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frozen_out

House Prices At Cheapest For 20 Years!

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Two posts tonight got me thinking, one on how you can eesentially judge your carbon footprint by your paypacket (which I agree with absolutely), and one on central banks injecting money into the banking system.

What effect are the 'injections' having, what is their purpose given that (IMO) all money represents is energy. We are told that energy can be neither created nor destroyed, only changed - so how can 'money' be injected into the system. Well it can if the price of energy changes, injecting money into the system without a concurrent increase in energy production MUST increase the price of that energy (although it doesn't change its value).

So the next step in my thought was to consider the price of a house in terms of barrels of oil. This seems sensible to me, after all a house takes energy to build, the house physically represents oil being changed into somewhere to live. So I plotted the house price in terms of oil price since 1971 and got this:

house_price.jpg

The price of a house in terms of barrels of oil is currently crashing, and in terms of actual resources a house is now cheaper than at any time in the last twenty years.

Is this deflation?

post-9037-1216942778_thumb.jpg

Edited by frozen_out

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Guest DissipatedYouthIsValuable
Is this deflation?

No. It's a graph of house vs. oil prices.

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Two posts tonight got me thinking, one on how you can eesentially judge your carbon footprint by your paypacket (which I agree with absolutely), and one on central banks injecting money into the banking system.

What effect are the 'injections' having, what is their purpose given that (IMO) all money represents is energy. We are told that energy can be neither created nor destroyed, only changed - so how can 'money' be injected into the system. Well it can if the price of energy changes, injecting money into the system without a concurrent increase in energy production MUST increase the price of that energy (although it doesn't change its value).

So the next step in my thought was to consider the price of a house in terms of barrels of oil. This seems sensible to me, after all a house takes energy to build, the house physically represents oil being changed into somewhere to live. So I plotted the house price in terms of oil price since 1971 and got this:

house_price.jpg

The price of a house in terms of barrels of oil is currently crashing, and in terms of actual resources a house is now cheaper than at any time in the last twenty years.

Is this deflation?

Carbon Arseprint!

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house are only cheap if you brought andstored the oil many years ago in $ or quidleys they are massively overvalued.....

in a treuely freeworld you could buy land and build your own hay bale house very very cheaply, trust me houses are way overvalued....

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No. It's a graph of house vs. oil prices.

oooh, you're so insightful.

Ultimately energy is all we have. Almost everything you buy has its price ultimately determined by the amount of energy it took to make it, therefore your possible consumption is determined by the barrels of oil you are paid. So right now, not only has your wage severely deflated over the past 12 months, so have the price of houses.

Do you disagree that money is simply an abstraction of energy?

house are only cheap if you brought andstored the oil many years ago in $ or quidleys they are massively overvalued.....

in a treuely freeworld you could buy land and build your own hay bale house very very cheaply, trust me houses are way overvalued....

This isn't the point. The point is if I was getting the same energy return on my labour as I was 20 years ago then houses would be cheap, what has happened isn't massicve house price inflation, it's massive wage deflation.

All that matters is the price of a house in relation to what you earn.

At av average still north of 180k they have a long way to fall.

I never said they didn't have a long way to fall. Having a long way to fall and already being historically cheap are not mutually exclusive events, especially as we are historicaly poor.

Edited by frozen_out

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... all money represents is energy.

We are told that energy can be neither created nor destroyed, only changed -

so how can 'money' be injected into the system...

Quaternio Terminorum

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Quaternio Terminorum

How so?

Theres only 3 statements.

Money is energy,

Energy can't be created

Therefore money can't be created.

When you work all you are doing is swapping your energy for oil. If I was getting the same return on my energy as someone did ten years ago houses would now be historically cheap. Therefore houses aren't historically expensive, your labour is historically cheap.

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How so?

Theres only 3 statements.

Money is energy,

Energy can't be created

Therefore money can't be created.

When you work all you are doing is swapping your energy for oil. If I was getting the same return on my energy as someone did ten years ago houses would now be historically cheap. Therefore houses aren't historically expensive, your labour is historically cheap.

and when something is historically cheap it can bounce back ;)

Edited by moosetea

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and when something is historically cheap it can bounce back wink.gif

That's the key point isn't it? (assuming you are making the allusion to wage inflation I think you are).

Can it bounce back? I don't know. We're paid in a finite resource, that if you believe many is rapidly dwindling. We're now competing with many more workers who want a share of the this resource. I don't think they can really bounce back, which is good news for the HPC, not so good for the inflationists.

Edited by frozen_out

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Guest DissipatedYouthIsValuable
Do you disagree that money is simply an abstraction of energy?

Yes. Or there wouldn't have been so much of the worthless paper and electronic bits created in the last ten years.

It was more an abstraction of euphoria.

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That's the key point isn't it? (assuming you are making the allusion to wage inflation I think you are).

Can it bounce back? I don't know. We're paid in a finite resource, that if you believe many is rapidly dwindling. We're now competing with many more workers who want a share of the this resource. I don't think they can really bounce back, which is good news for the HPC, not so good for the inflationists.

But money can be created at will whereas energy can't. Are you Injin's demented half sister?

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The point is missed here.

The majority of oil is used in transporting goods domestically and internationally. Countries compete for export markets because the foreign currency they receive is money that is debt free. The debt stays in the country they export to.

Modern production strives for monetary efficiency at the cost of energy efficiency and common sense. The gap between purchasing power and the price of goods is constantly expanding as the cost of interest on the ever expanding money stock grows. This puts a growth bias on the economy as a whole and forces production toward low cost, low quality goods. It is the debt-money supply system that is responsible for oil demand.

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How so?

Theres only 3 statements.

Money is energy,

Energy can't be created

Therefore money can't be created.

When you work all you are doing is swapping your energy for oil. If I was getting the same return on my energy as someone did ten years ago houses would now be historically cheap. Therefore houses aren't historically expensive, your labour is historically cheap.

But you're conflating two different definitions of energy

The physics definition, ie the physical property of a system that allows it to do work (work also defined in a physics frame of reference)

The economic definition, ie the calorific value of a material, or "energy resource" to give it a more formal name.

Therefore, two propositions and four terms - syllogistic fallacy.

Various other false assumptions are

:that the planet is a closed system (energy conservation only holds for a closed system)

:Money is a conserved quantity (clearly false because money is a human construct and therefore didn't exist in the past) (perhaps you mean value - but then define value in a non-anthropogenic setting)

:That there is a formal link of labour = oil. Tell that to the Sentinelese

Sorry if I seem a bit pedantic, but as a physicist I am constantly running into pseudoscience related to the violation of energy conservation - it's nice to argue in the opposite direction for a change.

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Guest DissipatedYouthIsValuable
But money can be created at will whereas energy can't. Are you Injin's demented half sister?

:lol::lol:

Got to admit though. It's a lovely graph.

Edited by DissipatedYouthIsValuable

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But you're conflating two different definitions of energy

The physics definition, ie the physical property of a system that allows it to do work (work also defined in a physics frame of reference)

The economic definition, ie the calorific value of a material, or "energy resource" to give it a more formal name.

Therefore, two propositions and four terms - syllogistic fallacy.

Various other false assumptions are

:that the planet is a closed system (energy conservation only holds for a closed system)

:Money is a conserved quantity (clearly false because money is a human construct and therefore didn't exist in the past) (perhaps you mean value - but then define value in a non-anthropogenic setting)

:That there is a formal link of labour = oil. Tell that to the Sentinelese

Sorry if I seem a bit pedantic, but as a physicist I am constantly running into pseudoscience related to the violation of energy conservation - it's nice to argue in the opposite direction for a change.

It's the calorific value of oil that allows us to use it to do work. We burn oil for energy, the entire ability of the industrial world to do work relies on the calorific value of oil. Therefore one proposition and three statements.

With regards to the other assumptions:

You can assume that the planet is a closed system in terms of industrial energy resource

I'm starting from the assumption that energy is the ultimate medium of exchange, and therefore the ultimate form of money. Energy is conserved, therefore money is conserved

And last there IS a link between labour and oil.

If our wages were paid in oil, then you'd be correct. Sadly though, our wages are paid in money, which makes real estate very expensive right now:

No it doesn't.

Say you make a car and sell it for £500k for 20 years, then you decide to sell it for £250k. The car is now cheaper, your ability to pay for it however has not changed unless your wages change. Your ability to pay and the cheapness of the car are independent.

OK. I can see I'm not getting many converts here, I'll start from what I see as the beginning.

Firstly I don't want to get into an argument over semantics, money, legal tender, currency and all that so I'll start with two definitions:

1) Money is a medium of exchange. You want something you swap it for money.

2) Currency is a type of money, not all currency has the same properties.

Now, energy is the ultimate currency. It is impossible to debase and everything anyone does involves an exchange of energy. You sit on the setee eating crisps. You're using chemical energy, derived from food, the food ultimately came from a farm of some type and has been transported to various places. The main source of energy used to allow you to sit on your sofa mucnhing crisps is oil (modern agriculture is essentially converting oil to food). So sitting there, in your undies, munching doritos ultimately has a cost in oil.

So where do you get the oil from? Well you work for it (OK some people don't, but assume this guy works for his money). Trouble is you can't cart barrels of oil everywhere so whoever you work for gives you something (for me, GBP) to allow you to purchase goods and services, all of which are ultimately derived from oil. In effect your employer pays you in energy, as oil is our main source you are essentially paid in oil.

If the amount GBP it takes to purchase one barrel of oil increases then the amount of energy you are swapping your labour for decreases. It's a hard fact you can now access less goods and services, because these goods and services all represent a quantity of energy.

So onto houseprices. You swap some of your accumulated energy for a house. If one day oil costs £50 a barrel and your house 100k you've swapped 2000 barrels of oil for a house. If the next day oil costs £100 a barrel and your house is still 100k, you've only swapped 1000 barrels for the house, but your wage has also halved. This is deflation.

Edited by frozen_out

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It's the calorific value of oil that allows us to use it to do work. We burn oil for energy, the entire ability of the industrial world to do work relies on the calorific value of oil. Therefore one proposition and three statements.

I'm very sorry frozen_out, I don't mean to be rude, but you're simply wrong.

"Energy is Conserved"

is a vague and floppy translation into words of a mathematically precisely defined statement. It has a very specific meaning, which does not apply for your argument. Specifically the energy in a closed system is conserved because the laws of physics are time invariant and energy and time therefore form a conjugate pair. See here

With regards to the other assumptions:

You can assume that the planet is a closed system in terms of industrial energy resource

I'm starting from the assumption that energy is the ultimate medium of exchange, and therefore the ultimate form of money. Energy is conserved, therefore money is conserved

You cannot assume that the Earth is a closed system in terms of industrial resource, as we continuously receive energy from other sources (eg the sun) and radiate energy (eg emf).

The assumption that energy is the ultimate medium of exchange is arguably a fair one, but there is still an excess of energy pumped into the system daily by sunlight. Therefore you cannot claim that energy is a limited resource based on current usage. You can't even claim that for oil, as it is possible, although currently economically inviable, to turn atmospheric or mineral carbon into oil using solar power.

Also as I said before, it is entirely possible to live without any reliance on oil if you want to - you simply need a hunter gatherer lifestyle.

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No it doesn't.

Say you make a car and sell it for £500k for 20 years, then you decide to sell it for £250k. The car is now cheaper, your ability to pay for it however has not changed unless your wages change. Your ability to pay and the cheapness of the car are independent.

What is this? “sell it for £500k for 20 years, then you decide to sell it for £250k” What is it? It sounds like gobbledygook - I can’t divine a point from this at all.

OK. I can see I'm not getting many converts here, I'll start from what I see as the beginning.

Firstly I don't want to get into an argument over semantics, money, legal tender, currency and all that so I'll start with two definitions:

1) Money is a medium of exchange. You want something you swap it for money.

2) Currency is a type of money, not all currency has the same properties.

Now, energy is the ultimate currency. It is impossible to debase and everything anyone does involves an exchange of energy. You sit on the setee eating crisps. You're using chemical energy, derived from food, the food ultimately came from a farm of some type and has been transported to various places. The main source of energy used to allow you to sit on your sofa mucnhing crisps is oil (modern agriculture is essentially converting oil to food). So sitting there, in your undies, munching doritos ultimately has a cost in oil.

This is complete nonsense. Have you not heard of photosynthesis?

So sitting there, in your undies, munching doritos ultimately has a cost in oil.

A very, very small one….

So where do you get the oil from? Well you work for it (OK some people don't, but assume this guy works for his money). Trouble is you can't cart barrels of oil everywhere so whoever you work for gives you something (for me, GBP) to allow you to purchase goods and services, all of which are ultimately derived from oil. In effect your employer pays you in energy, as oil is our main source you are essentially paid in oil.

Does not follow!

If the amount GBP it takes to purchase one barrel of oil increases then the amount of energy you are swapping your labour for decreases. It's a hard fact you can now access less goods and services, because these goods and services all represent a quantity of energy.

Actually, they all represent a large quantity of labour – that is the ultimate cost component of anything (along perhaps with scarcity value) – this principle is pretty basic to economics, by the way….

So onto houseprices. You swap some of your accumulated energy for a house. If one day oil costs £50 a barrel and your house 100k you've swapped 2000 barrels of oil for a house. If the next day oil costs £100 a barrel and your house is still 100k, you've only swapped 1000 barrels for the house, but your wage has also halved. This is deflation.

No, it is inflation. If the value of money decreases relative to other things, we call it inflation, not deflation. It is precisely because money is solely a medium of exchange that we define inflation in this way. Your thinking is confused and over-contrived.

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I'm very sorry frozen_out, I don't mean to be rude, but you're simply wrong.

"Energy is Conserved"

is a vague and floppy translation into words of a mathematically precisely defined statement. It has a very specific meaning, which does not apply for your argument. Specifically the energy in a closed system is conserved because the laws of physics are time invariant and energy and time therefore form a conjugate pair. See here

You cannot assume that the Earth is a closed system in terms of industrial resource, as we continuously receive energy from other sources (eg the sun) and radiate energy (eg emf).

The assumption that energy is the ultimate medium of exchange is arguably a fair one, but there is still an excess of energy pumped into the system daily by sunlight. Therefore you cannot claim that energy is a limited resource based on current usage. You can't even claim that for oil, as it is possible, although currently economically inviable, to turn atmospheric or mineral carbon into oil using solar power.

Also as I said before, it is entirely possible to live without any reliance on oil if you want to - you simply need a hunter gatherer lifestyle.

I have a sound grasp of the laws of thermodynamics, thanks. My job depends on it.

Sure, I don't disagree that there are energy sources other than oil, but they don't really add anything to the industrialised economy. Fair enough you may use some 'renewables' to reduce your oil use, but the fact remains that all goods and services currently bought and sold have some cost in oil. Even EDM admits that sitting in your jimjams munching doritos has a cost in oil, all be it a small one, but there is a cost nonetheless.

I find it interesting that you can measure the price of a house using things that others find perfectly acceptable, pounds, dollars, yen, gold, mondeos, big macs, whatever. They've all been used and people say they're apparently useful. But they ignore (and indeed ridicule if this thread is anything to go by) the simple fact that all these things are simply proxies for oil. I'll give you an example to illustrate my point.

Say it takes a tonne of wheat to feed a family for a year, and it takes one barrel of oil to produce a tonne of wheat. If you can't accumulate the equivalent of 1 barrel of oil over the course of a year you can't feed your family. It's a physical impossibility. It doesn't matter whether you are paid in pounds, dollars or chocolate easter eggs, if you don't earn the required amount of oil, you can't feed your family.

One final question: If energy was completely free, would you ever need to buy anything?

Edited by frozen_out

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I have a sound grasp of the laws of thermodynamics, thanks. My job depends on it.

Sure, I don't disagree that there are energy sources other than oil...

You're missing my point. Other have argued that oil is not equal to money, I am arguing that energy is not equal to oil and therefore that it is fallacy to say that:

Energy is Conserved

Oil is Energy

Money is Oil

- Therefore money is conserved.

Oil is not energy in the sense that dU + deltaW is energy. Don't forget that the first law of thermodynamics is only one of a number of consequences of the conservation of energy which is a far more fundamental statement.

One final question: If energy was completely free, would you ever need to buy anything?

Yes - you would need to pay for a reduction in entropy. Energy is free in a hunter gather society, in that the ultimate source of their energy is sunlight. However, you need to invest labour and therefore time to gather the energy sources together (reduce entropy) and therefore in such a situation the currency is time.

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So what's your point?

the point being you gave injin loads of abuse for explaining to you how the money supply actually works.

and then you come out with some shite about the price of oil compared to houses.

So after being abusive toward someone who was correct dont try and look clever

whilst being completely wrong.

Thats the point.

In fact i feel a whistful hope that you may get run over by a bus on your way home.

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  • 399 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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