I Told You So Posted March 1, 2006 Share Posted March 1, 2006 Taking a step back and looking at the bigger picture over say 10 years ignoring all the VI nonsense and city economists still talking about the possibilty of rate cuts it all seems so simple. World economies in trouble all central banks drop interest rates = housing bubble Central banks probably go to far with their loosening = bigger bubble World ecomonies start to recover far quicker than expected = higher inflation Central Banks respond with rate rises = property crash Property crash causes recessession = Central banks lower rates Cycle begins again Is it really that simple? Quote Link to comment Share on other sites More sharing options...
George Mainwaring Posted March 1, 2006 Share Posted March 1, 2006 The way the world works looks mad and inexplicable at first. When you realise that common sense rarely has any bearing on what happens it all becomes clearer. Quote Link to comment Share on other sites More sharing options...
Michael Posted March 1, 2006 Share Posted March 1, 2006 Taking a step back and looking at the bigger picture over say 10 years ignoring all the VI nonsense and city economists still talking about the possibilty of rate cuts it all seems so simple. World economies in trouble all central banks drop interest rates = housing bubble Central banks probably go to far with their loosening = bigger bubble World ecomonies start to recover far quicker than expected = higher inflation Central Banks respond with rate rises = property crash Property crash causes recessession = Central banks lower rates Cycle begins again Is it really that simple? Well, this boom/bust (used to be called stop/go) you describe has plagued the British economy ever since 1945. Quote Link to comment Share on other sites More sharing options...
eternalnomad Posted March 1, 2006 Share Posted March 1, 2006 and it is this very same natural economic boom/bust cycle that ignoramus Gordon Brown promised to end which as all educated people know is nonsense. The economic role of governments is to steer our economy through the safest possible route in these boom and busts which have, and probably always will naturally occur. In practice this means carefully building strong reserves in the good times to reduce the depth of the sh1t during the bad times. Rather worringly, this time around the UK are leaving a period of relative "boom" but still the coffers are empty and macro economic picture in pretty poor shape. It will take another Tory government to turn this ship around (and sadly will have to involve some rather unpleasant financial and economic "medicine") but before that happens this country will have to live with the government it deserves for a few years. Quote Link to comment Share on other sites More sharing options...
apom Posted March 1, 2006 Share Posted March 1, 2006 Taking a step back and looking at the bigger picture over say 10 years ignoring all the VI nonsense and city economists still talking about the possibilty of rate cuts it all seems so simple. World economies in trouble all central banks drop interest rates = housing bubble Central banks probably go to far with their loosening = bigger bubble World ecomonies start to recover far quicker than expected = higher inflation Central Banks respond with rate rises = property crash Property crash causes recessession = Central banks lower rates Cycle begins again Is it really that simple? Its either very simple, or very complicated... The simplist way to lok at it is that. Economy, like nature has a ballence it will cycle about the point of balence. Why otherwise are economists experts on Excel, and graphs? What goes around comes around There is a train line near me that used ot have only two trains a day using it.. I could have stood on it for hours and been in no risk, but I wouldn't have slept there.. There are some things that are perfectly safe. Standing on a train line and paying attention. There are some things that are very dangerous Sleeping on a train line.. There are some things that are innevitable. The train is coming... There are bad analogies, then there are my analogies.. Quote Link to comment Share on other sites More sharing options...
Without_a_Paddle Posted March 1, 2006 Share Posted March 1, 2006 Its either very simple, or very complicated... The simplist way to lok at it is that. Economy, like nature has a ballence it will cycle about the point of balence. Why otherwise are economists experts on Excel, and graphs? What goes around comes around There is a train line near me that used ot have only two trains a day using it.. I could have stood on it for hours and been in no risk, but I wouldn't have slept there.. There are some things that are perfectly safe. Standing on a train line and paying attention. There are some things that are very dangerous Sleeping on a train line.. There are some things that are innevitable. The train is coming... There are bad analogies, then there are my analogies.. Standing on a train line is not perfectly safe at all. You could get electrocuted even if the train is miles away... http://archive.thisiswirral.co.uk/2001/08/01/8452.html Quote Link to comment Share on other sites More sharing options...
Goat Posted March 1, 2006 Share Posted March 1, 2006 Actually it's even simpler than that. Big recession in early 90's drives property values below the true value. From 1997 to 2001 property prices return to true value as a rational supply and demand response. From 2001 onwards investors seeing big gains in property prices over the preceding few years begin coming into the market chasing more gains. Homeowners are willing to pay ever more in the sure and certain belief (sic) that prices only ever go up. A vicious spiral develops whereby increasing prices generates ever increasing demand chasing expected gains. Eventually buyers realise that prices aren't going any higher; investors begin to leave the market, crash develops. Quote Link to comment Share on other sites More sharing options...
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