skinnylattej Posted March 11, 2021 Share Posted March 11, 2021 In my view, UK housing is a huge bubble. 1983, this house was valued at 4 times local average income, 2021, this house valued at 8 times local average income. This estate used ti be considered "first time buyer" estate, now no-one moves on as they can't afford it. But most driveways have new big shiny German cars in white or metallic grey. And people are spending like crazy, new bathrooms, kitchens and now power operated garage doors. Quote Link to comment Share on other sites More sharing options...
Former postman Posted March 11, 2021 Share Posted March 11, 2021 8 hours ago, TheCountOfNowhere said: I think we all agree on that. Someone said that Exact thing to me on Monday, is that you Tony ? As you say, it makes no sense. You need to look at it from a different point of view. Are the MPs selling their houses ? Do they want hyperinflation then a war (again) ? Are they just clueless politicians being played by bankers ? Is the world run by lizards ? It's a state run investment scam ? Nothing makes sense unless you look at it differently. Who's Tony? Quote Link to comment Share on other sites More sharing options...
mynamehere Posted March 11, 2021 Share Posted March 11, 2021 The OP’s point is simple. House prices stopped being correlated to incomes a long time ago. These days wealth is much more significant. That’s just how the uk works. It has very low labour productivity and trade deficit vs similar nations. earnings multiples should not be used to predict bubbles or crashes! Quote Link to comment Share on other sites More sharing options...
Frugal Git Posted March 11, 2021 Share Posted March 11, 2021 (edited) The one saving grace for me has been to push me into going a completely different way. * hyper aggressive about earning what I think I'm 'worth' * Getting as much of a slice of the inflated money supply pie as I can * Speculating wildly on everything apart from housing * Encouraging people to investigate how the benefits system works or could work for them, legally I found the whole thing so disgusting, I went mad. The late boomers/early Gen X still can quite happily indeed sit in their inflated £500k houses they think are dirt cheap, languishing on 40k. I'd rather have 3x what they earn and a loaded pension. @wishicouldaffordone had the right idea. Edited March 11, 2021 by Frugal Git Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted March 11, 2021 Author Share Posted March 11, 2021 3 hours ago, Postman said: Who's Tony? Tony was the "Someone said that Exact thing to me on Monday" Only Tony would deny being Tony !!!! Quote Link to comment Share on other sites More sharing options...
Former postman Posted March 11, 2021 Share Posted March 11, 2021 Erm... I don't know what to tell you. Quote Link to comment Share on other sites More sharing options...
dugsbody Posted March 11, 2021 Share Posted March 11, 2021 Why do I think we have a house price bubble? Because interest rates plunged toward zero from the late 80s till now. Then they started extending the mortgage terms. Read any forum with posts from young people in the US, Canada, Australia, New Zealand, pretty much anywhere. They all complain about the same thing, house prices out of reach. Global problem with a global cause. Low interest rates. Quote Link to comment Share on other sites More sharing options...
Greater Fool Posted March 11, 2021 Share Posted March 11, 2021 4 hours ago, mynamehere said: The OP’s point is simple. House prices stopped being correlated to incomes a long time ago. These days wealth is much more significant. That’s just how the uk works. It has very low labour productivity and trade deficit vs similar nations. earnings multiples should not be used to predict bubbles or crashes! This, there should be figures available on the number of property transactions that involved money from a substantial inheritance. Quote Link to comment Share on other sites More sharing options...
Speed1987 Posted March 11, 2021 Share Posted March 11, 2021 (edited) We are not in a housing bubble, there is no bubble. What there is, are people who cannot psychologically adjust to the current housing market and economy. Credit isn't cheap, that's the price now, as interest rates are now low. Supply isn't low, we have a larger population now, post war. Boomers got lucky. London isn't overpriced, its a major capital of the world and therefore, you are competing with the worlds elites, to live there. It's not difficult to save a deposit, if you're willing to make the right choices and sacrifices. The government/BOE will always spend and increase the money supply, those who take on mortgage debt win. Debt will continue to get cheaper and cheaper. Edited March 11, 2021 by Speed1987 Quote Link to comment Share on other sites More sharing options...
mynamehere Posted March 11, 2021 Share Posted March 11, 2021 Indeed. key point is that government has target inflation goals. And will adjust their levers to achieve it. Something like 4% a year for housing. Government will never tolerate negative inflation. a possible exception might be if hpi went massively over target one year to smooth things out. But it would only a short term nudge. Overall trend will be positive. Quote Link to comment Share on other sites More sharing options...
winkie Posted March 11, 2021 Share Posted March 11, 2021 Most of us are living in a bubble. Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted March 11, 2021 Author Share Posted March 11, 2021 3 minutes ago, mynamehere said: Indeed. key point is that government has target inflation goals. Anyone ever stop to ask why they have inflation goals ? Quote Link to comment Share on other sites More sharing options...
zugzwang Posted March 11, 2021 Share Posted March 11, 2021 56 minutes ago, Speed1987 said: We are not in a housing bubble, there is no bubble. What there is, are people who cannot psychologically adjust to the current housing market and economy. Credit isn't cheap, that's the price now, as interest rates are now low. Supply isn't low, we have a larger population now, post war. Boomers got lucky. London isn't overpriced, its a major capital of the world and therefore, you are competing with the worlds elites, to live there. It's not difficult to save a deposit, if you're willing to make the right choices and sacrifices. The government/BOE will always spend and increase the money supply, those who take on mortgage debt win. Debt will continue to get cheaper and cheaper. All the evidence in just two charts. An unprecedented private sector debt bubble. 👇 And an equally monstrous public sector debt bubble to repair the damage. 👇 Quote Link to comment Share on other sites More sharing options...
mynamehere Posted March 11, 2021 Share Posted March 11, 2021 (edited) 10 minutes ago, TheCountOfNowhere said: Anyone ever stop to ask why they have inflation goals ? Moderate inflation is the cornerstone of economics. That’s unlikely to change. to try and answer technically, Low inflation is a sign of an unproductive economy running undercapacity. It’s a trigger for stimulus to encourage the economy back up to speed. A uk government would not deliberately allow any sustained period of house price deflation. Another government might. But not the uk government. which is why anytime yOy hpi approaches zero some scheme or other magically emerges. I put off buying a house for years until 2018 when the above was explained to me. Edited March 11, 2021 by mynamehere Quote Link to comment Share on other sites More sharing options...
“Nasty Piece of work” Posted March 11, 2021 Share Posted March 11, 2021 Economics are nice, but it’s driven by pure greed, and that drives dear Fatty and his “friends”. Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted March 11, 2021 Author Share Posted March 11, 2021 5 minutes ago, “Nasty Piece of work” said: Economics are nice, but it’s driven by pure greed, and that drives dear Fatty and his “friends”. Greed, yes in part, but maybe ego too. Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted March 11, 2021 Author Share Posted March 11, 2021 (edited) 12 minutes ago, mynamehere said: Moderate inflation is the cornerstone of economics. Why ? IIRC there was no inflation during the war years. Edited March 11, 2021 by TheCountOfNowhere Quote Link to comment Share on other sites More sharing options...
mynamehere Posted March 11, 2021 Share Posted March 11, 2021 (edited) 9 minutes ago, TheCountOfNowhere said: Why ? IIRC there was no inflation during the war years. it’s considered to be a good indicator of how closely an economy is running to a healthy capacity. makes sense there was low inflation during the war years. Large parts of the economy were shuttered or redeployed. Edited March 11, 2021 by mynamehere Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted March 11, 2021 Author Share Posted March 11, 2021 19 minutes ago, mynamehere said: it’s considered to be a good indicator of how closely an economy is running to a healthy capacity. . Why ? I could go on with that, but you've been conned by the establishment. Inflation was invested by the Chinese to stop the plebs accumulating wealth. It's systematic theft and for some reason people accept it as normal. Quote Link to comment Share on other sites More sharing options...
Biggus Posted March 11, 2021 Share Posted March 11, 2021 43 minutes ago, TheCountOfNowhere said: Anyone ever stop to ask why they have inflation goals ? The official justification for keeping inflation at two percent and not zero is - 'It allows prices and wages to adjust It avoids the risk of deflation. Deflation is potentially damaging because Increases the real value of debt. It can discourage spending because consumers expect prices to keep falling It can make monetary policy ineffective as you can’t have negative interest rates.' https://www.economicshelp.org/blog/2114/inflation/optimal-inflation-rate/ It's down to the bogeyman of falling prices making us all poor. Debt deflation occurs, or is the cause of, deflationary recessions. Deflation caused by increased productivity is, of course, a completely different prospect. But most people don't understand the difference. So deflation is viewed by people who don't really know what they're talking about as a bad thing. An example of deflation caused by increased productivity would be during the Belle Epoque, sometimes called the guilded era. People were getting welathier as more goods and services available made the value of money go up. It was a 'golden age', people were becoming wealthier. Quote Link to comment Share on other sites More sharing options...
mynamehere Posted March 11, 2021 Share Posted March 11, 2021 Just now, TheCountOfNowhere said: Why ? I could go on with that, but you've been conned by the establishment. Inflation was invested by the Chinese to stop the plebs accumulating wealth. It's systematic theft and for some reason people accept it as normal. conned by the establishment? Okay my friend. To answer your question, if there is no pressure on price inflation, that is a sign that there is a mismatch between capacity and output This theory has nothing to do with China or politics. Inflation is as old as money itself Quote Link to comment Share on other sites More sharing options...
zugzwang Posted March 11, 2021 Share Posted March 11, 2021 (edited) 35 minutes ago, mynamehere said: it’s considered to be a good indicator of how closely an economy is running to a healthy capacity. makes sense there was low inflation during the war years. Large parts of the economy were shuttered or redeployed. It makes room for the central bank to keep interest rates positive throughout the entire business cycle. Edited March 11, 2021 by zugzwang Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted March 11, 2021 Author Share Posted March 11, 2021 8 minutes ago, Biggus said: The official justification for keeping inflation at two percent and not zero is - 'It allows prices and wages to adjust It avoids the risk of deflation. Deflation is potentially damaging because Increases the real value of debt. It can discourage spending because consumers expect prices to keep falling It can make monetary policy ineffective as you can’t have negative interest rates.' https://www.economicshelp.org/blog/2114/inflation/optimal-inflation-rate/ It's down to the bogeyman of falling prices making us all poor. Debt deflation occurs, or is the cause of, deflationary recessions. Deflation caused by increased productivity is, of course, a completely different prospect. But most people don't understand the difference. So deflation is viewed by people who don't really know what they're talking about as a bad thing. An example of deflation caused by increased productivity would be during the Belle Epoque, sometimes called the guilded era. People were getting welathier as more goods and services available made the value of money go up. It was a 'golden age', people were becoming wealthier. It's comical. 'It allows prices and wages to adjust : 1 cow = 2 sheeps. It avoids the risk of deflation: It avoid the poor peoples money becoming worth more. "Increases the real value of debt.", nIcreases the real value of money and makes it less attractive to borrow money from our over lords "It can discourage spending because consumers expect prices to keep falling", I often go a year without food and I've not bought a PC since 1980 because they keep getting cheaper That's outright puerile propaganda ******. Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted March 11, 2021 Author Share Posted March 11, 2021 9 minutes ago, mynamehere said: conned by the establishment? Okay my friend. To answer your question, if there is no pressure on price inflation, that is a sign that there is a mismatch between capacity and output This theory has nothing to do with China or politics. Inflation is as old as money itself Quote Link to comment Share on other sites More sharing options...
Biggus Posted March 11, 2021 Share Posted March 11, 2021 59 minutes ago, “Nasty Piece of work” said: Economics are nice, but it’s driven by pure greed, and that drives dear Fatty and his “friends”. That's actually pretty close to the Keynsian view on bubbles. According to Keynes they're created by 'animal spirits', I think the term was. The Austrian view is that lose credit is spent into a sector of the economy. Increaded spending drives up prices, which sends a signal to enterpreneurs to invest in that sector. Resources poor out of other parts of the economy and into the bubble sector. I think it was Galbraith, in his book 1929 The Great Crash said that both were needed for a runaway bubble, like stocks in 1929. There have been times when credit is loose and interest rates low and nobody was willing to borrow. So it takes both animal spirits and easy credit to create a huge bubble, like housing in the UK. Long time since I read that book, so I could be mis-remembering . Quote Link to comment Share on other sites More sharing options...
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