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Si1

When did housing bubbles become govt policy?

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After john majors government were voted out of office. Became the accepted political view that the simmering resentment from the housing crash on his watch was to blame for tories being out of power for so long. Hence george osbornes policies of help to buy and the like. Keep the elderly and homeowners on side, despite stagnant wages and crumbling public services,   and we will win an election. Which is what happened. 

The housing bubble blown by new labour also much bigger now than in the 90s. Pop much worse economically and politically. 

 

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When the masses could vote.

Mass democracy is about who can buy the most votes with other peoples' money. And a housing bubble is an easy way to do that.

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Governments have always bribed the electorate. But thinking back to the 1970s, when a majority of the population rented, and far stricter mortgage lending placed a limit on the debt held by those who owned, what factors brought governments down?Stagnating wages, inflation, currency crises that destroyed peoples savings and raised prices, unemployment and closure of key industries. 

In the past, a decade of flat wages would have long seen a government out.  But now the majority of the population has thrown everything into wealth bricks, the overriding concern is the value of those wealth bricks and the monthly cost of servicing the debt on them. 

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For me it seems entirely logical

1.  Gatt trade comes into effect https://www.youtube.com/watch?v=wwmOkaKh3-s

 

2.  The basic fact is that computers mean money and IP cam move any place any time but people cannot in the main.

3.  Capital and production is moved to countries where the costs are lower and the workers dont play up as much.

4.  This results in less jobs making things in developed countries even 2nd world countries.

5.  The countries making things (eg china) however need to see them so they keenly purchase the debts and take money from consuming 1st and 2nd world nations.

6.  This results in lower rates and a "take it for granted" attitude to government debt and money coming back as investments.

7.  However only a few people can work in the chop shops of financial centres to make money from this so how is the gap bridged?  Consumption thats how but with real wages moribund (as the world wages equalise with us dropping to meet the risers) how does the government bridge the gap ..... at least long enough to get re elected.

8.  Maintain a property market that creates paper wealth which actually covers up the loss of wages that people used to enjoy.

Nobody wants to take the required action as it will implode so keep it going until technology (3d printing/fuel costs/etc) do something to come to the rescue..... or it implodes itself.

It really is quite funny that Corbyn promises a revolution.... but keeping help to buy etc etc when he gets in he must surely understand that if the housing market falls the population will expose how skint they really are.... and the money will not be there for the taking as it never really existed in the main.

The number of times I view a house 500k+ thats owner by someone who had a bog standard job in the 90s is quite scary.

On paper on the way to being millionaire.... in cash terms not much 

Edited by Fromage Frais

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On 02/11/2019 at 16:35, nothernsoul said:

After john majors government were voted out of office. Became the accepted political view that the simmering resentment from the housing crash on his watch was to blame for tories being out of power for so long. Hence george osbornes policies of help to buy and the like. Keep the elderly and homeowners on side, despite stagnant wages and crumbling public services,   and we will win an election. Which is what happened. 

The housing bubble blown by new labour also much bigger now than in the 90s. Pop much worse economically and politically. 

 

+1

 

As a homeowner I want my house to stay constant in value, increases harm others (and stop me moving up the chain) - decreases harm my loan to equity ratio - constant is the perfect compromise

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On 02/11/2019 at 16:15, Si1 said:

As per title, what gave?

When did housing bubbles become govt policy?

Once the banks were let off the leash.

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On 02/11/2019 at 17:32, MarkG said:

When the masses could vote.

But that was 1928?  I hardly think housing bubbles were government policy then.

I agree with the poster who said it started with the Blair government - it was the early 2000s it all got sillier, and has remained silly ever since.  

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8 hours ago, scottbeard said:

But that was 1928?  I hardly think housing bubbles were government policy then.

I agree with the poster who said it started with the Blair government - it was the early 2000s it all got sillier, and has remained silly ever since.  

If my memory serves me correctly, and I think it does, the first housing bubble was in the early 1970s under Ted Heath. Up to that time, there were tight constraints on borrowing, and schedule D taxation of houses. Heath basically triggered a credit boom, which was subsequently popped by the oil price jump of 1973. It is the very first peak in the graph on the home page of this website.

By 1978 borrowing was again tricky. One had to have saved with a building society for several years in order to get a mortgage, yet for most folks saving was something they did in a biscuit tin in the cupboard.

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10 hours ago, scottbeard said:

I agree with the poster who said it started with the Blair government - it was the early 2000s it all got sillier, and has remained silly ever since.  

The Blair govt allowed mass uncontrolled immigration - that coupled with 3 M EU migrants dragged people into BTL who would never ever have thought about it but a huge pool of unskilled workers who need to rent has fueled massive price rises. 

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2 hours ago, onlooker said:

If my memory serves me correctly, and I think it does, the first housing bubble was in the early 1970s under Ted Heath. Up to that time, there were tight constraints on borrowing, and schedule D taxation of houses. Heath basically triggered a credit boom, which was subsequently popped by the oil price jump of 1973. It is the very first peak in the graph on the home page of this website.

By 1978 borrowing was again tricky. One had to have saved with a building society for several years in order to get a mortgage, yet for most folks saving was something they did in a biscuit tin in the cupboard.

Your memory does serve you correctly, I recall it all much as you describe.

Heath started off with a "war" on inflation, or so I believe, but then as unemployment ballooned he started what he called "pump priming" whereby cheap money would become invested in business and industry but most of which ended up as bets on commercial and residential property. Successful ones too, for a while.

So I've always felt that Heath and TPTB thought "wait a mo, we're on to something here. Forget industry, we'll just inflate property in future".  It's almost amazing they haven't done even more of it.  If that imagined scenario is anywhere near right, it's telling that they didn't have the brains to suss what would happen in the 70s because there was a population spike among would be young house buyers just at the right - or wrong - time, hence the frantic HPI.

I did come across an alternative theory that Labour sowed the seeds on purpose with the 1947 Town and Country Planning Act, would seem a bit of a slow burner to me. 

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35 minutes ago, Bluestone59 said:

Your memory does serve you correctly, I recall it all much as you describe.

Heath started off with a "war" on inflation, or so I believe, but then as unemployment ballooned he started what he called "pump priming" whereby cheap money would become invested in business and industry but most of which ended up as bets on commercial and residential property. Successful ones too, for a while.

So I've always felt that Heath and TPTB thought "wait a mo, we're on to something here. Forget industry, we'll just inflate property in future".  It's almost amazing they haven't done even more of it.  If that imagined scenario is anywhere near right, it's telling that they didn't have the brains to suss what would happen in the 70s because there was a population spike among would be young house buyers just at the right - or wrong - time, hence the frantic HPI.

 

That's interesting.

In some respects Heath may have been the first of the neo-liberals. Educated but ignorant people who think they know best, and conveniently line their own pockets in the process. Took us into the common market without a referendum.

Edited by Si1

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It began in the early 2000s with the bursting of the stock market bubble. Krugman put it this way.

"To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

So a housing bubble to replace the stock market bubble is what we got.

In 2007 the bubble looked like it would end and a correction would take place. An economic correction and a return to growth based on fundamentals would be a disaster, obviously. So the central planners at central banks and very learned politicians, like Gordon Brown and George Bush, decided to drop interest rates to zero. And keep them at zero forever.

So, that's where we are now. A housing bubble, a bond bubble and an economy based on debt.

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55 minutes ago, Biggus said:

It began in the early 2000s with the bursting of the stock market bubble. Krugman put it this way.

"To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

So a housing bubble to replace the stock market bubble is what we got.

In 2007 the bubble looked like it would end and a correction would take place. An economic correction and a return to growth based on fundamentals would be a disaster, obviously. So the central planners at central banks and very learned politicians, like Gordon Brown and George Bush, decided to drop interest rates to zero. And keep them at zero forever.

So, that's where we are now. A housing bubble, a bond bubble and an economy based on debt.

Krugman's reputation should been destroyed by that statement - it has caused massive harm.

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On 02/11/2019 at 17:32, MarkG said:

When the masses could vote.

Mass democracy is about who can buy the most votes with other peoples' money. And a housing bubble is an easy way to do that.

Tyranny of the majority...or tyranny of the masses. A flaw in democracy such that it requires leaders to act with integrity and as stewards for the common good including the young and unborn.

I would argue the answer to the OP's question is- when politicians and those in positions of power gave up any pretence of integrity and interest in the common good.  HTB being only one example of a cynical scheme as evidence of this.

https://en.wikipedia.org/wiki/Tyranny_of_the_majority

 

 

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5 minutes ago, Wayward said:

Tyranny of the majority...or tyranny of the masses. A flaw in democracy such that it requires leaders to act with integrity and as stewards for the common good including the young and unborn.

I would argue the answer to the OP's question is- when politicians and those in positions of power gave up any pretence of integrity and interest in the common good.  HTB being only one example of a cynical scheme as evidence of this.

https://en.wikipedia.org/wiki/Tyranny_of_the_majority

 

 

I think Corbyn really shook things up by saying what he actually thinks. I can't say I share his politics, but that's not the point, I feel I can look him in the eye.

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16 hours ago, doomed said:

Once the banks were let off the leash.

That would be after the Big Bang in October 1986.

Having crushed the UK economy to the point of extinction in a monetarist straitjacket for five years, Thatcher reversed direction - without publicly admitting it - and the neoliberal, easy credit era took off for the stars.

 

 

Screen-Shot-2017-04-21-at-13.53.09.png

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17 hours ago, iamnumerate said:

+1

 

As a homeowner I want my house to stay constant in value, increases harm others (and stop me moving up the chain) - decreases harm my loan to equity ratio - constant is the perfect compromise

Exactly.

Problems it that millions in this country can't see the truth of that.

Evemn the (otherwise) very astute people I work with - even those who can see through the noise to the end goal and a path to get there (in business and technology terms) - either: see ever increasing house prices as a good thing OR see them as an inevitability and thus propose playing (or leaning on) the system to minimise the negatives that they can see.

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16 hours ago, hayder said:

1983

Yes the financial Big Bang....

When banks started lending money secured against property amongst other deregulations...😉

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1 hour ago, Aidan Ap Word said:

Exactly.

Problems it that millions in this country can't see the truth of that.

Evemn the (otherwise) very astute people I work with - even those who can see through the noise to the end goal and a path to get there (in business and technology terms) - either: see ever increasing house prices as a good thing OR see them as an inevitability and thus propose playing (or leaning on) the system to minimise the negatives that they can see.

Either 

a) You and I are a genii (I doubt it, for me)

b) lots of people are very stupid (I hope not)

c) lots of people don't care about others (I hope not).

 

So lets hope we are genii - the alternatives are far worse.

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52 minutes ago, iamnumerate said:

Either 

a) You and I are a genii (I doubt it, for me)

b) lots of people are very stupid (I hope not)

c) lots of people don't care about others (I hope not).

 

So lets hope we are genii - the alternatives are far worse.

The evidence points to C.

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On 02/11/2019 at 16:35, nothernsoul said:

After john majors government were voted out of office. Became the accepted political view that the simmering resentment from the housing crash on his watch was to blame for tories being out of power for so long. Hence george osbornes policies of help to buy and the like. Keep the elderly and homeowners on side, despite stagnant wages and crumbling public services,   and we will win an election. Which is what happened. 

The housing bubble blown by new labour also much bigger now than in the 90s. Pop much worse economically and politically.

Correct.  The worst part is that it happened by accident because of Labour's complacency that giving the Bank of England 'independence' meant the government didn't see that it needed to intervene to prevent crazy mortgage lending.

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  • 294 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% +
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