Wednesday, May 14, 2008

It’s time to pay for past excesses

The spectre of 'stagflation'

A combination of stagnant output and high inflation not seen for decades is set to haunt policy makers for months if not years to come. Even with the credit crunch, the housing market at its lowest ebb in 30 years, high street sales at their most miserable in half a decade, and industry reporting a collapse in orders, prices are still rising – and at an ever-faster rate.

Posted by quiet guy @ 08:11 AM (640 views)
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5 thoughts on “It’s time to pay for past excesses

  • Bananasplit says:

    The only important issue is mortgages are going to be more difficult to get and with lower income multiples and larger deposits required, the long term effect has not even started. The cash tap has been turned off and will be controlled like a water meter which will eventually create a self-fulfilling outcome of property prices completely intune with income so the people hanging on to high house prices are delusional but correctional therapy takes time to work and a few months patience will see prices falling sharply. The loose change the Chancellor handed out yesterday would not even buy a pint of ale once a week, Lets not be fooled tax is very high but only affects the low and middle earners, the very people that spend on the high street are being squeezed dry,we might end up with ghost town britain especially in towns and villages that attract second homers that rarely spend in local communities. Gordon Brown keeps talking about” we are well prepared for the downturn” ! the country has no savings, no industry, most low and middle incomes are in debt, house prices are falling and mortgages are available for good secure income for properties that the surveyor will down value. Jobs are starting to disappear and incomes and bonuses are drying up with rising inflation, unions will be asking for more money ………

    I love it…….very entertaining….But, i do feel a little compassion for those that are losing their home especially the children.

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  • Which ignores completely the crucial fact that wages aren’t rising.

    Demand-led rises in prices which are not linked with wage rises have the same effect as interest rate rises, which will reduce demand and hence reduce prices, taking away the risk of stagflation. The crucial thing is to keep the economy turning over, which is why the Bank should be cutting much more aggressively a la Fed.

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  • also sold to rent says:

    This is not going away in the long term. The cause is oil (www.appgopo.org.uk) and the only way we’re going to come out of this as winners is to get our vehicle fleet off of oil and become leaders in energy efficiency and renewable energy. From a housing market point of view this might result in prices falling below what even the most bearish of us think since people will be struggling just to pay for food and fuel.

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  • I agree with energy self-sufficiency, but only from the perspective of security.

    The commodity bubble is a function of demand and bets on the shape of demand going forwards. Sadly for commodity bulls that demand is not there any longer so prices will fall sharply, as will inflation. I also feel that when you get extremely stretched forecasts after a very big move -oil at USD200 a barrel for example – the next move is against the forecast. Remember when oil was USD 10 a barrel? It was supposed to go to cents…

    House prices will of course take a massive bath along with these other over-priced assets.

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  • Mytimeis Nigh says:

    Totally agree with also sold to rent, the future is in renewable energies, to save the planet and to save the economy. We should be market leaders in wave power; after all we are a small island surrounded by water. The carbon cycle lags behind by thirty years, so global warming is currently only effected by omissions back then. (I think, I ain’t a scientist). With peak oil and global warming, the times are changing. We need to be as prepared as possible, but with government and personal debt at all time highs, we are already at a major disadvatage.

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