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CrashIsUnderWay

A Simple Explanation For Why The Crash Is Now Underway

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We've been borrowing to consume over the last half decade because as a nation, we are living beyond our means. The doubling of consumer debt in the last 6 years from a base acheived over 600 years shows just how bad our national overspending has been.

This has only been possible because the global economy is awash with easy credit - mostly from the far east. Normally, such easily available credit would lead to massive inflation, which (allegedly) is missing in this case.

So where has the pressure gone? Into house prices. Houses have absorbed all the inflationary pressure that the current strategy would normally have produced.

The jig, as they say, is up.

Fat lady has cleared her throat, and the piper is fully warmed up. Here...we..go...

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The world is awash with easy borrowing – but there’s no saying that it won’t be awash with it for another decade.

The crash won’t start until that easy borrowing is stopped.

Governments have always borrowed too much and it’s not stopped them from just borrowing more

But the easy money won’t be around forever and someday it will have to be paid back in full with interest – are you saying you know when that date is?

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But the easy money won’t be around forever and someday it will have to be paid back in full with interest – are you saying you know when that date is?

Debts need to be repayed when they are due.

Credit will tighten if people begin to default en masse.

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I think this raises a wider issue: Why should the people respect the value of the paper money if the central banks don't?

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... if you spend all your available credit buying nice shiny gewgaws when times are good (i.e. live beyond your means), you are likely to find yourself unable to extend your credit lines when you actually need them (i.e. when times get tough).

With rates on the rise worldwide, and inverted yield curves popping up like daisies in the spring, eveyone make a wild guess whether the second half of 2006 will bring an enormous boom, or a great flatulent scottish-built plopping sound, closely followed by frantic buck passing.

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Crash = To undergo a sudden severe downturn, as a market or economy.

I’m not saying there won’t be a crash; in fact I would love to see the biggest crash since Mr C.R Ash drove his Robin Reliant through the front window of Crystal Gales china tea cup emporium. But how long does it take?

I notice you have been posting on this forum for over a year and I assume your nom de plume has always been CrashIsUnderWay; my questions is when will there be a sudden severe downturn?

Will we still be saying the crash is under way in 2007,8,9,10…How long does underway last? Should this website be called www.housepricegradualreductionovermanyyears.co.uk?

I’m getting older.

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This has only been possible because the global economy is awash with easy credit - mostly from the far east.

Can you explain in layman's terms how the Far East created this easy credit? Would be interesting to know how this happens.

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Can you explain in layman's terms how the Far East created this easy credit?

This is how I understand it – simple like me

We buy something from the Far East – they rather than spend it buy US dollars (in the form of investment) to keep there currency at a artificial low (at the moment they save about 50% of there income)

So with a low currency we keep buying low priced goods and inflation is kept artificially low – the problem arises when the far east feel they have made a bad investment and take there savings back – the dollar crashes and there currency rises making massive inflation

This is only the way I understand it – and don’t make any financial decisions on my advice (as it’s probably pants)

Edited by look to the past

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The doubling of consumer debt in the last 6 years from a base acheived over 600 years shows just how bad our national overspending has been.

An interesting spin on the figures.

A far better comparison would be the length of time taken to double the consumer debt over the past xx years.

i.e.

How many years did it take to go from

137.5 Billion to 275 Billion

275 Billion to 550 Billion

550 Billion to 1.1 Trillion

Alternatively, a measure of the % increases in debt for each year would be just as good. At least this would mean we could gauge these increases in like for like terms with times past, irrespective of the numbing numbers.

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Easy credit is'nt the only factor behind HPI.

Property has in large part replaced traditional pensions.

This means that people perceptions have radically altered.

People are prepared to stick with property even if some years the investment performs poorely, BUT HERE'S THE THING - unlike a pension or endowment, if performance is poor people dont feel so aggreived. Conversely when a managed investment performs poorly people exit as they resent the fact the fund managers, Banks and every other commission - Crow in the chain still takes a hefty slice.

Edited by dogbox

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I can help you there Londoner.

In a nut shell the easy credit comes from the Yen Carry Trade.

Hedge funds borrow Yen at not much of an interest rate and ship it to the U.K. I recall annecdotes about a big slug arriving in late 2002 / early 2003 .

The dollar carry trade is now over, the Euro trade is not so profitable. When / If interest rates rise in Japan then the U.K rates will be pushed higher too.

It is a bit of a dodgy business though. The Yen carry trade is what did for LTCM.

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Easy credit is'nt the only factor behind HPI.

Property has in large part replaced traditional pensions.

This means that people perceptions have radically altered.

People are prepared to stick with property even if some years the investment performs poorely, BUT HERE'S THE THING - unlike a pension or endowment, if performance is poor people dont feel so aggreived. Conversely when a managed investment performs poorly people exit as they resent the fact the fund managers, Banks and every other commission - Crow in the chain still takes a hefty slice.

Hands up how many 45 year old think their property will be their pension?

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In simple terms - when the Japanese property market collapsed, taking their 'wonder' economy with it, they found themselves with deflation, a nasty thing to have indeed (almost as bad as having some @rse like TTRTR as a landlord :-).

After a while, they realised that this presented an interesting opportunity.

They could print Yen and buy dollar-denom bills that paid real dollar interest.

And they could do this for free, because the main consequence of printing too much money would be inflation, and seeing as they had deflation, there was no actual downside for them - the worst that could happen would be they got rid of their deflation.

And remember, every $1 they 'created' (by swapping it for yen) meant another 10 or 12 available to borrow.

That's a few years ago; now, the main culprits are the emerging asian economies, who have done what the previous poster said.

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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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