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Traktion

Government Spending Surplus Leads To Lower House Prices

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Forget complex equations, terminology, etc. I will keep it simple here.

If a state borrows less from the future to spend today, then people who receive said money are less well off. Due to the law of rent, this will reduce house prices over time.

Conversely, government deficit spending leads to more money in people's pockets. Due to the law of rent, this will lead to higher house prices over time.

Ofc, this is ignoring everything else going on, which obviously occurs in a complex system.

Moreover, deficit spending on social housing would counter balance the situation, but what would be the net benefit, other than reducing housing costs today, at the expense of those paying the interest tomorrow

Therefore, I asset that deficit spending feeds the rentiers at the expense of everyone else. Thoughts?

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If corrupt bankers with politicians in their pockets get to do what the f*** they like, house prices go up.

Is that simple enough for you ?

Edited by TheCountOfNowhere

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Forget complex equations, terminology, etc. I will keep it simple here.

If a state borrows less from the future to spend today, then people who receive said money are less well off. Due to the law of rent, this will reduce house prices over time.

Conversely, government deficit spending leads to more money in people's pockets. Due to the law of rent, this will lead to higher house prices over time.

Ofc, this is ignoring everything else going on, which obviously occurs in a complex system.

Moreover, deficit spending on social housing would counter balance the situation, but what would be the net benefit, other than reducing housing costs today, at the expense of those paying the interest tomorrow

Therefore, I asset that deficit spending feeds the rentiers at the expense of everyone else. Thoughts?

Ignoring the deficit/surplus angle for a moment, its certain true in general that we cannot improve standards of living or general demand in the economy no matter how new money is introduced into the system so long as any increase in disposable income is absorbed by the property rentier cohort.

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Ignoring the deficit/surplus angle for a moment, its certain true in general that we cannot improve standards of living or general demand in the economy no matter how new money is introduced into the system so long as any increase in disposable income is absorbed by the property rentier cohort.

What changes could be made to prevent that? Isn't it a universal that the rentiers extract as much as they can?

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What changes could be made to prevent that? Isn't it a universal that the rentiers extract as much as they can?

Well instead of printing billions and giving it to the already well off, we could give it to the indebted to pay off their debts which are owed to the well off.

The well off benefit, the indebted benefit and the system clears a whole chunk of debt out the way.

They are going to print anyway so lets try trickle up seen as trickle down isn't working.

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All else (the external account) being equal, I would say this is true.

However, we do not "borrow from the future". It is a credit...i.e. there are two parts to it. The parts can come together and disappear any time and in any way we decide. Your assumption is that we decide to leave the problem for tomorrow rather than say, taxing those who have accumulated the gains by not trading in balance with their fellow man. That may be the case but need not be so.

What else is credit if *not* borrowing from the future?

If we want to leave future productivity out of the equation the state can run a balanced book.

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Well instead of printing billions and giving it to the already well off, we could give it to the indebted to pay off their debts which are owed to the well off.

The well off benefit, the indebted benefit and the system clears a whole chunk of debt out the way.

They are going to print anyway so lets try trickle up seen as trickle down isn't working.

Then they would have more free income to pay the rentiers... Edited by Traktion

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What else is credit if *not* borrowing from the future?

If we want to leave future productivity out of the equation the state can run a balanced book.

It comes from thin air. The only future cost is interest payments. The currency is debased the moment it is issued.

Doesnt matter anyway. The government only reduces its borrowing when the private sector ramps up its own borrowing. Given it hasnt even begun to run down its existing debt burden, thats not going to happen.

There will be no surplus, despite Gidiots little PR exercise.

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This is old news. Loose money pushes asset prices up.

Until recently it would also have pushed consumer prices rapidly up. That's changed somewhat as manufacturing costs for consumer stuff have dropped to near-zero. I expect that to change again as and when the currency bubble bursts.

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If the borrowing is appropriately invested (e.g. infrastructure, education) then it's borrowing for the future, not from the future. Many countries have demonstrated that in the past.

If we could know what investments were good ahead of time, we would all be rich.

Speculating with deficit spespendiis undemocratic - many who face the corresponding higher taxes were not even old enough - or even born - to voting it.

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It comes from thin air. The only future cost is interest payments. The currency is debased the moment it is issued.

Doesnt matter anyway. The government only reduces its borrowing when the private sector ramps up its own borrowing. Given it hasnt even begun to run down its existing debt burden, thats not going to happen.

There will be no surplus, despite Gidiots little PR exercise.

The guns of the state make it real. When thin air repayment is required and and failure to do so results in jail time, it is hardly trivial.

Edit: bloody predictive text!

Edited by Traktion

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The guns of the state make it real. When thin air repayment is required and and failure to do so results in jail time, it is hardly trivial.

Edit: bloody predictive text!

Who has been jailed?

No bankers...not even joe public missing his mortgage payments.

If they actually followed the law of the land, virtually every mortgage broker in the UK would be behind bars.

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Who has been jailed?

No bankers...not even joe public missing his mortgage payments.

If they actually followed the law of the land, virtually every mortgage broker in the UK would be behind bars.

Try not paying their taxes and see how long you last.

Btw, I agree that bankers should be in jail for fraud, but that is more of a reflection of banking in general, rather than deficit spending.

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Any infrastructure spending requires the present generation to 'speculate' on what the future generation will need or want. Of course we should not plunge the future generation into unmanageable debt or saddle them with PFI, but no more should we think we can save for all our future needs in a metaphorical biscuit-tin under the bed.

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I don't buy it.

If the government are running a surplus then the 'economy' is good, hence house prices go up.

If the government are running a deficit then there's more money in the system, hence house prices go up.

Do you work for rightmove?

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Any infrastructure spending requires the present generation to 'speculate' on what the future generation will need or want. Of course we should not plunge the future generation into unmanageable debt or saddle them with PFI, but no more should we think we can save for all our future needs in a metaphorical biscuit-tin under the bed.

Why not just invest what is taxed? Why the need to spend ahead? An 'advantage' is only gained until debt saturation point anyway.

Edited by Traktion

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I don't buy it.

If the government are running a surplus then the 'economy' is good, hence house prices go up.

If the government are running a deficit then there's more money in the system, hence house prices go up.

Do you work for rightmove?

Eh? I asserted that the government running a surplus results in lower house prices.

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Therefore, I asset that deficit spending feeds the rentiers at the expense of everyone else. Thoughts?

I agree. My reasoning is somewhat different - that government issued debt in a fiat economy IS money. The reason this feeds the rentiers though is that although what is being produced is money, the government also sees fit to add on a nice coupon as a bonus. However as we can see these coupons on this money-masquarading-as-bonds are being frittered away in all the major currency areas.

The other reason I see deficit spending as being rentier-friendly is that the issuance of bonds is by definition standing in for taxation which implies that in aggregate the sector buying the bond ought to be paying at least some of the money they are using to buy bonds, in tax.

However, it is also true that a persistent balanced budget or even a persistent surplus will generate a negative nominal rate of interest, and deflation, in the private sector. So by definition that is pro-labour and anti-rentier. However under this definition pensioners count as rentiers. House-deposit savers count as labour as long as the price of houses falls faster than the rate at which their deposit accumulates towards the magic value. Deflation without negative nominal rates in the private sector is also pro-rentier, at least until the whole thing crashes in flames.

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"Why not just invest what is taxed"

Fair enough point, ideally that should be the case. However, Govts may find that investment is needed at the exact point that tax receipts fall and (past) debt repayments remain high. No easy answer to that one, esp. if you don't want to increase taxes because it is perceived that it's a vote-loser for any party that advocates it. I suspect whichever coalition wins in May will eventually be forced to cross the rubicon and increase taxes, and perhaps get wealthy pensioners to pay their share as well.

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