House prices won't crash - say Daily Express

dopester wrote: »

I suppose all of the 9 previous times since year 1570 where economic boom ended in a big credit crunch, which in EVERY INSTANCE saw property and land values crash, causing a lot of ruin each time businessmen, businesses, and with political backlash - holds no insight in to what will be the result of this credit crunch.

phil_b wrote: »

I think many would argue that what happened in 1570 has naff all to do with 2008 to be honest

Source: The Great Reckoning (1992) - James Dale Davidson & William Rees-Mogg

Bright Lights from the Gloom

Every depression radiates unforeseen consequences across generations. It puts those who lose fortunes in good company and motivates human ingenuity in unexpected ways.

The story of an Englishman whose life illustrates this point has been much in our minds. He is a successful businessman who has fallen on hard times, as so many have. In the early sixties he inherited a farm from his father. He was not much good as a farmer, his hedges were a disgrace to the neighbourhood, but he always had an eye for a bargain. He sold the farm, built up a business in textiles and leather goods, put money into other businesses, and joined the local council.

Before he inherited the farm, as early as the fifties, he had an interest in properties, and as his business expanded, he bought more properties. By the late sixties he had reached a high point in his civic career. He was appointed the bailiff of the local market town in which he lived. His operations were on a substantial scale. He was part of the English enterprise culture before Mrs.Thatcher.

Unfortunately, it was the crisis of the mid-seventies that turned his fortunes for the worse, as it did those of many other businessmen and property people. He was overstretched. Some of his deals went sour. Unemployment was rising and money was tight. Life became a lot less pleasant for him. He had to sell most of the property he had bought, often for low prices, although he was able to keep his home. He retired from the council. There were lawsuits, even appearances in court and threats from the bailiffs. For twenty years he had become steadily richer; for the next twenty years he became steadily poorer

Who is this old man? His name is John Shakespeare; his son’s name is William. The facts are recorded in Dennis Kay’s Shakespeare. The years are correct, but the century was, of course, the sixteenth. John Shakespeare lived on until 1601, “a merry-checked old man,” and saw his son’s theatrical and business success.

John Shakespeare was indeed a victim of the major Elizabethan depression that began in the 1570s and continued, with some intermissions, to the end of the century. There were thousands of businessmen like him, and there have been many more thousands of businessmen destroyed in each of the depressions that have occurred at the rate of two every hundred years. What has been happening in the nineties, and the terrible damage to lives and careers, has happened again and again in the past.

The depression of the 1630s spread across Europe and incidentally destroyed the business of a collateral ancestor of Lord Rees-Mogg, William Mogg of Wincanton. He went bankrupt for £1300, an enormous sum at the time, in the trade of “banking in grain”. More important, that depression also destroyed the finances of King Charles I, whose need to raise new money led to the Civil War, his defeat, and his execution.

On November 12, 1672, John Evelyn noted in his diary that “widows and orphans” had been ruined by King Charles II’s stop on the Exchequer, and he added a later comment: “The credit of this bank being thus broken did exceedingly discontent the people and never did His Majesty’s affairs prosper to any degree after it.”

In 1721, Jonathon Swift, then dean of St.Patrick’s in Dublin, wrote of the aftermath of the South Sea Bubble: “Two hundred chariots just bespoke / Are sunk in these devouring waves, / And here the owners find their graves.” An eighteenth-century depression was as damaging to the carriage business as a twentieth-century one is to car manufacturers, which General Motors has reason to know.

The South Sea Bubble and the depression of trade that followed it ruined countless families, of both businessmen and investors. A Midland businessman who failed in trade, partly because of the depression and partly because of an unsuccessful investment in making artificial parchment, was Michael Johnson, the leading bookseller of Lichfield. Like John Shakespeare, he was a hardworking and successful businessman and a local councillor in a Midlands market town.

The 1570s depression struck when William Shakespeare was eleven years old; by a coincidence, the South Sea Bubble collapsed when Michael Johnson’s son was also eleven years old. Who knows whether the one would have gone to London as a common player and the other as a bookseller’s hack if their father’s businesses had continued to prosper?

In 1780, Edmund Burke was complaining of the high rate of interest and the corresponding low value of land. He advocated an economical reform of government. In 1782, John Walter, who was to become the first proprietor if the Times, in effect became bankrupt as a result of huge losses at Lloyd’s caused by the American war and by the depression of the time. He called his creditors together and was able to repay them out of his substantial earnings.

That depression, which persisted through 1780s, caused James Dale Davidson’s ancestor Josiah Prather to lose the Brookfield Plantation in Southern Maryland. It also destroyed the finances of Louis XVI and led directly to the French Revolution and to his execution.

It one reads the mid-nineteenth-century novelists Dickens, Thackeray, and Trollope, they all record the debtors’ prisons, the ruined banks, the distressed childhoods of the post-Napoleonic depression. Sir Walter Scott himself died in heavy debt because of his commitment to the failure of the house of Constable in the crash of 1825-26. Later in the century, the great agricultural depression of the 1870s lasted for a generation.

In this century we have experienced the depression of the thirties and – more like the late nineteenth century – the longer economic malaise that has linked the inflation of the seventies to the deflation and debt of the nineties.

Since the mid-sixteenth century there have been nine of these depressions. All followed periods of excessive debt, all involve a credit crisis, all lead to a collapse of property values, all ruin independent businessmen, all have serious political consequences, and all cause high unemployment and social distress.

They do have some positive results, however, in releasing energies from the businesses they destroy. With no depression, we might have had a large leather business in Stratford and a bigger bookshop in Lichfield, but no Hamlet and no Johnson’s Dictionary. Perhaps even now debts are distressing the parents of an eleven-year-old child who will write the poetry of the next century.

History teaches that, if you weren't so blinded to it.

I honestly don't care if house prices fall by 50% because I'm in for the long term, plus you have to live somewhere.