever thought possible.

This bubble still has a long way to go.

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Trouble with bubbles is they always get a lot bigger than you could possibly imagine and then they burst a lot louder than you ever thought possible.

This bubble still has a long way to go.

So, what are you thinking there? £1mil for a bedsit in SW3 - oh, hang on.

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Trouble with bubbles is they always get a lot bigger than you could possibly imagine and then they burst a lot louder than you ever thought possible.

This bubble still has a long way to go.

My search areas in East Dorset and West Hampshire are seeing many green arrows pointing down with "Google Chromes Property Tracker". And several coming back onto the market.

But there are some slave boxes of the lowest order coming onto the market at ludicrously high prices, im thinking agents are worrying and are saying crazy numbers to the seller just to get their business ... only for them to put the prices down when they havent sold several weeks/months don the line.

I just dont see this bubble getting bigger now, its all down hill but it may take years to get there!

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The consensus view is that some 'exogenous' event (to use the bullshite vernacular of our economist friends) is required to burst a bubble- so we await a black swan delivery.

But I'm not sure that's always true. To me it's like a giant game of chicken in which the players push the envelope of risk further and further toward the improbable until some kind of innate intelligence reasserts itself, at which point there is the kind of spontaneous unplanned moment where the mood of the herd shifts and the stampede begins.

I have this image of a vast sweeping plain in which the happy herbivores spend their days munching on the green shoots of expanding bubbleness- but the herd knows that the predator of risk is out there, somewhere, stalking them.

So they continue to feed but keep one eye on the long grass, poised to flee at the first sign of threat. It might only take the slightest breeze in that grass to unleash the pent up anxiety and transform that grazing mass into a panicked melee. So no actual predator is required, no black swan event, just the unbearable tension of knowing that sooner or later the good times must end combined with the knowledge that he who exits first is most likely to save his skin.

Yes folks it's Attenboroughnomics!

If only the economists had any understanding of predator-prey cycles, Lotka-Volterra, or the dynamics of unstable nonlinear systems generally, then we might not be in the almighty mess we're in now. Alas, but for a literal handful of mavericks and outsiders, they do not.

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Trouble with bubbles is they always get a lot bigger than you could possibly imagine and then they burst a lot louder than you ever thought possible.

This bubble still has a long way to go.

this is very true

i never imagined it would reach this stage

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Three things I do know.

1. Everything is traded on margin with leverage.

2. Everything is traded in dollars when the shit hits the fan.

3. In a crisis all correlations tend to 1.

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Trouble with bubbles is they always get a lot bigger than you could possibly imagine and then they burst a lot louder than you ever thought possible.

This bubble still has a long way to go.

True, but the bubble is not too far off to burst I believe, many factors are now coming to light:

HTB2 interest is tapering off, it's now proving unpopular even among ex chancellors, now warning it is helping the bubble.

New mortgage rules coming into force, making it ever harder to get a mortgage on an overpriced property people cannot afford.

Many home owners now worried of runaway prices my now harm them if they need to sell, down/up size.

Household bills has dramatically increased, leaving people with less spending money or savings.

Interest rates may rise sooner rather than later.

I don't believe the bubble will burst, just deflate very slowly over a decade.

Think about it, prices cannot keep rising as people (even high earners) cannot keep up. I believe the gross rental yields in prime london has collapsed as rent cannot keep on rising making it unaffordable even among high earners.

X

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