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bob monkhouse

The Begining And The End

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If you live in the Western world, you'll have experienced your fair share of mania's.

If you're on this site, I'll hazard a guess that you're clued up on asset bubbles.

Now you're most likely aware of the last few bubbles which have emanated over the preceding 20 years. Without wishing to stir any debate regarding gold, it appears we have a commodity bubble which was propagated as chance would have it (gasp!) around the same time as the housing mania was gaining full momentum. Now with housing reaching its vinegar strokes, and commodity inflation attracting more attention, one must ask 'where's the next saviour coming from?'. Have renewables been primed? Will Chindia grab the baton?

It's been said before but it bears repeating: Capitalism involves booms and busts. There is a phenomenon known as the business cycle that loosely revolves around those booms and busts. The policies of Greenspan, the Fed and associated Western Banks suppressed those busts, and "risk" was more or less struck from the lexicon of the English language (while linguists have pronounced "subprime" their word of the year).

If we stop attempting to bypass the creative destruction of capitalism, we will finally be able to bring about a recovery built on a solid foundation instead of the quicksand underlying the 2003-07 "recovery" that was built on the housing mania. We have squeezed and squeezed, yet the crop is getting weaker as each year passes, and the soil is no longer fertile.

No more Boom and Bust, Mr Brown? And you managed our economy?

Edited by bob monkhouse

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So I guess what im asking/wondering...is can this trend continue?

...this continued boom, sans bust, has compounded returns upon returns to unprecedented levels...can financial engineering prolong this illusion? No correction means no return to fundementals, to real wealth creation...then again, is not wealth being created in the East...?

Im confused.

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Guest Steve Cook
So I guess what im asking/wondering...is can this trend continue?

...this continued boom, sans bust, has compounded returns upon returns to unprecedented levels...can financial engineering prolong this illusion? No correction means no return to fundementals, to real wealth creation...then again, is not wealth being created in the East...?

Im confused.

This cannot be maintained, I believe

I am new to an understanding of macro economics and so I expect this to be shot down quick sharp. That's OK. You don't learn unless you stick your neck out and then listen very carefully to critisisms....

Boom and bust is a product of the ways the human mind works....things go in one direction, initially led by smart money....followed by institutional money....followed by the masses......

Because we are social creatures, we tend to base our decisions (including investment decisions) not on what we know, but on what we think others know and we don't. Hence, the herd mentality. Hence, the overshoot, both up and down the market cycle.

All of the above has carried on in the global capitalist economy for a century or so because each bust can be, in principle, recovered from, by renewed growth (eventually).

However, this model of perpetual growth (where money can be borrowed from tomorrow's economic growth) is predicated on perpetual amounts of energy coming into the system, in turn fueling increased economic activity to give the all of the new money that is created, a home. If the energy supply stagnates or even drops (causing economically untenable rises in energy prices), all of the above stops working.

That is where we are now, I think.

Where it goes from here....I can't guess the details....but "down" is a pretty good starting point.....

Steve

Edited by Steve Cook

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This cannot be maintained, I believe

I am new to an understanding of macro economics and so I expect this to be shot down quick sharp. That's OK. You don't learn unless you stick your neck out and then listen very carefully to critisisms....

Boom and bust is a product of the ways the human mind works....things go in one direction, initially led by smart money....followed by institutional money....followed by the masses......

Because we are social creatures, we tend to base our decisions (including investment decisions) not on what we know, but on what we think others know and we don't. Hence, the herd mentality. Hence, the overshoot, both up and down the market cycle.

All of the above has carried on in the global capitalist economy for a century or so because each bust can be, in principle, recovered from, by renewed growth (eventually).

However, this model of perpetual growth (where money can be borrowed from tomorrow's economic growth) is predicated on perpetual amounts of energy coming into the system, in turn fueling increased economic activity to give the all of the new money that is created, a home. If the energy supply stagnates or even drops (causing economically untenable rises in energy prices), all of the above stops working.

That is where we are now, I think.

Where it goes from here....I can't guess the details....but "down" is a pretty good starting point.....

Steve

Well put.

So the downside matierialises. Depression, protectionsim, tariffs, war. To be replaced with?? A return to the old?

edit: And many of us, myself included, are guilty of subcoming to the herd instinct. This site helps counter that (unless it involves precious metals!)

Edited by bob monkhouse

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Capitalism is and will continue to be the only real way. Why we don't have a true Capitalist government to vote for escapes me. Why must we settle for the rediculous option of voting either labour or cons, when there should really and honestly be a National Capitalist party to vote for eludes me. Pussies. As it is, we'll all be bowing to Brussels as our evil overloard and what of our true masters?

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Guest Steve Cook
Well put.

So the downside matierialises. Depression, protectionsim, tariffs, war. To be replaced with?? A return to the old?

Return to the old?

In the absence of any known alternative I would say so. I can't see a global economy working like we see it now without cheap energy supplies enabling cheap transportation of goods. Telecommunications, however, are not that energy intensive and so there must be some aspects of the global economy that will persist because of this. I suppose one upside is that local economies will become economically viable once more some time down the line.

When I am feeling particularly pessimistic, though, I can see global superpower resource wars. At which point we enter a new, and terrible world

A return to the old......I hope so.....If we're lucky

Steve

Edited by Steve Cook

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Capitalism is and will continue to be the only real way. Why we don't have a true Capitalist government to vote for escapes me. Why must we settle for the rediculous option of voting either labour or cons, when there should really and honestly be a National Capitalist party to vote for eludes me. Pussies. As it is, we'll all be bowing to Brussels as our evil overloard and what of our true masters?

To be honest, I think the problems we are now facing go beyond the capitalist/socialist dichotomy. It doesn't really matter which engine you have under the bonnet, if you don't have any fuel...

Edited by Steve Cook

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The biggest problems with the world of economics is that it isn't satisfied with just a profit. Growth is the buzz word and without it share holders don't get their payouts, MDs don't get huge pay rises and companies can't keep on expanding and consuming more of the market.

I run my business like a co-operative, we just have to make a profit...thats surely all you need to do. I've done work for barter on occasion, and I can't understand why we simply can't go back to more traditional ways of doing business.

Money is not everything, let the super wealthy have their fun as I don't give a damn about their sad lives. Why don't working people just stick together and start trading with each other, refuse to pay our taxes on mass and simply go back to shopping on markets etc etc.

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The biggest problems with the world of economics is that it isn't satisfied with just a profit. Growth is the buzz word and without it share holders don't get their payouts, MDs don't get huge pay rises and companies can't keep on expanding and consuming more of the market.

I run my business like a co-operative, we just have to make a profit...thats surely all you need to do. I've done work for barter on occasion, and I can't understand why we simply can't go back to more traditional ways of doing business.

Money is not everything, let the super wealthy have their fun as I don't give a damn about their sad lives. Why don't working people just stick together and start trading with each other, refuse to pay our taxes on mass and simply go back to shopping on markets etc etc.

I think I agree with this entirely Dubsie. I don't think, though, it will be the result of a political/philisophical choice on the part of the particpants. Rather, such localised economies, based upon personal relationships, will simply emerge as the most efficient models in a low energy future.

Edited by Steve Cook

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To be honest, I think the problems we are now facing go beyond the capitalist/socialist dichotomy. It doesn't really matter which engine you have under the bonnet, if you don't have any fuel...

Except that Capitalism tends to err on the side of OVER-consumption, inevitably taking you to the edge far quicker.

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Except that Capitalism tends to err on the side of OVER-consumption, inevitably taking you to the edge far quicker.

I guess I would agree with this. Precisely because it is a more efficient driver of economic growth

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I think I agree with this entirely Dubsie. I don't think, though, it will be the result of a political/philisophical choice on the part of the particpants. I think, rather, that such localised economies, based upon personal relationships, will simply emerge as the most efficient models in a low energy future.

I hope it does because it is these local relationships that bring true wealth. Going shopping in a vibrant market where people smile and take the time to have a chat is more important than saving a couple of quid at Tescos. I would be a liar if I said I never shopped at a supermarket but I do try my best to get out on the two market days to do some shopping. At what point will it be impossible for companies like Tescos to keep on growing....what then?

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I guess I would agree with this. Precisely because it is a more efficient driver of economic growth

It is also a more efficient driver of innovation... the two can cancel each other out.

I want my cheap electric car that does 0-60 in 4 seconds powered by hydrogen fuel cells recharged by a mixture of nuclear and renewable sources.

I don't see many socialist states developing such technology.

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It is also a more efficient driver of innovation... the two can cancel each other out.

I want my cheap electric car that does 0-60 in 4 seconds powered by hydrogen fuel cells recharged by a mixture of nuclear and renewable sources.

I don't see many socialist states developing such technology.

You might want that Steve but it still costs over £17000 to buy one and that price is currently less than what it costs to build one. So unless you have 17k sitting in your back pocket then forget it.

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It is also a more efficient driver of innovation... the two can cancel each other out.

I want my cheap electric car that does 0-60 in 4 seconds powered by hydrogen fuel cells recharged by a mixture of nuclear and renewable sources.

I don't see many socialist states developing such technology.

I agree with you that capitalist economies promote innovation more than socialist ones. This is because a socialist system provides no self-interested incentive for individuals or organisations to push the boat out, technologically speaking.

However, this is why I would agree with bearORbullENIGMA. In a world of diminishing resources, capitalism simply takes us more quickly to the edge.

I fully accept that my proposition rests on the assumption that there is no viable alternative to fossil fuels. However, I don't wish to pursue that particular thorny issue further on this thread (unless you insist..... ;) ). It's not coyness on my part. I just think that it might be legitimately seen by other posters as drifting off topic.

Steve

Edited by Steve Cook

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The biggest problems with the world of economics is that it isn't satisfied with just a profit. Growth is the buzz word

Two reasons we 'need' growth:

- we keep making new people faster than the old ones die, meaning we need more cake overall unless we're prepared to accept smaller individual portions

- successive generations generally want more cake than the last generation had.

Eliminate those aspects of human nature and you eliminate the need for economic growth ;)

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Two reasons we 'need' growth:

- we keep making new people faster than the old ones die, meaning we need more cake overall unless we're prepared to accept smaller individual portions

- successive generations generally want more cake than the last generation had.

Eliminate those aspects of human nature and you eliminate the need for economic growth ;)

Don't you think most people have enough to live a good life in this country. Wealth will not automatically mean happiness.

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Don't you think most people have enough to live a good life in this country. Wealth will not automatically mean happiness.

I agree, in fact I believe that wealth can often reduce happiness, firstly because pursuing wealth for its own sake is a waste of a perfectly good life, and secondly because we have a habit of using our wealth to isolate ourselves.

But what I meant is that if population goes up by (say) 5% and if people aren't prepared to reduce their consumption accordingly, then you need 5% more of everything. If people actually want more (as they seem to) then the economy has to grow by > 5%

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I agree, in fact I believe that wealth can often reduce happiness, firstly because pursuing wealth for its own sake is a waste of a perfectly good life, and secondly because we have a habit of using our wealth to isolate ourselves.

But what I meant is that if population goes up by (say) 5% and if people aren't prepared to reduce their consumption accordingly, then you need 5% more of everything. If people actually want more (as they seem to) then the economy has to grow by > 5%

Very true and it is this mentality that will end up destroying our planet. I had a discussion about this with a Labour MP and my point was that for world to tackle poverty and environmental issues then growth would have to be curbed and this would also include population. The Labour vitually called me a fascist for my views on population control. But who is being short sighted and who is facing up to the reality of real world issues.

My point is that as we consume more of the worlds resources we can't assume that firstly they are going to be equally shared and secondly that as we consume more we are going to have to distribute dwindling resources amongst a larger population. This in turn will make everyone a lot poorer.

Another factor I haven't mentioned is technology and you could assume that new technology will allow the current trend of population growth and growing consumption to be aided by technological advance. But this is a big assumption and we still have to live on the same amount of land unless we starting living in our orbit.

So our world has some tough choices to make, either we slow down and make the most of our lives on this miracle planet or we carry on consuming our little planet until we destroy it.

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Surely the begining of financial armaggedon is a good thing then (is there any doubt now that the financial system has fatal flaws?) the sheeple will only stop consuming when they are forced to do so. "Losing" £200,000 on your house is as good a start as any.

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Surely the begining of financial armaggedon is a good thing then (is there any doubt now that the financial system has fatal flaws?) the sheeple will only stop consuming when they are forced to do so. "Losing" £200,000 on your house is as good a start as any.

I know a property manager who values houses for mortgage companies and has given me a little insight to what to expect from property in the next two years. He gave me an example of a family home worth about 240,000 in the Midlands will be worth around £170,000 in three years time and within the scope of most family incomes. My house will be worth about 40,000 less than it was 2 years ago, so I could of purchased it for around £80,000 rather than £120,000.

He also said that it could be worse but that depends on the job market which is virtually impossible to predict

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I know a property manager who values houses for mortgage companies and has given me a little insight to what to expect from property in the next two years. He gave me an example of a family home worth about 240,000 in the Midlands will be worth around £170,000 in three years time and within the scope of most family incomes. My house will be worth about 40,000 less than it was 2 years ago, so I could of purchased it for around £80,000 rather than £120,000.

He also said that it could be worse but that depends on the job market which is virtually impossible to predict

The crux of the matter no one actually knows its all just guess work some educated some not, with everything that’s going on or should I say down at the moment the above would be an acceptable outcome in my opinion , very scary times these you are unable to trust anyone be it financial advisor banker politician and yes even an estate agent :o

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Capitalism can only fail as self-destruction is inherent in the system. It will continue to veer wildly between boom and bust until the end, when we will see the biggest bust ever. Whether that is now is open to debate.

As for innovation, Capitalism is hopeless, as profit maximisation means doing what you already do, only more efficiently. Innovation costs money, and capitalists hate spending money. Real innovation only comes during times of hardship and trouble. War is a great source of ideas, so if you want innovation pray for WW3.......

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Guest Steve Cook
Capitalism can only fail as self-destruction is inherent in the system. It will continue to veer wildly between boom and bust until the end, when we will see the biggest bust ever. Whether that is now is open to debate.

As for innovation, Capitalism is hopeless, as profit maximisation means doing what you already do, only more efficiently. Innovation costs money, and capitalists hate spending money. Real innovation only comes during times of hardship and trouble. War is a great source of ideas, so if you want innovation pray for WW3.......

Actually.....yes....I agree

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  • 293 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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