Bank of England finally admit their role in the broken housing market

[Si1]

1 hour ago, Dorkins said:

I think the financial and electoral demographic chickens will come home to roost in the 2020s, by 2030 it will all be over. Agree with your point that a lot of damage has already been done though over the last 15-20 years. There is a large cohort who have already had to make major life compromises due to the high cost of housing (dual full time income instead of cutting back on work to raise families, having fewer or no children, longer commutes etc) and that cannot be magicked away.

demographics -> interest rates -> house prices

Figure 16

https://www.federalreserve.gov/PubS/ifdp/2005/847/ifdp847.htm

 

[onlooker]

1 hour ago, Confusion of VIs said:

One look at a graph of the £ $ exchange rate should sort that for you.

Trumps policy is to spend lots of borrowed money and let the next guy worry about how it gets paid back. It is already clear that the hope that the boost to the economy would result in a drop in borrowing has not materialised and now he needs near 0% interest rates to stop his chickens coming home to roost.       

The exchange rate is, partly, a consequence of the difference in interest rates.

Trump's policy may be to spend lots of borrowed money. He is certainly worried about the rise in the value of the $ harming US exports, whereas most other countries are desperately trying to hold down the value of their currencies against the $. You say the US economy is suffering and will not deliver a boost to pay off the borrowing. Given all that, why would interest rates be going up? We are still in the grip of deflation.

[Dorkins]

8 minutes ago, Si1 said:

demographics -> interest rates -> house prices

Figure 16

https://www.federalreserve.gov/PubS/ifdp/2005/847/ifdp847.htm

 

Interesting, thanks. So a bit of stagnation in the early 2020s then fast drops in the mid-late 2020s. Sounds plausible.

[Si1]

3 minutes ago, Dorkins said:

Interesting, thanks. So a bit of stagnation in the early 2020s then fast drops in the mid-late 2020s. Sounds plausible.

That's what's happened. It more or less gets the credit crunch and the echo bounce. Now we know it's dropping and that matches a drop in gradient at that point on the graph. More or less.

[Society of fools]

8 hours ago, TheCountOfNowhere said:

“We find that the rise in real house prices since 2000 can be explained almost entirely by lower interest rates,” the authors write. “Increasing scarcity of housing has played a negligible role.”

Unbelievable.

It takes dozens of some of the best educated, best resourced, best connected, best paid financial analysts in the country to come to a conclusion that a few dozen ordinary people on this House Price Crash worked out 10 years ago with no more processing power than was available on their excel spreadsheet, publicly sourced information, and a little of their spare time. 

Utterly disgraceful. 

[Si1]

39 minutes ago, Society of fools said:

Unbelievable.

It takes dozens of some of the best educated, best resourced, best connected, best paid financial analysts in the country to come to a conclusion that a few dozen ordinary people on this House Price Crash worked out 10 years ago with no more processing power than was available on their excel spreadsheet, publicly sourced information, and a little of their spare time. 

Utterly disgraceful. 

+1

The narrative suited the establishment at the time. That's all.

[TheCountOfNowhere]

2 minutes ago, Si1 said:

+1

The narrative suited the establishment at the time. That's all.

In that case, what's the new narrative? 

[Si1]

1 hour ago, TheCountOfNowhere said:

In that case, what's the new narrative? 

Stop brexit. Or general panic now the previous settlement is falling apart.

I'm thinking back to John Major in the 90s and before that Heath and Callaghan in the 70s. The narrative was panic and confusion. Finding something to blame and fix things.

Nurse!

Edited September 11, 2019 by Si1

[longgone]

On 11/09/2019 at 11:11, TheCountOfNowhere said:

https://www.google.com/amp/s/amp.theguardian.com/business/2019/may/02/bank-of-england-holds-interest-rates-and-vows-to-restrict-future-rises-

 

Bank of England warns of interest rate rise over next three years

0.25 ????

[Ah-so]

On 11/09/2019 at 16:24, Society of fools said:

Unbelievable.

It takes dozens of some of the best educated, best resourced, best connected, best paid financial analysts in the country to come to a conclusion that a few dozen ordinary people on this House Price Crash worked out 10 years ago with no more processing power than was available on their excel spreadsheet, publicly sourced information, and a little of their spare time. 

Utterly disgraceful. 

It's a staff blog not actually the opinion of the Bank, although if the opinion was very opposed to policy it would be unlikely to be published. Andy Haldane, the Chief Economist, quite likes unorthodox thinking so as long as the work was firmly evidenced, it would go through. 

Regarding pay, they probably count as among the worst paid financial analysts in the country. Especially compared to the City. 

However, I agree that this conclusion is common sense and we have been making it for years on this site, particularly the link between rents and property prices. 

[Up the spout]

On 11/09/2019 at 21:46, onlooker said:

The exchange rate is, partly, a consequence of the difference in interest rates.

Trump's policy may be to spend lots of borrowed money. He is certainly worried about the rise in the value of the $ harming US exports, whereas most other countries are desperately trying to hold down the value of their currencies against the $. You say the US economy is suffering and will not deliver a boost to pay off the borrowing. Given all that, why would interest rates be going up? We are still in the grip of deflation.

Trump wants lower rates because he and his peers have hundreds of millions of debt. Every tweet (especially about Gyna) is aimed at destabilising the US economy, which if successful will lead to lower interest rates.

[Voice of Doom]

Thought this thread was appropriate for this.

The Oxford Macroeconomics Prof, Simon Wren-Lewis, has blogged about why interest rates have caused HPI not lack of supply.

https://mainlymacro.blogspot.com/2020/01/evidence-and-persistence-of-mistaken.html?m=1

[Aidan Ap Word]

14 hours ago, Voice of Doom said:

Thought this thread was appropriate for this.

The Oxford Macroeconomics Prof, Simon Wren-Lewis, has blogged about why interest rates have caused HPI not lack of supply.

https://mainlymacro.blogspot.com/2020/01/evidence-and-persistence-of-mistaken.html?m=1

Quote

My question is why this point is almost never made in the popular discourse on the house price problem? One answer is that housebuilders have a vested interest in suggesting a dire need for more housebuilding, in part because it adds to pressure on governments to free up greenfield sites. This is exactly what has happened since 2010. There is nearly always a vested interest in perpetuating incorrect economic explanations.

Fair play to the academic who does a very good job of not mentioning Persimmon and HTB.

(to be clear he makes some very very good points, IMO anyway)

Edited January 22, 2020 by Aidan Ap Word
Clarity

[dugsbody]

On 11/09/2019 at 16:24, Society of fools said:

Unbelievable.

It takes dozens of some of the best educated, best resourced, best connected, best paid financial analysts in the country to come to a conclusion that a few dozen ordinary people on this House Price Crash worked out 10 years ago with no more processing power than was available on their excel spreadsheet, publicly sourced information, and a little of their spare time. 

Utterly disgraceful. 

There are still many, many people on this forum and others who refuse to acknowledge it. 

[Innkeeper]

11 minutes ago, dugsbody said:

There are still many, many people on this forum and others who refuse to acknowledge it. 

But they understand the laws of supply and demand so they must be right ?

[Social Justice League]

This is an astonishing revelation from the BOE.

They should be done for treason imo.

Disgraceful mis-management.

[Social Justice League]

IR's should be 5% today.