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Leonard Hatred

Artificially Cheap Money Is Nothing New

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A while back, I found a book on social policy for £1. I was very surprised, in the "Housing" chapter, to see this passage about a 1930s housing boom. Apparently it was caused by cheap building labour due to unemployment, speculative building, rising wages, but most of all, low interest rates by the National government from 1932 onwards.

One the one hand there is the view that the boom, supported by cheap money, too Britain out of the slump, generating a multiplier effect on the whole domestic economy. On the other hand there is the view, apparently taken by the Treasury at the time, that the boom created instability and distortion in the domestic economy by channelling investment into housing exchange and over-indebted home owners rather than to capital investment in manufacturing and other export-orientated activities. There are of course strong echoes here of some of the issues surrounding the 1980s home ownership boom.

[...]

By the late 1930s... building societies were taking more risks in their lending policies. The length of mortgage loans was increased to an unprecedented 25 years and loans were extended to cover up to 95 per cent of the purchase price in a market where the price of houses was falling slowly... In some cases the builder and building society colluded to produce inflated selling prices and poor quality housing.

The lesson? Nobody learns from history. And even if some do, no ******er listens. "It's different this time", etc.

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A while back, I found a book on social policy for £1. I was very surprised, in the "Housing" chapter, to see this passage about a 1930s housing boom. Apparently it was caused by cheap building labour due to unemployment, speculative building, rising wages, but most of all, low interest rates by the National government from 1932 onwards.

The lesson? Nobody learns from history. And even if some do, no ******er listens. "It's different this time", etc.

When was the book written? I try to keep a record of all previous house price booms and slumps.

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A while back, I found a book on social policy for £1. I was very surprised, in the "Housing" chapter, to see this passage about a 1930s housing boom. Apparently it was caused by cheap building labour due to unemployment, speculative building, rising wages, but most of all, low interest rates by the National government from 1932 onwards.

Very interesting Sir Talbot -- I wonder though -- what sort of SCALE was this on in comparison to the SCALE of MORTGAGE FRAUD, LIAR LOANS/"Self-Cert" [etc.] today...... Because I get the strong impression that FRAUD has never happened on the sheer SCALE that has been the case this time.......... Right across the UK in every street, hamlet, village, town, city...... AND ALSO further afield - exported by the Brits to places like Spain, Portugal, France, Bulgaria etc etc. AND ALSO of course, in the USA!!!!

Edited by eric pebble

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The lesson? Nobody learns from history. And even if some do, no ******er listens. "It's different this time", etc.

This is also Alan Greenspan's view, that people are prone to episodes of Irrational Exuberance, and that over generations no learning takes place.

But these models do not fully capture ... the innate human responses that result in swings between euphoria and fear that repeat themselves generation after generation with little evidence of a learning curve. Asset-price bubbles build and burst today as they have since the early 18th century, when modern competitive markets evolved.

After reading all the complete rubbish in the newspapers about how it was supposed to be "different this time", I'm sadly starting to agree with his view.

Edited by BandWagon

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This is also Alan Greenspan's view, that people are prone to episodes of Irrational Exuberance, and that over generations no learning takes place.

After reading all the complete rubbish in the newspapers about how it was supposed to be "different this time", I'm sadly starting to agree with his view.

History is barely taught in schools now........ It's regarded as too difficult -- and if it is taught - there are precisely 2 subjects:

1 - Adolf Hitler

2- Elvis Presley

I kid you not -- this REALLY is the case in 2ndary mods........

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Very interesting Sir Talbot -- I wonder though -- what sort of SCALE was this on in comparison to the SCALE of MORTGAGE FRAUD, LIAR LOANS/"Self-Cert" [etc.] today...... Because I get the strong impression that FRAUD has never happened on the sheer SCALE that has been the case this time.......... Right across the UK in every street, hamlet, village, town, city...... AND ALSO further afield - exported by the Brits to places like Spain, Portugal, France, Bulgaria etc etc. AND ALSO of course, in the USA!!!!

I think that the scale of house purchasing was very small at this time compared to either the 1980s or the present affecting as it did only the more affluent sections of the working class and lower middle classes. The wider ramifications of easier access to money in respect of some building societies' lending would have been minimal for the economy at large. "Liar loans" would have been few in that day and age since Building Societies were lending their own depositors' money and would have required references and a fair measure of job security from prospective borrowers. This period also saw massive public building programmes particularly in respect of social housing for rent following slum clearances. This cannot be said of the present situation.

A far more significant impact on the inter-war UK economy came from the increase in Hire Purchase which stimulated demand for consumer goods through the mid-late 1930s. The UK government (along with many other countries) reverted to a Protectionist policy following the 1932 Import Duties Act in an attempt to revive the UK economy against "unfair" overseas competition so stimulating domestic consumption was important. It was easier to finance this as the government came off the gold standard about the same time. The government began increasing defence procurement from 1936 onwards as the threat from Germany became more apparent; this also gave an additional boost to manufacturing industries and secured employment.

I assume Page and Silburn would have been aware of this wider picture, but were comparing events in the 1930s and the 1980s and suggesting that what had seemed a novel experience to those who witnessed GC1 had precedents 50 years before.

The present "irrational exuberance" has echoes of previous manias, but I think Eric is right in thinking that its scale and the level of fraud beneath it is unprecedented. The full extent will only become clear once the collapse in GC2 has run its course, but there will be a few papers and books to be written on the subject, I'm sure. Whether the lessons of GC2 will be forgotten by future generations we can only guess.

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Don't knock him... his recent achievements in lunar exploration mean that house prices are only going in one direction :P

(pace John Wriggleworm)

There IS some guy/outfit on the US which is selling plots of land on the moon -- I kid you not!! :P

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  • 297 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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