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Economic Paradox

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On the one hand the economy is supposedly booming, the housing market has allegedly broken £200K & is predicted to be set to grow yet again.

On the other hand, personal debt is at an all time high, the number of bankruptcies, IVA's, etc are definitely growing at an alarming rate, and they are going to continue increasing month by month.

How can you have a situation where the same society, at the same point in time, experience both prosperity in abundance, but also financial ruin in abundance?

Surely it is impossible for both states to exist simultaneously, & therefore only one can be true?

The bull case is based on assumptions & subjectivity, whilst the bear case is based on fact & emperical evidence.

Why isn't the true state of affairs obvious to everyone?

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There is little in the way of paradox.

The UK population has correctly stopped saving, and taken on masses of debt and spent. The ones who saved and trusted money have been reamed.

In 2003 The BOE said don't worry and keep spending - assets are always going to rise faster then liabilities.

Nearly all the debt is secured on houseprices which are still rising.

The inflation measure is a grand con trick which is becoming readly apparant - Through huge energy price rises, water bill rises, Council tax bills, Food price rises, beers, newspapers, and rent increases - (Bills have risen from £700 to £1000) - it is actually falling!

Truely massive immigration flows are deflating real wages - the only capital that isn't allowed to rise in price - human capital. Can you imagine the productivity figures without these workers working for buttons?

Fake jobs abound - thanks to the massive money torrent the BOE has unleashed.

The only paradox left is what effect printing money like this can have - there is an endless flow of immigrants to lower wages so thats no bother.

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Could it also be the "Ocean finance type syndrome" where people consolidate all their debts and end end up borrowing even more money.

"Now we have manageable monthly payments for the next 75 yrs, and we were also able to have a holiday and buy a new car !!! "

Great !! :lol:

or "Appy Days !!" as Phil Tuffnell would say.

Edited by FaTB

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Also, everything is going so well that we need a rate cut... a sign of weakness.

It's strange how people can afford to service a debt on a £200k house yet at the same time are unable to part with £15 on the highstreet, hence "worst sales figures in 50 years!". Actually, the former would explain the latter.

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On the one hand the economy is supposedly booming, the housing market has allegedly broken £200K & is predicted to be set to grow yet again.

On the other hand, personal debt is at an all time high, the number of bankruptcies, IVA's, etc are definitely growing at an alarming rate, and they are going to continue increasing month by month.

How can you have a situation where the same society, at the same point in time, experience both prosperity in abundance, but also financial ruin in abundance?

Surely it is impossible for both states to exist simultaneously, & therefore only one can be true?

The bull case is based on assumptions & subjectivity, whilst the bear case is based on fact & emperical evidence.

Why isn't the true state of affairs obvious to everyone?

The answer is straightforward and one which must be readily accepted by the government... simply put:

The pay gap between the richest and poorest in society is larger than it has been before

This is one issue the government really cannot avoid as it's clearly illusrated in the ONS Annual Survey of Hours and Earnings (ASHE) data:

http://www.statistics.gov.uk/downloads/the...SHE_2004web.pdf

(Look at figure 6)

Essentially the lowest income 10% gets about £50 per week more in 2004 than in 1998 whilst the highest income earners in the top 10% are getting roughly £200 extra per week gross. Proportionally the richest in 1998 used to earn on average just over three times that of the poorest whilst in the current climate the richest 10% are earning nearly four times a week more.

That adds up to serious money for the richest whilst the income for the bottom 10% is probably rising barely in line with inflation... if at all.

The people writing articles and thinking on the economy rarely look at this kind of data until it starts to crop up as defaults, insolvencies, bankruptcies, IVA's etc. which is only just starting to happen. But the fact is that under New Labour guidance the Rich have got Richer and the Poor have got Poorer.

Remember we live in a capitalist society which means that those able to afford capital assets; houses, stocks etc. are those who gain... and in the boom environment we've had its made lots of people feel very wealthy. But quite often even the comparatively well off are in large debts after their mortgages, loans, credit etc. is taken into account... but with appreciating asset values they often feel don't need to think about the knock on effects to those further down the ladder or income gap or of the real value of debt they are in.

So its through a widening income gap that the two situations can exist simultaneously...

Another not so happy thought brought to you by Tony and Gordo.

- Pye (Property Speculation Ninja :ph34r: )

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I guess a large factor in this is that the VIs, journalists, politicians and opinion-formers generally are among those who've done well, and they've lost contact with those who haven't. So the public image is a distorted version of reality.

The sort of attitude you see when people like Dogbox claim that £30k is a pittance and every man and his dog, not to mention his wife, are on at least £40k. It's all cr@p.

Edited by munro

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How can you have a situation where the same society, at the same point in time, experience both prosperity in abundance, but also financial ruin in abundance?

Surely it is impossible for both states to exist simultaneously, & therefore only one can be true?

Allow me to refer you to the first paragraph of "A Tale of Two Cities", by Charles Dickens B) .

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The answer is straightforward and one which must be readily accepted by the government... simply put:

The pay gap between the richest and poorest in society is larger than it has been before

This is one issue the government really cannot avoid as it's clearly illusrated in the ONS Annual Survey of Hours and Earnings (ASHE) data:

http://www.statistics.gov.uk/downloads/the...SHE_2004web.pdf

(Look at figure 6)

Essentially the lowest income 10% gets about £50 per week more in 2004 than in 1998 whilst the highest income earners in the top 10% are getting roughly £200 extra per week gross. Proportionally the richest in 1998 used to earn on average just over three times that of the poorest whilst in the current climate the richest 10% are earning nearly four times a week more.

That adds up to serious money for the richest whilst the income for the bottom 10% is probably rising barely in line with inflation... if at all.

The people writing articles and thinking on the economy rarely look at this kind of data until it starts to crop up as defaults, insolvencies, bankruptcies, IVA's etc. which is only just starting to happen. But the fact is that under New Labour guidance the Rich have got Richer and the Poor have got Poorer.

Remember we live in a capitalist society which means that those able to afford capital assets; houses, stocks etc. are those who gain... and in the boom environment we've had its made lots of people feel very wealthy. But quite often even the comparatively well off are in large debts after their mortgages, loans, credit etc. is taken into account... but with appreciating asset values they often feel don't need to think about the knock on effects to those further down the ladder or income gap or of the real value of debt they are in.

So its through a widening income gap that the two situations can exist simultaneously...

Another not so happy thought brought to you by Tony and Gordo.

- Pye (Property Speculation Ninja :ph34r: )

I do not believe in trickle down economics as a philosophy of how to run a country. Nevertheless in a normally run democracy I believe that a sign of general improvement is the poor doing a bit better (in absolute terms) and the rich getting a lot richer (in business). After a while, with normal supply/demand re labour, the bottom/middle catch up - imperfectly. Look at the miracle economies of the last sixty years for some examples. If this were all that were happening in the UK Gordon could say he was doing a very good job - if the politics of the Labour party allowed. My point is that the increase in the gap between rich and poor means very little on its own, particularly as you express it as earnings not capital assets.

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I do not believe in trickle down economics as a philosophy of how to run a country. Nevertheless in a normally run democracy I believe that a sign of general improvement is the poor doing a bit better (in absolute terms) and the rich getting a lot richer (in business). After a while, with normal supply/demand re labour, the bottom/middle catch up - imperfectly. Look at the miracle economies of the last sixty years for some examples. If this were all that were happening in the UK Gordon could say he was doing a very good job - if the politics of the Labour party allowed. My point is that the increase in the gap between rich and poor means very little on its own, particularly as you express it as earnings not capital assets.

I agree that the pay gap alone is not enough - you also need a very healthy credit supply and an ostrich type approach to risk...

My main point was that its quite easy to reject the

'Surely it is impossible for both states to exist simultaneously, & therefore only one can be true?'

comment simply by assessing the income tendancies of the top and bottom 10% - i.e. those most likely to have money issues/overpay on property.

-Pye

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answer:

it is easy to borrow. aggressive borrowing, and a misperception that property cannot fall are

temporarily sustaining property prices

I agree.

The supposed wealth of this country is all tied up in an asset which has been subject to a huge speculative bubble.

As soon as the bubble bursts and prices fall people will not be feeling half as wealthy.

At this point they will start to ask questions. But like all greedy people who think they are doing well they ask no questions until the issues affect them.

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Another paradox, except it isn't, pension funds are hand tied having to rely on interest rates available in the market. The latest increase in deficits and knock on increase in provisions has been caused by the BOE themselves when they dropped rates last summer.

http://today.reuters.co.uk/news/newsarticl...BRITAIN-BOE.xml

Bank's Tucker-Investment fall may be on pension woes

LONDON (Reuters) - Business investment may have fallen back because firms are concerned with dealing with pension deficits, Bank of England Monetary Policy Committee Member Paul Tucker was quoted as saying in a Sunday newspaper.

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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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