Tuesday, May 16, 2006

Immigration policies key to house prices

In2perspective: Immigration key to low inflation and interest rates

The deflationary pressure on the economy generated by the willingness of migrant workers to work for minimum wage or less translates into low interest rates. This allows us to borrow money, whether in the form of credit cards, mortgages, loans or otherwise, at new low rates....

Posted by Jack Hughes @ 10:51 AM (624 views)
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1. Rimmer said...

Fine comments so long as overall unemployment remains low!

Tuesday, May 16, 2006 11:04AM Report Comment

2. uncle chris said...

I wonder if they will feel the same way when millions of Romanian workers descend on the UK and Ireland next few years. I'm not one for the BNP but there is a serious problem developing and we cannot carry on sticking our head in the sand hoping the problem will go away. We are a relatively small country and we cannot go on taking in millions (and I mean millions) of migrant workers that are shunned by the rest of Europe. From talk on the street (no I'm not Huggy Bear) I have picked up on serious unrest in my local community about the UK's open door policy. All people see is the liberal ruling class spouting empty promises, the rich getting richer and the least fortunate in our society loosing out by holding out for a decent standard of life by refusing to accept low paid jobs.

The UK needs a serious debate about whether we want to be a part of the global community. There is no way we can compete with the likes of China, a country which puts no worth of the lives of it's workers - bourne out by the deaths of thousands of chinese miners each year. Personally I think France has the right idea by standing up for and protecting it's citizens. I just wish our politicians would choose the non-global economy route. After all, what has it brought us but higher taxes, fat cats and less chance of buying a house.

Tuesday, May 16, 2006 11:56AM Report Comment

3. denzil said...

If mass immigration means keeping inflation low then this government do not give two hoots about it.

I really have little time for the BNP but it does not take too much thinking about to realise why they're growing in popularity.

Tuesday, May 16, 2006 12:22PM Report Comment

4. Surfgatinho said...

At the other end of the scale there seem to be plenty in the UK who are unwilling to do jobs that pay minimum wage as they get a better deal on the dole.
Where I live nearly everyone I know has done a stint of flower-picking in the past. Now-a-days I don't know a single person who does it and all the flower pickers are Eastern European.

I understand how all this makes for lower inflation and lower interest rates but I think it is also bad for fundamentals and society.

What happens if we have a recession? Will all the immigrant workers be entitiled to dole over here, and will this already tax over-burdened generation have to pay even more?

And finally, isn't the UK already a little overcrowded (speaking as a complete misanthrope!)

Tuesday, May 16, 2006 12:27PM Report Comment

5. Followthebear said...

I agree. Ringwing economists constantly criticise the French economy, but people work less and earn the same as in the UK, their industry is 25% more productive, they have the same national wealth as us and all without North Sea oil, the City of London, the benefit of the English language, and mass Eastern European immigration.

Tuesday, May 16, 2006 12:31PM Report Comment

6. European-bear said...

Its always easy to blame "wage demands" for causing inflation (and hence low wages as counter inflationary). However, this is one of the biggest scapegoat and lie that politicians deliver. The real reason for inflation is when the money supply is too great. i.e. there is too much money chasing too few goods and services, so the price goes up. If the money supply stays the same there is no inflation. Employers can pay what they want (or can) and it will not be inflationary as there is no extra money in the economy. If the money supply stays the same then employers can only pay more by efficiency savings elsewhere or increased sales. If they cannot make efficiency savings or increased sales, then employer simply would not be able to respond to the wage demand. If the employer is able to make increased sales (or the same sales at increased prices) then if there is no increase in the overall money supply, someone else has to decrease their prices or make fewer sales of competing good.
Wage demands are not the cause of inflation. The cause of inflation is increasing the money supply at a faster rate than the economy is expanding. High wage demands are merely a symptom of inflation. But governments (and central banks) like to blame the workers for the problem of inflation rather than the true cause which is themselves....

Tuesday, May 16, 2006 12:38PM Report Comment

7. denzil said...

>>The cause of inflation is increasing the money supply at a faster rate than the economy is expanding.

Euro Bear are you referring to money supply within business or money supply overall? What I don't understand is if you say the cause of inflation is due to money supply then surely excess growth(inflation) surely should increased the money supply significantly and in turn led to inflation. But we have not really seen inflation, is this due to "fudged" figures or have cheap imports had as big a surpressing effect as we are led to believe?

I maybe misinterpreting your message so please correct me if I am well off the mark.

Tuesday, May 16, 2006 01:29PM Report Comment

8. denzil said...

Missing words in my message above: "in property prices"
What I don't understand is if you say the cause of inflation is due to money supply then surely excess growth(inflation) in propery prices should have increased the money supply significantly and in turn led to inflation.

Tuesday, May 16, 2006 01:32PM Report Comment

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10. Bobbill said...

The true definition of inflation is the increase in money supply (M3), unfortunately everyone tends to think of inflation as price increases (the consequence of increased money supply).

We know the money supply has radically increased and "official" inflation figures are so fudged they are not worth looking at. I get the impression anything that radically increases in price is excluded from inflation figures, like housing when it was wildly escalating it was not used in determining inflation. Come now how can such an important item we all need not be included in inflation calculations? (Champain is now included and was exempt from the latest duty [I mean tax] increases) I believe when housing enters its long overdue Bull market with dropping prices it will become part of the inflation calculation to offset the rising costs of energy so that it can be officially reported that inflation is benign. The consequences the masses get meagre salary increase while CEOs and others in the upper echelons get increase many multiples of the official increase we are all sup[posed to be happy with, who has true knowledge and grasp of inflation, the upper echelons or the masses?

We know what we can do with the money we have; it buys less and less after essential living costs have been paid. I dont buy DVD recorders each month neither Champain.

Tuesday, May 16, 2006 01:58PM Report Comment

11. Miniftse said...

Uncle Chris and Surfgatino - get use to immigration we need it. We live in a society that has no more than a five year outlook (business\governments and individuals), that means todyas pensions are paid by todays workers (opposed to yesterdays workers), so if we want to retire then we need a constant supply of workers, with a declining birth rate immigration is proving to be the answer.

Followthebear - Unfortunately we are in the race to the bottom - the American way, no body benefits by not playing by the rules no matter how absurd the rules may be, the french have 50% graduate unemployment, they are rioting.

EuropeanBear I think you make some valid comments, over supply of money is the problem the world is facing. It is responsible for the current bubbles in stocks, property and commodities, 3 bubbles at the same time is pretty unusal. With global interest rate increases it looks like they may be tightening the belt and we should have some correction. I think some of the ways in which inflation is reported are suspect, I think 2% is currently very conservative.

Tuesday, May 16, 2006 02:01PM Report Comment

12. denzil said...

>>I believe when housing enters its long overdue Bull market with dropping prices it will become part of the inflation calculation to offset the rising costs of energy so that it can be officially reported that inflation is benign.

Good point! It wouldn't surprise me one bit.

Tuesday, May 16, 2006 02:12PM Report Comment

13. European-bear said...

I think the term is bear market (declining prices) not bull market (increasing).
The point about money supply....the UK economy increases in size, on average, by about 2-2.5% per year. So the money supply should increase by about 2 - 2.5% a year, as there are 2 - 2.5% more goods and services each year (on average) compared to the previous year. If the money supply increased by the same amount as the economy each year there should be no inflation (or am I being over simplistic).......
So do not blame inflation on pay demands. If the money is not there, you can demand what you want, but it will not be paid. Blame it on excessive increases in money supply.....

Tuesday, May 16, 2006 03:44PM Report Comment

14. harold said...

EB is right, and the whole point is that the money supply is now being tightened in response to global inflationary pressures. Unfortunately, in the meantime we have not invested all this extra money in industry and technology, i.e., wealth creation, but on foreign cars and holidays by people MEWing. In other words, we haven't invested it for a rainy day (sensible option), rather blown it on imported goods (silly option), hence the record levels of unsecured debt. Just how far up debt creek we are without a paddle may not be evident at present. However, this will change rapidly with, now virtually inevitable, IR rises.

Money supply can have a number of actuating mechanisms - one is wealth creation (the Far Eastern option), another is borrowing (our option).

Tuesday, May 16, 2006 04:18PM Report Comment

15. Retiredbanker said...

Followthebear- many good points raised.
The UK media are always knocking the French and Germans to distract attention from the very real problems here.
France still has viable aerospace, car, and shipbuilding industries unlike ourselves. It is also self sufficient in food
production with a substantial surplus available for export.
According to the DTI, North Sea oil and gas are "effectively all over" by 2020 (only 14 years away!), and those of us
that remember the sorry state of the UK economy before these reserves were (all too rapidly) exploited, can only
shudder. These reserves have been sold at $5/10 per barrel, and we will soon have to compete with the rest of the
world for diminishing supplies at $100+ per barrel.
Importing cheap labour is the usual short term political fix, and I do not see how this Country can maintain a
projected population in excess of 70 million, particularly with the widely forecast increase in food production costs
associated with the decline of oil and gas.
Many environmentalists are of the opinion that populations will have to be reduced in line with decreasing resources.
With regard to the claim that we need immigrants to pay for future pensions, I think that most of the younger
people will not get much in the way of pensions anyway, and will just have to keep working for longer. Reading
between the lines of the recent pension reports, it is clear that the Government well knows this, but does not have
the guts to admit it.

Tuesday, May 16, 2006 04:32PM Report Comment

16. Ticktock said...

I have read somewhere that it is estimated, that on any given day of trading, only 3% of transactions relate to actual commerce. The rest is speculative. Given that money has been 'free' for several years now (i.e. yen carry trade) and given the staggering contemporary scale of global speculation, it is not hard to be bearish on just about everything once rates start to rise (which they are)

The trick for the global capitalist elite to pull off, was in printing money like like never before (in order to buy assets around the world + stave off global depression/ K-wave down leg) while suppressing wage demands that would raise CPI, thus forcing the BOE to raise rates. This is why CPI is used rather than any other measure that might acually reflect the real devaluation of our currency This is the inevitable result of running the printers flat out. Once our 'debt' investers abroad realise that they are being cheated (and many already have) trouble (and war) will ensue.

On immigration, it is only natural that those who see the world through the eyes of an economist, in terms of proffit, loss, pounds and pence, will see this as a wondorful thing to be encouraged. This is why business people make bad politicians, and thus why New Labour are a bad Government.

As a socialist, nothing could be more deppressing that watching working class support grow for the BNP, but grow it will. Human beings are tribal and while multi-racial issues can be overcome, multi-cultural ones tend to lead to serious clashes, particularly if all are forced to compete for scraps in order to feed their families.

Tuesday, May 16, 2006 05:02PM Report Comment

17. Wannabe Emigre said...

I can agree with most the above comments, but this country could support a higher population easily (I am not a Malthusian), but the cost of doing so in terms of the fall in living standards would be high, but then I ask myself how would this country actually maintain its standard of living, it doesnt produce anything, it doesnt invest in its young-a fall in education standards, and it is busy spending all its capital abroad and it is selling what is left of its industry to other countries, and what industry that it has left is hampered by social policies that while they are laudable in theory are in practise open to abuse-how many working dolies do you know??. I am normally an optimistic person but as far as I can tell this country is going to the dogs-( The emerging economies are not hampered by such policies,they largely reward hard work and most importantly if you dont want to work you can starve as far as most of the indigenous population is concerned- there is social policy over in these countries it is called the extended family-which this country has destroyed too

Tuesday, May 16, 2006 10:09PM Report Comment

18. Denzil said...

>>I can agree with most the above comments, but this country could support a higher population easily

I agree but at some point there is a limit. My argument with immigration is that it if the country are going to permit 230,000 "legal" immigrants in 2004 + a natural increase (births - deaths) of 131,000 then the infrastructure has to be able to support that. By infrastructure I refer to roads, public transport, housing, hospitals etc. Considering that we have a population growing at around 360,000 per year property new builds housing in 2004 were around 200,000. It is worth stating that net immigrant into the UK in 2004 was exceptionally high and the previous year from memory was 177,000. Another stat of note is current house building compares quite poorly with any year dating back to 1950. In the late 60's 400,000 new homes were built per year. In fact current house building compares poorly with any year since the 50's and if you then consider poplulation growth through those periods the comparison is little more than horrendous.
What implications for HPC?

Wednesday, May 17, 2006 10:23AM Report Comment

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