ΒιΆΉΤΌΕΔ

All this user's posts have been removed.Why?

Men were deceivers ever, one foot on sea and one on shore, to one thing constant never, so sigh not so and let them go, be thee blith and bonny, transforming all your tales of woe into HEY NONNY NONNY.

THE END

We are all lotus eaters now.

or

fish slappers



Why can they not eat cake indeed?

Good luck all.

AFORE YE GO

Didn't James G Brown fix everything then? Did he, in fact, persuade everyone to do THE WRONG THING? I always wondered how a financial genius knew how to fix it, BUT NEVER SAW IT COMING.

No wonder he is doing a McCavity again.

#7

They can't default, they all signed up to the Lisbon Treaty, 'if the sovereign government cannot live up to its commitments then all assets will be signed over to the IMF and ECB'

Give it a few months and even the middle classes will believe that Black Bloc is the only way forwards.

I am bored with all these posts about the economy now. Can we go back to cheese and crackers and the mysterious case of Paul Mason's mobo contacts?

I was just talking with a 35 year old young man who is married and has a young child.

His wife, quite rightly, does not wish to move away from the place where she was born and brought up - Cornwall.

But he tells me that, despite almost saving 100K by putting in every hour they could in working and saving, that they stand no chance of ever owning their own home.

He says the house that he rents have asking prices of about 450K despite most of them just sitting on the market for years because no one, no one local anyhow, can afford them. What does sell goes to rich Londoners.

He is destined to pay out most of his wages in private landlord rents. He can't get into a Council house or a Housing Association property because they either no longer exist or the waiting lists are measured in decades.

He is not prepared to have such a millstone of stress, worry and financial drain around his neck. It would kill him. I don't blame him.

His story is one of hundreds of thousands, perhaps millions, of people in the UK today.

I mention this as the bank stress tests are directly connected with the massive credit bubble, much of it a housing bubble of liar loans, that brought the global economy to its knees, bankrupted banks and still threatens to bankrupt nations.

All of us on here know this. We are an enlightened bunch.

But I think it is worth remembering that the affects of the global credit binge are still directly affecting so many in this country.

The UK is almost alone in the World in not yet seeing a massive housing crash. The Government and the BOE have gone out of their way stop it happening in order to protect the banks who so stupidly, but also so greedily, loaned so many liar loans on bricks and mortar not in other countries but here in the UK.

Those UK banks that keep threatening to leave our shores are up to their eyeballs in global liar loans. You name a country in trouble and you can bet your bottom dollar, which might be the only thing most of us have left soon, that British banks are at the heart of it all.

It is long overdue that this giant house of cards came crashing down. It is long over-due that, as a Society, we cut out the cancer of dirty banks and dirty bankers from our lives and from these shores.

They are leeches on the souls of Men. Gosh, I am getting poetic in my anger. It must be that teaspoon of Jack Daniels I put in my midnight cocoa.

So what if the banks fail their stress tests today, next week or next year. It won't make a squat of difference to that couple in Cornwall. It won't make a squat of difference to most of us.

The worst thing that can happen is, as Darling so panicked, that the ATM machines run empty. Well, what would happen then? Would the sky fall in? Would us polite British all sit at home and do nothing.

Or would we take our cue from the Egyptians, the Tunisians and all the rest?

Perhaps what this country needs most of all is for another even bigger banking crisis? If it happens I think I would feel safer being one of the masses instead of one of the banking elite.

I do hope the banks fail the stress tests. I do hope it brings about another crisis. I do hope that, this time, the People say enough is enough and that this rotting cancer within Humanity is lanced with a fiery lancie thingy.

I could murder a bit of cheese on a nice cracker now.

Hello all, I've been reading this blog for a couple of months now and it's always a thought provoking read.

So, although I'm not an economist by any means, I thought it was about time I contributed.

Anyway a recurring theme that has puzzled me slightly and repeated by @tawse57 in #5 is the assertion that a housing crash is necessary and a good thing. Presumably the result of this would be a huge number of people in negative equity, more defaults, more toxic debt, more bail outs, more sovereign debt, more austerity, more protests etc etc.

It might help out your mate in Cornwall but those of us who worked hard, saved hard and finally got a foot on the ladder (and can afford to repay their mortgage, albeit over a number of years) might be in bit of a hole.

Surely the govt should be doing all it can to keep prices stable, not going up, but not crashing. I can't see what good would come from a housing market crash, am I missing the point somewhere??

It's April Fools day tomorrow so I hope Paul is not thinking of another blog for Friday or anyone at the ΒιΆΉΤΌΕΔ because we may not take more doom and doom seriously. You did not come up with a solution so I presume it is another part two in prospect. I cant think of one apart from the state taking control of the banking system, new deal/Marshall plan, confiscation of bankers bonuses, a down sized one cake royal wedding, hand to hand single malt combat on the barricades outside Fortnum and Masons (for the latter do you need to declare an interest?).

#6 Pooza
Welcome aboard.
The point on the housing market (and commercial property, synthetic CDO's etc.) is that the asset values are overstated compared with a 'normal' market valuation, a situation typically known as an asset bubble. The cause of the overvalue is that credit was too easily obtainable, and too cheap. In the crisis we recognised that valuation could not go on ever upwards, and as a result banks like Lehmans were forced to recognise that the value of their loans (backed by overvalued assets) was much less than they were included on their balance sheets. As banks realised that many other banks were insolvent they stopped lending to each other (known as the wholesale markets, an important source of finance for banks and commercial firms). The problem for the banks is that the loans on their books are still overvalued. If forced to recognise the losses associated, then the banks would likely become insolvent and collapse with our cash and savings disappearing. To avoid insolvency, the banks with the help of governments have been building up other assets in their balance sheets to try and become more capable of absorbing the losses. As inflation climbs the value of assets behind the loans becomes nearer 'normal'.
Why do people on here advocate bank insolvency to sort the problem? Because that would mean a narrower group more closely associated with causing the crisis would bear the losses and we would in theory return to 'normal' market conditions quicker. That group would include bank shareholders, bankers, property owners in negative equity foreclosed and forced to refinance, anybody dependent on the property market for a living (estate agents, hooray!). The government has made a decision to socialise the losses pending the long term unwinding of the bubble, spreading the impact wider among the population and taxpayers generally and preserving the banking system - seen my many as the status quo - without addressing the problems that caused the bubble in the first place. Overlay onto all this the massive problems caused by globalisation, peak oil and the trade imbalances and you have something to exercise the most agile of minds...which is why we all post on here.

Pooza...There is a difference between house prices 'crashing' and 'correcting'. Crashing implies that the price of a home will fall like a stone to a level far below what it is really worth, but that is never going to happen.
It is also worth remembering that less than 50% of homes in the UK have a mortgage associated with them and of the ones that do the majority of the people living in them are sitting on vast amounts of equity. My brother bought his house in 1999 for Β£70,000 and today it is worth Β£200,000 so prices would have to fall by over Β£130,000 for him to be in negative equity, or to put it another way prices could fall by say Β£100,000 and he'd still be doing very nicely thanks...

The question is, are houses really worth the prices the mortgage lenders keep telling us?

We are told they are because it is a simple fact of supply and demand.

But how many young, potential first time buyers do you know who can afford to buy a house?...I don't know any.

How many of the people you know who do own a home could afford to be a first time buyer today and afford a mortgage at today's house prices?...I know 3.

The rise in house prices only stopped in 2008 yet wages have been stagnant since 2005, add years of high inflation to this further eroding the value of a months salary and how can prices really be worth more or less what they were at the hight of the boom?

The thing to remember is that house prices are only worth what the banks want them to be worth once everyone at the bottom, first time buyer stage of the housing ladder is paying a mortgage at today's prices. In the years leading up to 2008 this was done by giving them 8 times plus salary mortgages. It was never sustainable then and certainly isn't now.

But don't worry though, house prices rose and fell again in the 80's and 90's...the world didn't stop turning and we're all still here.

Thanks for the responses #8 & #9

I know someone who is young (just about, 34), and was a first time buyer last year. Me!

It's not easy, lots of hard work and saving required. So even if house prices drop by say 20 - 25% first time buyers from the 90s may be fine but any first time buyer in the last 5 years could be punished. Perhaps we were naive or gullible but my mortgage seems totally manageable and is actually cheaper than many of the rip off landlords that charge extortionate rent for sub standard properties.

Perhaps a tax on second properties would help people like me and tawse's friend in Cornwall.

Sorry I think I've deviated a little from Paul's True Finn post.

tonyparksrun's analysis is correct as far as it goes. Where house prices are unaffordable it is because of the land/location value not the cost of bricks and mortar which is pretty much the same everywhere in UK. Speculators, inheritors and those downsizing/selling up are reaping the capital gains, but it's the banks which are collecting the rent. Fortunately there is a very simple solution: collection of all land rent for public benefit. If this were done house prices would reflect the bricks and mortar value only. See www.labourland.org.

CRASH - CASH (#9)

Surely, if your house was madly overpriced when you bought it (and the mortgage lender was wickedly happy to lend anyway) then 'correction' FEELS like a crash?

Duck?

Housing policy in this country has been further bedevilled by the lack of "social" housing since Thatcher's day. It's created our own form of sub-prime lending - people being almost forced onto the private market by poor quality expensive rented accommodation and the (now rhetorical) expectation of easy capital profits which have traditionally been the second pension of the middle classes. Of such things are bubbles made. I get depressed every time I hear somebody talk about the "property ladder".

One of the best policies in the current climate is not Osborne's stupid sub-prime budget giveaway to first-time buyers. It would be to start building a new generation of quality social housing (OK, I know it has a bad reputation ...). Employ all those builders on the dole. House people at a reasonable price. Long term income from short-term investment. Suck the air (slowly) out of the private housing bubble.

Of course the Treasury will never have it.

Getting back OT. For the Eurozone to function effectively, then it has to operate financially as a single country, rather than as individual countries. Accounts have to be balanced. So the Germans have to realise that if they want other countries to pay for their goods, then they have to at least partially finance the means for them to pay for it. All that forcing the outliers into a deflationary spiral will do is to reduce demand for German goods, which won't help their own economy one iota.

The early days of the EU, when Spain, etc. received massive rural development finance primed the pump for the German boom, raising living standards in the outliers and providing a ready new market for German goods. [Thatcher was to stupid to see this opportunity]

The German economy will get nothing from driving down prosperity in the outliers. The trouble is that domestic politics and orthodox neo-liberal economics kind of get in the way of this kind of solution.

privatise all the nicks now...there's gonna be a riot...gonna be a .....

The guy who runs Wal-Mart has just told Americans to prepare for 'serious inflation' in the months ahead.

Thank goodness we have none of it here.

House prices are unaffordable because

a) We are overpopulated - too many people chasing too few homes
b) wages have been kept artificially low since about 1999 - and that is why debt and house prices are apparently so high.

Then we have the deficits and the incredible waste - we import workers by the million and pay to keep our unemployable unemployed.

Finally, Europe has a politcal Elite that has raised corruption to an art form, and we in the UK are not exempt, although the Irish are paragons at that game.

So, if, come May, you vote for any of the Lib-Lab-Cons, then you are simply voting in favour of the status quo - the problem I guess, is, that I see no politcal party advocating investigating Labour and the Banks for corruption - maybe that straight kinda guy has a second diary full of maps of where all the bodies are buried.

#17 DevilsAdvocate

"House prices are unaffordable because

a) We are overpopulated - too many people chasing too few homes"

Well maybe in London. In the rest of the country (even the South East) there is really plenty of monoculture farmland which has no great environmental, scenic or leisure use, which could easily balance the housing shortage - it's just the planning regulations which prevent it. Green belts - what are they for? To keep the plebs in their place in overcrowded City centres with inadequate open spaces and parkland?

Make enough land available and houses prices will be driven by how much they cost to build and the agricultural value of the land - not by the maximum people can afford to pay. I would guess this is around 50% of current prices in the UK.

As for where all the billions of Euros/Pounds went that have disappeared from the banks balance sheets, I guess the big winners were those who owned land and managed to get planning permission to build on it. Plus those property speculators (and the odd downsizing retiree) who bought in and got out at the right time. Plus the bankers/estate agents etc who got there cut - but maybe that's only a small slice oif the cake? It's all gone somewhere though.

Look, 1% own 70% of the land (although we only know for sure of 55% of the owners!). We don't get to see most of it. We believe the myth that we are overpopulated because we're all squeezed into a little bit of it. Tax it all (at full rental value), then we'll see if that 1% really need so much land.

This is the true nature of the Euro snafu.
It's just a bigger version of the bankers' debt-based money system running dry on Fractional Reserve Banking and is the work of a clever devil.
The economist, Steve Keen has correctly described our money system as credit based with a fiat money bit stuck on.
What part does fiat money (cash) play in this system?
It only makes up 3% of the money supply yet costs zero interest to us and we can sell it to the private banking system. I think there is a solution there somewhere if only a smart economics commentator would point it out.
For fiat money also read electronic fiat money.
The lenders of last resort have to realise, organise and nationalise.

I wish I had a vote in Finland.

I never fail to be amazed, when a small (relatively) action, taken by a section of society changes the big picture for ever.

And for anyone who thinks we won't get Inflation ??????

Posen will be a loser.

18 Random Thought

"Well maybe in London. In the rest of the country (even the South East) there is really plenty of monoculture farmland which has no great environmental, scenic or leisure use, which could easily balance the housing shortage - it's just the planning regulations which prevent it....Make enough land available and houses prices will be driven by how much they cost to build and the agricultural value of the land - not by the maximum people can afford to pay. I would guess this is around 50% of current prices in the UK. "

This seems to a thread full of polite and reasonable people so I will fight back my original thoughts!!!

What you are proposing is a carbon copy of what happened recently in a country very close to us, called Ireland! Speculative development on sites with reassigned usage (lots of brown envelopes changing hands here I think) saw the building of 400,000 extra homes in a country with about 1.5 million households...how daft was that?

Selling houses at cost is not likely to attract anyone to actually invest in developments. Some new developments, due to a variety of factors, will be more desirable than others so people will pay more for the chance to live there...and off we go again

Lastly, there may well indeed be areas of unattractive farmland in Southern England that could be concreted over in your thesis...but we would lose productive land, we would put even greater pressure on road and utility infrastructure and, crucially, there wouldn't be enough water to go round.

Oddly, the thing that doesn't get talked about are the social and cultural changes we are undergoing, leading to to a huge increase in single occupancy. The green and pleasant land may end up being tarmaced because we can no longer live together!

Oooops...sorry...the Euro? I don't know about you but I'm off to buy some gold!

1% own 70% of the land (wilcox)

That is the issue for certain in terms of over pricing and values. The greenbelt seems like a good idea in a monarchy when the only benefit is to Mrs Queen and her friends. Compared to other European countries we are just plain stupid about this issue.

Over crowding because of restrictive land use results in bad education, housing and all the rest. It also drives up business costs and manufacture is therefore uncompetitive. Land is a better punt than working and has been for centuries, that is why we have a declining industrial base and ever increasing speculation.

The remedy, get rid of green belt - preserve some areas but far fewer than at present - tax non productive land on a fair basis - make housing density far smaller by law and the result will be a return to village life and sensible communities.

If we had a radical new planning policy like that our old towns and villages from Cornwall to Cowdenbeath might have a chance of retaining their brightest and best.
It would regenerate industry without the need for subsidy. Create jobs and increase tax revenues all in one move. It might even help dying towns like Burnley / Oldham / Blackburn / Bodmin where all this began 200 years ago with a thing called the Industrial Revolution.

Note to self - The Industrial Revolution is over now. Time to move on.

Anyone have that sneaking feeling that there are some prime candidates for default out there, but nobody wants to be the first. If one goes then the others will not be far behind - the markets will see to that.
Is there also a question out there that politicians are muddling through (or trying to) because they fear political oblivion. They were elected to a man/woman on the basis that markets rule, liberalisation and trickle down works. We have seen that left to the markets intractable imbalances occur, asymmetry of risk and pricing occur (for whatever reason, markets & information are imperfect) and trickle down doesn't work, in fact exactly the opposite. Leaders need to emerge from outside the current lot, have the honesty to tell it like it is and get working on a solution (clue, it won't involve maintaining Euro standard human rights, a comprehensive welfare safety net and international free trade).

@Quiet unassuming little man "The remedy, get rid of green belt - preserve some areas but far fewer than at present - tax non productive land on a fair basis - make housing density far smaller by law and the result will be a return to village life and sensible communities. "

No, you need to tax all land at its true value at the time and revalue frequently. Although most of the land owned by the really big landowners is low rental value per acre, they have so much of it that they would not want to keep it all. Good agricultural land should be preserved but the ownership would change to real farmers, since the capital cost of land would be negligible. We could then have a sensible plan for new development sites, with the difference that developers would be earning their returns from developing and not land speculation. As for the productive land, which you want to keep untaxed, that could provide a huge additional revenue source for the Exchequor. Think Mayfair, Belgravia - half owned by Gerald Grosvenor and occupied by non-doms.

Removing planning and the green belt will just lead to urban sprawl and an unsustainable car-based economy like the US - like we already have in many parts of the UK already.

We need more social housing and denser housing in existing cities, with improved public transport.

EU leaders have been trying to head off a chaotic default on peripheral debt. If Ireland, Portugal and Greece default - how much will the governments of northern Europe be asked to pay?
IT IS BEING MAINTAINED THAT THE EURO MUST BE PRESERVED TO KEEP THE EU TOGETHER.
β€œWe must save the euro to save the European Union!”
Why?
Angela Merkel: "If the euro fails, then Europe fails. If we succeed, Europe will be stronger.”
Why?
The European Union is an orange, and the euro is an apple. You must be careful how you mix the two because they are not the same. Three of the long-standing members of the EU - Britain, Denmark and Sweden - have stubbornly remained outside the euro. Have they suffered? Who's to say?
In fact, the majority of the new members from eastern Europe have yet to join the single currency, but they are still EU members.
Breaking up the euro will not break up the EU. It will change the financial character, but to see this break-up of the euro as the end of the EU is just plain illogical.
By any measure, the single currency has handicapped. It hasn’t made the economies of Europe into one economic zone and it hasn't helped indentedness:
It hasn’t promoted sustained growth. It has simply prevented individual euro members from fixing their economies by standard economic processes because (for example), the cannot manipulate private currencies to manage import/export trade.
The Euro members face financial instability over which they have no control. In fact, the euro is creating this lack of control. It;s like be asked to swim while handcuffed.
There are years of terrible austerity for the high-deficit countries, accompanied by big cuts in living standards and rates of unemployment that will make it virtually impossible for an entire generation of Greeks, Irish or Spanish to build their economies.
In Germany, the Netherlands and France, there will be resentments over the bailouts, and this could lead to inter-country civil unrest. Will this unrest and resentment strengthen the EU?
Saving the euro us NOT about saving European Union.
I have come to think that saving the EU, the euro needs to be examined, maybe dismantled - temporarily. It may have been an idea whose implementation came too soon.
Neither Greece leaving nor Germany leaving makes much sense. In either scenario, what remained would be just as dysfunctional as before.
What does make sense is to have different euro zones. The lower-deficit countries in the north would form one bloc, while the high-deficit countries, all in the south apart from Ireland, would form another.
It may be the time, an interim time, for national currencies, re-creating the deutsche mark, the franc, the lira and so on. The EU would be preserved in the same form in which it exists today. There would be the same free movement of goods, money and people around the member states. There would just be no more euro...for now.
Once the resurrected currencies settled down, I think there would be a growth of prosperity. The deflationary doldrums would have been lifted. The Greeks, the Spanish and the Irish could set about rebuilding their economies with new, lower exchange rates. I believe that within one tear, the whole EU continent would be relatively quick rate. Deficits would be falling. This is especially true for Ireland, which needs despecrately to devalue its currency in order to compete re exports.
This does not mean that there are no advantages to keeping the euro as such. Businesses could price their goods in euros if they wanted to and sell stuff to each other in that currency. The financial markets could use it to price stocks and to issue bonds, etc.
The Euro could float on the foreign-exchange markets, find its own level. A European central bank should be maintained. Its mandate: keep the euro as a strong & secure value. Within the core euro-zone countries, the new euro might over time displace national currencies. It’s certainly possible to imagine that happening in the Netherlands, Belgium and Austria. They might well be followed by some of the eastern European countries. Latvia and Lithuania might easily decide it wasn’t worth the hassle of running their own currency. Time to switch to the euro.
The EU currency must be allowed to grow from the bottom up (green shoots) instead of being imposed from the top down (manure).
I don't understand why the EU leaders are fighting so hard, not to save the EU, but to save the Euro - when it is evidently holding back financially so many of its members. The EU leaders have already created this massive bailout package, used for Greece and Ireland so far.
Why?
Let countries solve their own problems without the sword of Damcles hanging over their heads. There is financial wisdom and know-how in all countries, but if you bind them to the Euro, the individual solutions will likely fail, increasing indebtedness and sparking despair.
Think about this: When the US dollar collpases, it will be a new game anyway...