winkie Posted October 27, 2020 Share Posted October 27, 2020 You only need to worry about interest rates if you need to borrow money. Most people do as they are poor, but pretend to be rich. Oh what a great game our broken financial system is. Nothing wrong with borrowing to buy a first home, or first car not leasing or renting....or to start a viable business, even the Right education, stuff that can add value.....to borrow to buy food, drugs, rock and roll, holidays, clothes...stuff that will be spent short-term say less than a year....who wants to be paying for a meal ate last year, pair of shoes that bined six months ago, still paying for that holiday two years ago plus interest.... Quote Link to comment Share on other sites More sharing options...
Pop321 Posted October 27, 2020 Share Posted October 27, 2020 Imagine a world without mortgages. Some here would assume housing would crash 80% and everyone could afford to buy in cash. In reality prices would fall 20%, before being snapped up by the mega rich to rent out to the proles. Easy money at 6% yield plus and the renters can't afford to buy cash over 10 or 15 years. Easy money. I would have that cash and not interested in buying rows or terraces with tenants, boilers, certificates, roof repairs.....because I already have the wealth. The old cash LLs do still exist and I know many of them but they own 2/3 ir maybe 4 and live frugally... 1990’s new BTL was never really about a good investment of your wealth it was a leverage to create wealth and one that worked well for many and myself. Now I own outright the last thing I want are these houses...if I could stomach evictions I would sell mine tomorrow and wallow about in cash. Property at lower values yielding even 20% is a job (for the mega rich) not an investment if prices aren’t rising in price. Those Middle East investors in London don’t let the places out...they don’t need to. Commercial property is a little different (albeit that world is changing) it offers a different type of investment...insure it and let it to a firm. Indeed I know a LL of a chain store and it’s all about kudos and little perks. I could buy some other type of business and make millions with my cash....but I don’t because it’s hard work. It’s the same with property it’s not the golden egg investment. Property investment for the mega rich is the inclusion of a property fund in a portfolio. Not rows of houses in Stoke. Those funds will concentrate their investments carefully Now I agree a massive crash is doubtful but not because I believe the intrinsic value of property is wrong but rather the governments will keep fighting a true market price. Last place I bought was £210k and the neighbouring house was sold 6 months prior for £410k. That was in a relatively softish market. When prices are falling make no mistake how low I and many others (ie cash rich property interested people) will wait until we buy. Have said before about an old boy I knew who bought 2 terraces (split into 8 flats) for about 20% of value. Was in the 90’s and nothing was selling and I saw the seller crying in the street because she could not evict a drug dealer. This lovely old fella bought the places from her and I remember his lovely words to me. I pull out their eyes out and piss on their brains. (still think he stole this from The film trading places) 20% under this scenario not even nearly close enough. I expect that as a routine seasonal drop anyway in the cold snap of winter with mortgages still around. Without mortgages and a true crash....you wouldn’t see me until I knew rents would be paid, grants were available and councils were waiving council tax. Quote Link to comment Share on other sites More sharing options...
winkie Posted October 27, 2020 Share Posted October 27, 2020 How much national wealth is tied up in land and property?.... practically a property absolute crash now will be avoided if at all possible.....HPI growth days have passed however. The wealth held within property will be required in future days to cover for health and care costs and day to day living if pensions or income unable to cover.....the public purse can't afford to pay for everything always....easy come easy go. Quote Link to comment Share on other sites More sharing options...
msi Posted October 27, 2020 Share Posted October 27, 2020 How much national wealth is tied up in land and property?.... practically a property absolute crash now will be avoided if at all possible.....HPI growth days have passed however. The wealth held within property will be required in future days to cover for health and care costs and day to day living if pensions or income unable to cover.....the public purse can't afford to pay for everything always....easy come easy go. Most of UK will be underwater within 500 years, so that is a HPC hard limit Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 27, 2020 Share Posted October 27, 2020 Is this the time for returns or wealth conservation? They are not mutually exclusive. Quote Link to comment Share on other sites More sharing options...
Unmoderated Posted October 27, 2020 Share Posted October 27, 2020 fundamentally 60k added to the price every 3 years no ones wage would keep up and even if it did the next generation of buyers always end up in something smaller than they would have done. wages are terrible even at high five or 100k a year compared to houses prices in the SE now. If you really think a compounding of hpi year on year is sustainable why does this site exist ? it may be sustainable if you are prepared to live in ever decreasing accommodation of course, what gives price or size Hold up - the argument starts with all things being equal a 22 year old should wait three years before buying since there's no difference in their earnings? Actually, in the example of a trainee accountant they'd be earnings at least £15k more in three years so that would cover the £60k. Not that this would justify the increase but missing three years of repayments for the sake of waiting and seeing is just nuts! I agree the £60k/year isn't sustainable when its about 10-15 % of the price (unless wages are increasing by those amounts) but there's more to it than the market average. They're doing road improvements that makes this street far less busy. They're improving the town centre and investing in new leisure facilities etc tec blah blah. I could sit there and wait for three years (all the time paying rent, not clearing a mortgage and potentially getting left further behind) or I could buy. Now, in another town somewhere in the south east a 22 year old might be earning enough to buy something. Many a bed wetter would put it off and 'wait and see'. The issue is they'll always be waiting and seeing. There will always be something that's going to cause a crash, or a downturn. There's always a cloud on the way even when the sun is shining. Timing the market is an absolute mug's game. Anyone on here saying they'll wait because prices are going to fall and they'll magically buy at the bottom is deluded and heading for a retirement in rented. Quote Link to comment Share on other sites More sharing options...
longgone Posted October 27, 2020 Share Posted October 27, 2020 Hold up - the argument starts with all things being equal a 22 year old should wait three years before buying since there's no difference in their earnings? Actually, in the example of a trainee accountant they'd be earnings at least £15k more in three years so that would cover the £60k. Not that this would justify the increase but missing three years of repayments for the sake of waiting and seeing is just nuts! I agree the £60k/year isn't sustainable when its about 10-15 % of the price (unless wages are increasing by those amounts) but there's more to it than the market average. They're doing road improvements that makes this street far less busy. They're improving the town centre and investing in new leisure facilities etc tec blah blah. I could sit there and wait for three years (all the time paying rent, not clearing a mortgage and potentially getting left further behind) or I could buy. Now, in another town somewhere in the south east a 22 year old might be earning enough to buy something. Many a bed wetter would put it off and 'wait and see'. The issue is they'll always be waiting and seeing. There will always be something that's going to cause a crash, or a downturn. There's always a cloud on the way even when the sun is shining. Timing the market is an absolute mug's game. Anyone on here saying they'll wait because prices are going to fall and they'll magically buy at the bottom is deluded and heading for a retirement in rented. Really that`s the only line that matters. somewhere down the line wages will not equate house prices. And we are well past that. Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 27, 2020 Share Posted October 27, 2020 Really that`s the only line that matters. somewhere down the line wages will not equate house prices. And we are well past that. and yet somehow people continue to buy. Quote Link to comment Share on other sites More sharing options...
longgone Posted October 27, 2020 Share Posted October 27, 2020 and yet somehow people continue to buy. Cheap lending to make up the shortfall. 50 quid a month cheaper than renting and they flock. Quote Link to comment Share on other sites More sharing options...
Social Justice League Posted October 27, 2020 Share Posted October 27, 2020 and yet somehow people continue to buy borrow. Begging banks for cash is so unlike the middle classes. Quote Link to comment Share on other sites More sharing options...
longgone Posted October 28, 2020 Share Posted October 28, 2020 Begging banks for cash is so unlike the middle classes. Fomo Innit, how else will they get the 200k required for the next rung on the ponzi express and still end up in a chit 800 foot semi with an audi half parked on the pavement. Quote Link to comment Share on other sites More sharing options...
Social Justice League Posted October 28, 2020 Share Posted October 28, 2020 And then having to pay the mortgage every month for decades out of taxed, peasant income.............. It's fools gold..........but then most men know this already. It's the insecure wives/birds who tell the simps what to do and by Christ, they do it while gubbing a few blue pills. They need to buy that hole.............lol. It's cheaper to head off to Amsterdan and pay the fifty, or so I've heard.............. Quote Link to comment Share on other sites More sharing options...
longgone Posted October 28, 2020 Share Posted October 28, 2020 Quote Link to comment Share on other sites More sharing options...
A.steve Posted October 28, 2020 Share Posted October 28, 2020 (edited) Really that`s the only line that matters. somewhere down the line wages will not equate house prices. And we are well past that. I have a wild hypothesis for you. I'll present it as a narrative about a fictional similated economic environment: Simplified-EarthGame. In Simplified-EarthGame, there are assets - call them houses. Players need to pay a market price to buy houses and 'spare' ones may be offered to rent on a second, indepenedent, rental market. In order to buy houses, or pay rent, money needs to be acquired. The obvious (and approved) mechanism is by performing menial tasks (in a competitive marketplace) in exchange for money from others. The money acquired in this way dominates spending in the rental market. Another way to acquire money is by borrowing it. Players can borrow money against revenue generating assets. Houses are one example - but other assets (for example a new word, also known as a trademark) can be readily created. Assets are valued by the revenue streams they generate. An interesting phenomenon arises when feedback occurs among players involved in acquiring money by borrowing it. Feedback occurs when cycles emerge. A simple cycle might involve 3 players: A, B and C... Players A, B and C create assets called Alpha, Beta and Gamma - respectively. Player A borrows 20 credits at 10% against Alpha - and rents Beta from B for 1 month for 10 credits. Player B recieves 10 credits from A for Beta for 1 month - indicating Beta revenues of 120 Credits/anm - valuing Beta at 1200 Credits - against which B borrows 200 Credits and rents Gamma from C for 1 month for 100 Credits. Player C receives 100 credits for Gamma from for 1 month - indicating Gamma revenues of 1200 Credits - valuing Gamma at 12,000 Credits, against which C borrows 2000 Credits and rents Alpha from A for 1000 Credits. Players A, B and C are always solvent. At the end of round 1: A pays 2 Credits interest, spends 8 Credits on other things... has 1000 Credits cash and 20 Credits debt against an asset valued at 10,000 Credits. B pays 20 Credits interest, spends 30 Credits on other things, has 50 Credits cash, debt of 200 Credits and an asset valued at 1,200 Credits. C pays 200 Credits interest, spends 300 Credits on other things, has 800 Credits cash, debt of 2,000 Credits and an asset valued at 12,000 Credits. Note that all three players are: solvent - and it looks plausible that they can remain so. vastly more creditworthy than at the beginning of the first round - by virtue of their demonstation of ownership of revenue-generating assets. this wealth generation takes place in a closed loop - and the assets need not be of any interest to other players. There are no detectable bad debts for A, B or C. A B and C can easily double their borrowing and rent payments in period 2 - and, by so doing, double their disposable income. There is no technical reason why the valuations of the assets should not grow exponentially without bound - as long as sufficient rent is paid to cover any interest payments. Players A, B and C are all able to spend money on other things in each round - i.e. they have a source of unearned income - yet none contributes anything of tangible value to other players. Clearly, this virtuous cycle might easily result in revenues (and ability to spend) that vastly eclipse the revenues of other players (who might perform menial tasks rather than borrow and pay each-other's interest). There is nothing about this cycle that depends upon outside influences - so it can spiral exponentially independent of other players... as long as a bank wants to make loans and charge interest. Interesting questions: What happens when the internal payments between A, B and C grow so large that they bear no resembalnce to other means of revenue generation? Are the assets Alpha, Beta and Gamma bogus - or genuine? Does it matter that there are 3 players? Would 1 or 2 suffice? Is any player acting fraudulently? If game-play is valid at round 1, what about round 100 or 1000? Does it matter if players A, B and C are co-ordinated by another player D? Edited October 28, 2020 by A.steve Quote Link to comment Share on other sites More sharing options...
Si1 Posted October 28, 2020 Share Posted October 28, 2020 (edited) I have a wild hypothesis for you. I'll present it as a narrative about a fictional similated economic environment: Simplified-EarthGame. In Simplified-EarthGame, there are assets - call them houses. Players need to pay a market price to buy houses and 'spare' ones may be offered to rent on a second, indepenedent, rental market. In order to buy houses, or pay rent, money needs to be acquired. The obvious (and approved) mechanism is by performing menial tasks (in a competitive marketplace) in exchange for money from others. The money acquired in this way dominates spending in the rental market. Another way to acquire money is by borrowing it. Players can borrow money against revenue generating assets. Houses are one example - but other assets (for example a new word, also known as a trademark) can be readily created. Assets are valued by the revenue streams they generate. An interesting phenomenon arises when feedback occurs among players involved in acquiring money by borrowing it. Feedback occurs when cycles emerge. A simple cycle might involve 3 players: A, B and C... Players A, B and C create assets called Alpha, Beta and Gamma - respectively. Player A borrows 20 credits at 10% against Alpha - and rents Beta from B for 1 month for 10 credits. Player B recieves 10 credits from A for Beta for 1 month - indicating Beta revenues of 120 Credits/anm - valuing Beta at 1200 Credits - against which B borrows 200 Credits and rents Gamma from C for 1 month for 100 Credits. Player C receives 100 credits for Gamma from for 1 month - indicating Gamma revenues of 1200 Credits - valuing Gamma at 12,000 Credits, against which C borrows 2000 Credits and rents Alpha from A for 1000 Credits. Players A, B and C are always solvent. At the end of round 1: A pays 2 Credits interest, spends 8 Credits on other things... has 1000 Credits cash and 20 Credits debt against an asset valued at 10,000 Credits. B pays 20 Credits interest, spends 30 Credits on other things, has 50 Credits cash, debt of 200 Credits and an asset valued at 1,200 Credits. C pays 200 Credits interest, spends 300 Credits on other things, has 800 Credits cash, debt of 2,000 Credits and an asset valued at 12,000 Credits. Note that all three players are: solvent - and it looks plausible that they can remain so. vastly more creditworthy than at the beginning of the first round - by virtue of their demonstation of ownership of revenue-generating assets. this wealth generation takes place in a closed loop - and the assets need not be of any interest to other players. There are no detectable bad debts for A, B or C. A B and C can easily double their borrowing and rent payments in period 2 - and, by so doing, double their disposable income. There is no technical reason why the valuations of the assets should not grow exponentially without bound - as long as sufficient rent is paid to cover any interest payments. Players A, B and C are all able to spend money on other things in each round - i.e. they have a source of unearned income - yet none contributes anything of tangible value to other players. Clearly, this virtuous cycle might easily result in revenues (and ability to spend) that vastly eclipse the revenues of other players (who might perform menial tasks rather than borrow and pay each-other's interest). There is nothing about this cycle that depends upon outside influences - so it can spiral exponentially independent of other players... as long as a bank wants to make loans and charge interest. Interesting questions: What happens when the internal payments between A, B and C grow so large that they bear no resembalnce to other means of revenue generation? Are the assets Alpha, Beta and Gamma bogus - or genuine? Does it matter that there are 3 players? Would 1 or 2 suffice? Is any player acting fraudulently? If game-play is valid at round 1, what about round 100 or 1000? Does it matter if players A, B and C are co-ordinated by another player D? It's not a closed system though is it? The lending bank needs capital from somewhere to keep increasing the lending to keep the little cycle going, unless I'm mistaken?? Edited October 28, 2020 by Si1 Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 28, 2020 Share Posted October 28, 2020 Begging banks for cash is so unlike the middle classes. Not sure they beg. Traditionally you probably had to be middle class to get a mortgage. Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 28, 2020 Share Posted October 28, 2020 Cheap lending to make up the shortfall. 50 quid a month cheaper than renting and they flock. 50 a month cheaper than renting on a cashflow basis but what about when you look at it on a p&l and balance sheet basis? 1k a week on a mortgage is about 300 interest and 700 repayment. Actual expense 300 since 700 is going from cash to liability i.e. nil on an accounting basis. Renting is 1,050 a month on a cash flow basis and 1,050 on an expense basis. Pretty compelling. Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 28, 2020 Share Posted October 28, 2020 Fomo Innit, how else will they get the 200k required for the next rung on the ponzi express and still end up in a chit 800 foot semi with an audi half parked on the pavement. Haha, yeah there are a few on my street (The type seem attracted by a Victorian semi/terrace. Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 28, 2020 Share Posted October 28, 2020 I have a wild hypothesis for you. I'll present it as a narrative about a fictional similated economic environment: Simplified-EarthGame. In Simplified-EarthGame, there are assets - call them houses. Players need to pay a market price to buy houses and 'spare' ones may be offered to rent on a second, indepenedent, rental market. In order to buy houses, or pay rent, money needs to be acquired. The obvious (and approved) mechanism is by performing menial tasks (in a competitive marketplace) in exchange for money from others. The money acquired in this way dominates spending in the rental market. Another way to acquire money is by borrowing it. Players can borrow money against revenue generating assets. Houses are one example - but other assets (for example a new word, also known as a trademark) can be readily created. Assets are valued by the revenue streams they generate. An interesting phenomenon arises when feedback occurs among players involved in acquiring money by borrowing it. Feedback occurs when cycles emerge. A simple cycle might involve 3 players: A, B and C... Players A, B and C create assets called Alpha, Beta and Gamma - respectively. Player A borrows 20 credits at 10% against Alpha - and rents Beta from B for 1 month for 10 credits. Player B recieves 10 credits from A for Beta for 1 month - indicating Beta revenues of 120 Credits/anm - valuing Beta at 1200 Credits - against which B borrows 200 Credits and rents Gamma from C for 1 month for 100 Credits. Player C receives 100 credits for Gamma from for 1 month - indicating Gamma revenues of 1200 Credits - valuing Gamma at 12,000 Credits, against which C borrows 2000 Credits and rents Alpha from A for 1000 Credits. Players A, B and C are always solvent. At the end of round 1: A pays 2 Credits interest, spends 8 Credits on other things... has 1000 Credits cash and 20 Credits debt against an asset valued at 10,000 Credits. B pays 20 Credits interest, spends 30 Credits on other things, has 50 Credits cash, debt of 200 Credits and an asset valued at 1,200 Credits. C pays 200 Credits interest, spends 300 Credits on other things, has 800 Credits cash, debt of 2,000 Credits and an asset valued at 12,000 Credits. Note that all three players are: solvent - and it looks plausible that they can remain so. vastly more creditworthy than at the beginning of the first round - by virtue of their demonstation of ownership of revenue-generating assets. this wealth generation takes place in a closed loop - and the assets need not be of any interest to other players. There are no detectable bad debts for A, B or C. A B and C can easily double their borrowing and rent payments in period 2 - and, by so doing, double their disposable income. There is no technical reason why the valuations of the assets should not grow exponentially without bound - as long as sufficient rent is paid to cover any interest payments. Players A, B and C are all able to spend money on other things in each round - i.e. they have a source of unearned income - yet none contributes anything of tangible value to other players. Clearly, this virtuous cycle might easily result in revenues (and ability to spend) that vastly eclipse the revenues of other players (who might perform menial tasks rather than borrow and pay each-other's interest). There is nothing about this cycle that depends upon outside influences - so it can spiral exponentially independent of other players... as long as a bank wants to make loans and charge interest. Interesting questions: What happens when the internal payments between A, B and C grow so large that they bear no resembalnce to other means of revenue generation? Are the assets Alpha, Beta and Gamma bogus - or genuine? Does it matter that there are 3 players? Would 1 or 2 suffice? Is any player acting fraudulently? If game-play is valid at round 1, what about round 100 or 1000? Does it matter if players A, B and C are co-ordinated by another player D? There is a big difference between imagining up an asset capable of generating those incomes and genuinely creating one. Houses need to be built. Even if the land was free or significantly cheaper through removal of planning regulations there are still major costs. How did three players come by such an asset? Who are they borrowing from? Day one these guys have magic assets and no debt but over time the debt pile and interst costs accumulate so it is not sustainable. If they are borrowing and renting from each other then what about tax? Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 28, 2020 Share Posted October 28, 2020 Did you choose not to choose life? Did you choose something else? Heroine? Quote Link to comment Share on other sites More sharing options...
Unmoderated Posted October 28, 2020 Share Posted October 28, 2020 Really that`s the only line that matters. somewhere down the line wages will not equate house prices. And we are well past that. So the 22 year old should always wait until 25 because past rises are not (in your opinion) sustainable? Quote Link to comment Share on other sites More sharing options...
Pop321 Posted October 28, 2020 Share Posted October 28, 2020 I have a wild hypothesis for you. I'll present it as a narrative about a fictional similated economic environment: Simplified-EarthGame. In Simplified-EarthGame, there are assets - call them houses. Players need to pay a market price to buy houses and 'spare' ones may be offered to rent on a second, indepenedent, rental market. In order to buy houses, or pay rent, money needs to be acquired. The obvious (and approved) mechanism is by performing menial tasks (in a competitive marketplace) in exchange for money from others. The money acquired in this way dominates spending in the rental market. Another way to acquire money is by borrowing it. Players can borrow money against revenue generating assets. Houses are one example - but other assets (for example a new word, also known as a trademark) can be readily created. Assets are valued by the revenue streams they generate. An interesting phenomenon arises when feedback occurs among players involved in acquiring money by borrowing it. Feedback occurs when cycles emerge. A simple cycle might involve 3 players: A, B and C... Players A, B and C create assets called Alpha, Beta and Gamma - respectively. Player A borrows 20 credits at 10% against Alpha - and rents Beta from B for 1 month for 10 credits. Player B recieves 10 credits from A for Beta for 1 month - indicating Beta revenues of 120 Credits/anm - valuing Beta at 1200 Credits - against which B borrows 200 Credits and rents Gamma from C for 1 month for 100 Credits. Player C receives 100 credits for Gamma from for 1 month - indicating Gamma revenues of 1200 Credits - valuing Gamma at 12,000 Credits, against which C borrows 2000 Credits and rents Alpha from A for 1000 Credits. Players A, B and C are always solvent. At the end of round 1: A pays 2 Credits interest, spends 8 Credits on other things... has 1000 Credits cash and 20 Credits debt against an asset valued at 10,000 Credits. B pays 20 Credits interest, spends 30 Credits on other things, has 50 Credits cash, debt of 200 Credits and an asset valued at 1,200 Credits. C pays 200 Credits interest, spends 300 Credits on other things, has 800 Credits cash, debt of 2,000 Credits and an asset valued at 12,000 Credits. Note that all three players are: solvent - and it looks plausible that they can remain so. vastly more creditworthy than at the beginning of the first round - by virtue of their demonstation of ownership of revenue-generating assets. this wealth generation takes place in a closed loop - and the assets need not be of any interest to other players. There are no detectable bad debts for A, B or C. A B and C can easily double their borrowing and rent payments in period 2 - and, by so doing, double their disposable income. There is no technical reason why the valuations of the assets should not grow exponentially without bound - as long as sufficient rent is paid to cover any interest payments. Players A, B and C are all able to spend money on other things in each round - i.e. they have a source of unearned income - yet none contributes anything of tangible value to other players. Clearly, this virtuous cycle might easily result in revenues (and ability to spend) that vastly eclipse the revenues of other players (who might perform menial tasks rather than borrow and pay each-other's interest). There is nothing about this cycle that depends upon outside influences - so it can spiral exponentially independent of other players... as long as a bank wants to make loans and charge interest. Interesting questions: What happens when the internal payments between A, B and C grow so large that they bear no resembalnce to other means of revenue generation? Are the assets Alpha, Beta and Gamma bogus - or genuine? Does it matter that there are 3 players? Would 1 or 2 suffice? Is any player acting fraudulently? If game-play is valid at round 1, what about round 100 or 1000? Does it matter if players A, B and C are co-ordinated by another player D? How did A, B and C create the incoming generating assets Alpha, Beta and Gamma? Let me know and some friends and I will create some this afternoon then we are sorted. 😉 The bubble scenario has other outside influences. True story. The is a HMO in our town let out for £60k a year (8 nasty bedsits) and has been in the market for 2 years at £750k. Despite the yield it’s a million miles away from being worth £750/£500 or even £350k. These terraces sell for £250/£300k as houses. It’s almost as though the asset value is based on more than just the income it generates. Leveraging is a short term model in the real world... used it myself. However those who borrow and don’t have enough respect or fear of debt can look forward to someone like me buying it from them when the wheels fall off. Viewing something today (again I am researching because my son is hoping to buy at some point) it’s auction guided at £130k. Vacant but a BTL repossession worth £175k in its current state but stripped out no kitchen or bathroom. I was asked to view and make an offer because it needs to be cash. £80k is my number...I will tell the EA to look for someone who doesn’t think we are teetering on the edge of a cliff. ps I say teetering at the edge rather than heading off a cliff. Nothing is certain (crash or no crash) but it does appear many can’t even see the cliff edge but are just looking at the horizon. They may be the ones who slip. Quote Link to comment Share on other sites More sharing options...
A.steve Posted October 28, 2020 Share Posted October 28, 2020 It's not a closed system though is it? The lending bank needs capital from somewhere to keep increasing the lending to keep the little cycle going, unless I'm mistaken?? The lending bank does, indeed, require capital. In the game, played by A, B and C, there needs to be a bank. There is nothing to stop A, B and C investing a portion of their funds in a bank to provide capital adequacy for lending. Ours is not a closed system - but, in order to contemplate the real complex system, one needs to consider simplified fictional scenarios. There is a big difference between imagining up an asset capable of generating those incomes and genuinely creating one. Houses need to be built. Even if the land was free or significantly cheaper through removal of planning regulations there are still major costs. How did three players come by such an asset? Who are they borrowing from? Day one these guys have magic assets and no debt but over time the debt pile and interst costs accumulate so it is not sustainable. If they are borrowing and renting from each other then what about tax? In the scenario I presented, only A, B and C (and their banks) need to consider the Alpha, Beta and Gamma assets valuable. The banks can use revenue stream estimates to justify asset valuations. Sure, houses need to be built and require scarce resources - like land. However, houses are not the only assets. Other assets might include a painting, or a trademark or a share in the revenues of a legal entity. Creating assets is easy. Establishing value for the assets is not as hard as it sounds within a closed group with access to credit. I fully understand your concern that this might not be sustainable. The question is this: By what mechanism do you expect this to fail if it is not sustainable? How did A, B and C create the incoming generating assets Alpha, Beta and Gamma? Let me know and some friends and I will create some this afternoon then we are sorted. 😉 The bubble scenario has other outside influences. I've just drawn a picture of a turd, an original, unique, priceless artwork. I'm willing to let you admire it for £1000/month. With a credit card, you can play the role of A, all we need is someone to play C and an accommodating banker... and then we'd all be much richer! (What could go wrong?) I accept that there are outside influences... most notably trust and belief. However, I note that both trust and belief are fragile. They remain until they don't... and when they don't... that change could happen very quickly. Quote Link to comment Share on other sites More sharing options...
Locke Posted October 28, 2020 Share Posted October 28, 2020 menial tasks (in a competitive marketplace) in exchange for money from others. Why "menial"? Two things which might help: value doesn't exist; it is simply an opinion. exorbitant privilege. Government rules force people to accept Fiat as if it had backing and also force people to "invest" in stock markets, because of tax breaks for pension "investments". Quote Link to comment Share on other sites More sharing options...
Pop321 Posted October 28, 2020 Share Posted October 28, 2020 I've just drawn a picture of a turd, an original, unique, priceless artwork. I'm willing to let you admire it for £1000/month. With a credit card, you can play the role of A, all we need is someone to play C and an accommodating banker... and then we'd all be much richer! (What could go wrong?) I accept that there are outside influences... most notably trust and belief. However, I note that both trust and belief are fragile. They remain until they don't... and when they don't... that change could happen very quickly. Indeed as you describe it....''wild hypothesis''. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.