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Economy Slowing, So What?

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During the last 6/7 years house prices rising has led to the home owners performing low interest rate MEW.

They have used this money to have extensions, do up their property's, buy new cars, go on holidays, buy new gadgets etc, and repay at low monthly repayments.

Retailers have been having a field day, opening up shopping centres here there and everywhere.

As a result traffic has been getting worse around the country whilst Mr Consumer goes on a spending spree.

So then, isn't it just normal that this is now coming to an end?

This spending spree cannot continue forever. The number of car purchases, clothes purchases etc cannot

continue increasing every year forever and ever? Especially at the rate it has been.

So why then do the media and people get so carried away when there is a reduction in sales of a) cars, B) household goods, and retail spending in general.

It doesnt mean the economy is going into recession, it just means it will go back to normality before the housing boom? Doesnt it?

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During the last 6/7 years house prices rising has led to the home owners performing low interest rate MEW.

They have used this money to have extensions, do up their property's, buy new cars, go on holidays, buy new gadgets etc, and repay at low monthly repayments.

Retailers have been having a field day, opening up shopping centres here there and everywhere.

As a result traffic has been getting worse around the country whilst Mr Consumer goes on a spending spree.

So then, isn't it just normal that this is now coming to an end?

This spending spree cannot continue forever. The number of car purchases, clothes purchases etc cannot

continue increasing every year forever and ever? Especially at the rate it has been.

So why then do the media and people get so carried away when there is a reduction in sales of a) cars, B) household goods, and retail spending in general.

It doesnt mean the economy is going into recession, it just means it will go back to normality before the housing boom? Doesnt it?

I am not sure we can go back to normality without a little pain first.

The personal loans will have to be rapaid.

Businesses and shops have opened or expanded on the back of the spending boom. When/if this stops those businesses will either go 'bump' or will have to scale back - they will have to lay people off.

When people get laid off they don't spend as much - or they can't pay their mortgages or loans.

More shops and businesses go bump or cut back because of less spending.

It creates a vicious circle.

The spending boom was not as simple as people just buying more - businesses reacted to the increase in disposable money and they will have to react to the decrease in disposable money - and that will hurt.

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its a matter of opinion what hapens next

my view is that the amount of debt taken on board by individuals and the state will need to correct.

this will mean that in the period ahead expenditure will be below average.

the end result will be low/zero/negative growth and either a downturn or rcession.

this is what Brown refers to as boom and bust which he claims to have eliminated.

well i think we've had a big boom and a big bust is in progress.

others may have different views.

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During the last 6/7 years house prices rising has led to the home owners performing low interest rate MEW.

They have used this money to have extensions, do up their property's, buy new cars, go on holidays, buy new gadgets etc, and repay at low monthly repayments.

Retailers have been having a field day, opening up shopping centres here there and everywhere.

As a result traffic has been getting worse around the country whilst Mr Consumer goes on a spending spree.

So then, isn't it just normal that this is now coming to an end?

This spending spree cannot continue forever. The number of car purchases, clothes purchases etc cannot

continue increasing every year forever and ever? Especially at the rate it has been.

So why then do the media and people get so carried away when there is a reduction in sales of a) cars, B) household goods, and retail spending in general.

It doesnt mean the economy is going into recession, it just means it will go back to normality before the housing boom? Doesnt it?

Yea but no but yea...

Have you ever had a decent payrise that makes a real difference?

At first you love it, your minted, all the money in the world, you can buy loads more crap that you've sorta wanted but you had to spend money on other things. After a while you dont notice the extra money any more because your lifestyle adapts to it... you buy nicer things more expensive baked beans and thats the way your life is.

You adapt to the money you have, should you not have that money any more you dont just shrug it off and revert to your previous lifestyle... it hurts... financially and emotionally. You had it all and now you don't, now you've taken a step back in life, you are poorer and you feel it.

The sentiment that gets carries with it is powerful, its destructive mentaly and emotionally.

Normality is based upon today and it is relevant to today, you will compare tommorow with today and realise that its not as *nice*.

In boom times retailers higher more staff, car producers make more cars they all have ancillary services which bolster the economy through job creation and investment.

Yea things will turn to normal (you will have to pick your own normal) but its no good if you've been employed as a direct result of boom times because without the boom you are surplus and out of a job. No job, no money, no mortgage payments.

All that being said recessions are a necessary part of the economic cycle they make companies more efficeint and productive otherwise they go bust. Do a search on "economic cycle" , recessions are inevitable and much needed, they just come with varying degrees of hurt.

The spending spree cannot continue forever - but a industry/sector has enlarged to accomodate it in its present bloated state. When its no longer needed.. neither are you :)

EDITED:

2005's version looks much better :lol:

Edited by theChuz

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So why then do the media and people get so carried away when there is a reduction in sales of a) cars, household goods, and retail spending in general.

It doesnt mean the economy is going into recession, it just means it will go back to normality before the housing boom? Doesnt it?

yes you would think it was obvious, but it goes to show the sheer levels of salivating greed which is blinding even the most respected institutes in the way people were blinded into thinking WW1 was a good idea.

its mass-sheep hypnosys. and the beeb/itv are in it up to the gunnels....

its a dive which they seem unable to pull out of and cant see that the ground will arrive eventually. they just seem to be increasing speed. i dont get why prudence has been thrown out of the window. i really do not get it.

i suppose it because all the pull out money that was in the dot com boom had nowhere else to go. its been ploughed into property and hence all property has been over subscribed. mind, the governmnet and media are not helping by attempting to take credit and appeal to a majoirty of home owners, but no one is thinking straight or realistic about the future of their own children. who in the end have to pay for all this madness.

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yes you would think it was obvious, but it goes to show the sheer levels of salivating greed which is blinding even the most respected institutes in the way people were blinded into thinking WW1 was a good idea.

its mass-sheep hypnosys. and the beeb/itv are in it up to the gunnels....

its a dive which they seem unable to pull out of and cant see that the ground will arrive eventually. they just seem to be increasing speed. i dont get why prudence has been thrown out of the window. i really do not get it.

i suppose it because all the pull out money that was in the dot com boom had nowhere else to go. its been ploughed into property and hence all property has been over subscribed. mind, the governmnet and media are not helping by attempting to take credit and appeal to a majoirty of home owners, but no one is thinking straight or realistic about the future of their own children. who in the end have to pay for all this madness.

Quite simple really.......

The reason that "prudence has been thrown out of the window", is so that the "gunnels" will not be awash when the good ship HPC is finally forced to land on the runway of reality, due to an excess cargo of oxymoron's :):):)

ru anotther red brik university teecher ???

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i was only saying the debt would have to be paid back at some time....

though past experience of the 89-92 crash was that it didnt seem to crush overall business.

just people who\d paid far too much for a home. like now. they got crushed a bit. for a while, but they are alright now. perhaps the same will happen to all those btls ect.

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Unlike the Great Crash (the one that came in the late 1980-'s) the coming devastation will be different because HPI has removed so much liquidity from the economy. MEWing etc was fine all the time things were going up up and away but when payback time comes around IR go up and liquidity vanishes. People get worried and spend less in the High Street. This leads to stores closing, factory lay-offs, fewer new cars sold and a general sense of forboding about the future. Confidence levels plummet. Supply starts to build and prices begin to fall. Then comes negative momentum and the crash arrives.

Its just another business cycle that will see a more severe downturn to counter the effects of a more dramatic upturn. Simplistically put: what goes up must come down and the higher it went up the harder it must fall.

Remember, no market has at any time anywhere in the world plateaued following hyper-inflation (120% HPI in 6-7 years).

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It doesnt mean the economy is going into recession, it just means it will go back to normality before the housing boom? Doesnt it?

Depends if your business model is predicated on relentless growth and you've built in lots of new capacity in anticipation of that, lots of retailers have done just that.

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Yeah but I'm sure most retailers are aware the boom couldnt continue but carried on regardless anyway.

But you're right, B&Q are shutting down a massive store in Bournemouth and another one near.

Mind you they did have about 6 in the area.

Anyway, the government is also creating lots of jobs through PFI and public spending so wont that outway it?

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Yeah but I'm sure most retailers are aware the boom couldnt continue but carried on regardless anyway.

But you're right, B&Q are shutting down a massive store in Bournemouth and another one near.

Mind you they did have about 6 in the area.

Anyway, the government is also creating lots of jobs through PFI and public spending so wont that outway it?

Brown is pushing public sector wage constraint this year :huh:

Anyway, things are catching up with him and the binge needs to be paid for via tax rises, more borrowing or spending cuts, there is no other way out and he's gone for lots of extra borrowing and taxing oil companies so far, either way it's a net take on the economy, 2007-8 will be interesting because the huge increases in public spending are meant to settle down to a more normal pace.

There is also a question as to whether these are productive jobs, by creating a non-job you take a worker out of the private labour pool and then put an extra burden on a productive private worker who is having to then pay for the non-job thru extra taxes, effectively each worker creates a dual burden, for how long can that be sustained? Even if you pile it on the national debt regardless there's going to be problems with currencies and just covering the interest payments, remember that we already spend more on public debt payments than we do on defense, that's equal to half the education budget, if we spent the money on education rather than servicing debt then people could learn how to do their sums properly <_<

The usual course of events is to try and inflate their way out and then cause a currency crisis, Brown is old school. Sterling v. US Dollar is already down 10% in 2005, that's the biggest fall since 1992 when Sterling tanked 19% following the ERM exit. Expect some interesting movements on cable (sterling/dollar) when the Fed continues to raise and the BoE holds or cuts, our interest rates are nearly at parity, a nice negative carry.

Edited by BuyingBear

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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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