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pwyll

Controlling Hpi

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How should we look to control HPI in the future? The idea that central banks can control inflation seems to have been falsified by recent events - this was something that the likes of Hayek predicted. Basically, although you can put in place constitutional controls on interest rate setting, it all depends on the terms of that settlement and these always seem to be manipulable; eg, changing the inflation measure to CPI. Hayek et al. also discuss the point that with liberalization of exchange controls and the lifting of credit restrictions, the rates that central banks set don't have much effect. Hayek proposed that banks be able to set their own currency and that a free market in these currencies would stabilize the supply. I think this would be disastrous given the wild risks that the banks have taken during the recent period of hyperinflation. Any thoughts?

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this comes up so often, but it is a very very simple thing to stop

you would stop it if you by law only permit a max of 80% mortgages

that removes the positive feedback effect of rising house prices = more houses bought = hpi = mew = buy more = higher prices ect ect

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How should we look to control HPI in the future? The idea that central banks can control inflation seems to have been falsified by recent events - this was something that the likes of Hayek predicted. Basically, although you can put in place constitutional controls on interest rate setting, it all depends on the terms of that settlement and these always seem to be manipulable; eg, changing the inflation measure to CPI. Hayek et al. also discuss the point that with liberalization of exchange controls and the lifting of credit restrictions, the rates that central banks set don't have much effect. Hayek proposed that banks be able to set their own currency and that a free market in these currencies would stabilize the supply. I think this would be disastrous given the wild risks that the banks have taken during the recent period of hyperinflation. Any thoughts?

I suspect that if / when the sh1t does really hit the fan, there will be an over-reaction from government to stop this happening again any time soon.

They have to seriously make the rules better for people renting so there isn't such an over-riding desire to own a property to feel safe.

I suspect they will legislate to ensure banks go back to 3 or 4 times income and make them liable if they haven't made a decent effort to check if someone really does earn what they say they do.

The power of interest rates has been removed by constantly relaxing the lending criteria so that has to be the place to start.

Making people realise they'll have to work until they drop so forget a pension of any sort (property or otherwise) might be next on the list.

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Hayek proposed that banks be able to set their own currency and that a free market in these currencies would stabilize the supply. I think this would be disastrous given the wild risks that the banks have taken during the recent period of hyperinflation. Any thoughts?

I strongly support competition of currencies. And it is very simple what would happen if we had competing currencies where none had

a monopoly: they would all be commodity backed, most of them with gold and silver, I suppose.

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I strongly support competition of currencies. And it is very simple what would happen if we had competing currencies where none had

a monopoly: they would all be commodity backed, most of them with gold and silver, I suppose.

I don't understand. What is so wonderful about Gold or Silver, or other commodity, other than that they are finite?

Surely the ability to inflate to a degree allows economies to recover (nominally) more quickly from economic problems?

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I strongly support competition of currencies. And it is very simple what would happen if we had competing currencies where none had

a monopoly: they would all be commodity backed, most of them with gold and silver, I suppose.

King Hubbert who predicted Peak Oil about now suggested that all currencies should be energy based

http://www.hubbertpeak.com/hubbert/monetary.htm

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How should we look to control HPI in the future?

Several measures required:

Tax empty property - ie no Council Tax relief

Remove taper relief on BTL

Remove tax deductability for interest on BTL

Revise assured shorthold tenancies and put power with tenants

Ease planning restrictions

Impose FSA regs that ensure anything above 3 or 4 times mortgage lending is heavily scrutinised

Do this and HPI drops markedly

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Extending his argument, you could use water, or food productivity as a better measure.

In a system of competing currencies a new bank can only be established when new customers pay in something,

and in return for this something they get tokens or banknotes with which they can claim what they paid in.

Now, I just don't see queues of people bringing bread or crude oil to the bank. Also, to keep the bank's currency

consistent they could only accept one kind of good (e.g. not walnut-bread and sesame-seed bread; or if yes, then

only at the same ratio). So, most likely natural money would dominate, which is gold and silver.

Edited by Goldfinger

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Surely the ability to inflate to a degree allows economies to recover (nominally) more quickly from economic problems?

Many on this forum think that the ability to inflate has caused all this mess and will bring down the world's financial system

in what will be known as the Greater Depression.

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Several measures required:

Tax empty property - ie no Council Tax relief

Agree - too many vacant properties

Remove taper relief on BTL

Agree - why should there be an additional tax relief, although rates should be the same as alternative investments like shares or bonds

Remove tax deductability for interest on BTL

Disagree - BTL is a geared investment in the same way as a share is geared

Revise assured shorthold tenancies and put power with tenants

Disagree - tenants are already in a decent position of power now, and we do not want to go back to the days when a small number of landlords control the market. AST's encourage investment in the rental market, and keep rents down.

Ease planning restrictions

Disagree - unless there are serious changes to ensure we avoid lowest common denominator design. Planning officers are paid badly and, on average, seem to think Chalet Bungalows are attractive architecture. Hmmm.

Impose FSA regs that ensure anything above 3 or 4 times mortgage lending is heavily scrutinised

Agree - Good idea, and probably the one which would instill the most effective control on volatility.

Do this and HPI drops markedly

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Several measures required:

Tax empty property - ie no Council Tax relief

Agree - too many vacant properties

Remove taper relief on BTL

Agree - why should there be an additional tax relief, although rates should be the same as alternative investments like shares or bonds

Remove tax deductability for interest on BTL

Disagree - BTL is a geared investment in the same way as a share is geared

Revise assured shorthold tenancies and put power with tenants

Disagree - tenants are already in a decent position of power now, and we do not want to go back to the days when a small number of landlords control the market. AST's encourage investment in the rental market, and keep rents down.

Ease planning restrictions

Disagree - unless there are serious changes to ensure we avoid lowest common denominator design. Planning officers are paid badly and, on average, seem to think Chalet Bungalows are attractive architecture. Hmmm.

Impose FSA regs that ensure anything above 3 or 4 times mortgage lending is heavily scrutinised

Agree - Good idea, and probably the one which would instill the most effective control on volatility.

Do this and HPI drops markedly

Interesting way of looking at things. You will find many friends on this site........

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Many on this forum think that the ability to inflate has caused all this mess and will bring down the world's financial system

in what will be known as the Greater Depression.

And just as your namesake was ultimately destined for failure...

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And just as your namesake was ultimately destined for failure...

We'll see. It's not that I am looking forward to it. But at least I want to make a profit from the stupidity of

others who maneuvered me and others into this mess.

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Don't get me wrong. I read your posts with interest, and many of those who post here, but those who think that we are going to have a depression are, I think, wrong.

I think we are very likely to see a recession, probably triggered by the US (my first post referenced that I have been tracking the train wreck over there for about 12-18 months), but in reality whilst prices may fall substantially, your average homeowner is not highly leveraged, and it is only those who have bought in the last 2-3 years who will feel the major impact.

I spent last week in Japan talking about real estate, and compared to their situation 10 years ago, our bubble looks like a zit. OK, they actually have always had a savings rate, but nevertheless, I don't see anyone singing "brother, can you spare a dime" any time soon.

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Make it law to only have a car if you can park it off-road in a designated spot.

Oops no, that might not sort HPI out directly but would allow price differences between terraces and flats with no parking and houses which have gardens and parking space. It'd push planners into stopping building stupid flats that have a limited market and make them build houses with parking spaces - or at least put enough space with flats to have parking - rather than the problems created when 100 people move into a block with only 10 spaces. Or even 8 spaces on 8 x 2 bedroom flats.

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Also, make school selection by lottery;as is happening in some areas, much to the chagrin of the Mail.

Make M.Ps live on the average wage of the people they represent.

Edited by hankdd

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Your all assuming that a bubble is a terrible thing for the public but it can be a great thing if the laws don’t restrict us to make use of the bubble.

Look at the tech bubble at the late 90s, it was very similar to the housing bubble, people got crazy and left fundamentals because they believed the prices would always rise.

But during that tech bubble the infrastructure was laid which we use today as our high bandwidth internet, since the tech bubble companies have maid little investment in bandwidth because it was all there “thanks” to the tech bubble. The tech bubble gave us dirt cheap internet and bandwidth access for a decade!!

Now I propose instead of stopping bubbles we don’t shoot ourselves in the foot and make use of them. If planning was easy like in Spain we would have definitely seen some 5 million new homes being built since 2000 but instead we have had less than 1million!!

The Spanish have “suffered” a housing bubble, but they have 5million more homes to show for it, and they will have dirt cheap good quality housing for their young probably for 50 years to come. Just like the tech bubble improved our tech infrastructure the housing bubble improved the Spanish housing infrastructure. But the housing bubble did ****** all for us.

The bubble is not to blame, the target should be the dam laws which restrict us buying a piece of land and building our homes for cost!!

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to my mind, this sounds pretty sensible (in the comments):

"You can't have a sound economy without a sound monetary system.
"The supply and demand theory for high house prices is a red herring. The real culprit is the monetary system and the banking system lending ever more ludicrous sums of money to people, money which in many cases will never be repaid.
"What is required is stable houseprices and this can only be achieved with fundamental monetary reform and much stricter regulation of the banking industry. We need free market banking, the abolition of fractional reserve banking, the abolition of the central banking system and a greater proportion of debt free money in our economy"

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