Arrived: Halifax figures for July!

WTF?_2

Sir_Humphrey wrote: »

And forget Right-Libertarian fantasies of "inflating out" of the problem. It just ain't gonna happen.

I don't think that'll stop the pressure being on for the government to try it. It's already a given that the Federal Reserve is going to go the inflation path as evidenced by its policies and by past papers from Bernanke.

Inflation (across the board) would offer a quick fix: relieve the pressure on the indebted banks, make legions of indebted voters feel immediately better and might well be enough to win Labour the next election.

Of course, the longer term consequences for the economy would be catastrophic but set against the need to stay in power and all the VIs lobbying for inflationary lower interest rates and bank bailouts, I could well see the bunch of monkeys in the government going for it.

If only that idiot Brown had called the election last year when he had a golden chance. He'd be in for five years now and might actually implement some longer term policies aimed at sorting the situation instead of having to go ahead with short-term policies aimed at getting him reelected in less than two years time.

Sir_Humphrey

!!!!!!? wrote: »

I don't think that'll stop the pressure being on for the government to try it. It's already a given that the Federal Reserve is going to go the inflation path as evidenced by its policies and by past papers from Bernanke.

The Fed tried to stimulate the economy by dropping IRs. They tried to bail out banks. The first objective was not to increase inflation IMO.

That is not to say I agree with their efforts.

You have to remember that Japan had 0% IRs along with deflation for many years. It is impossible to have negative nominal IRs, so you can only cut so far.

The only way the government could produce a "Weimar/Zimbabwe" situation would be to literally print bank notes and allow wage inflation to let rip. Such a move would render any party that did unelectable for just about forever. If Brown tried it, younger Labour people would have him removed to protect their future careers. This is real life, not a far fetched political thriller.

In addition, a lot of government spending commitments are index-linked, so it would not solve their problems anyway.

For these reasons, the government has never deliberately taken this step. The Callaghan government wrecked itself trying to contain inflation.

Any idea that inflation is a deliberate policy choice only exists in the minds of right-wing American loopy-loos who spend too little time in the real world and too much time on the internet (Or in the company of other loopy-loos). You probably know the names of the loopy-loos I have in mind if you spend time on the internet. Clue, their initials include RP, LR and BB.

whowants2brich

Statisticians at the ready:

The following is an extract from the historical data of house prices as per the HBOS archives for average prices in the whole of the UK on a monthly basis (AllMonSA for those who want to look at the spreadsheet) - http://www.hbosplc.com/economy/includes/07_08_08historic%20data.xls

I've added the final 2 columns to get a view of the annual percentage change in prices, which show a pretty scary similarity between the change in house prices back in the 1989 crash, and what we're seeing now. Such a massive swing from increasing prices (34% in Dec 1988, 11% in Jul 2007) to decreasing prices (-0.12% in Mar 1990, -10.9% in Aug 2008).







I think that the only thing will be that the cliff-face is positive but rapidly approaching negative in the late 80s, whereas now the steep drop is already well into negative territory...

I think that the long slow drop of the early 90s was slow and gradual. I wonder if because this is such a steep fall in prices, that maybe things will turn around and improve as quickly as things turned for the worse this time last year...?

Generali

Either use Google docs to create the spreadsheet or use something like http://www.badblue.com/ (I have never used this so have no idea if it's any good or not).

PasturesNew

whowants2brich wrote: »

...I wonder if because this is such a steep fall in prices, that maybe things will turn around and improve as quickly as things turned for the worse this time last year...?

No. It doesn't work like that. It's turned quickly, but it took 10 years to get to that point.

It'll be a few years unravelling.

Lotus-eater

PasturesNew wrote: »

No. It doesn't work like that. It's turned quickly, but it took 10 years to get to that point.

It'll be a few years unravelling.

No, it works the way it works this time, who knows, we can guess it will be similar to last time, but we simply do not know.

Generali

Sir_Humphrey wrote: »

For these reasons, the government has never deliberately taken this step. The Callaghan government wrecked itself trying to contain inflation.

Didn't they have monetarism forced upon them as a condition of the IMF bailout? The whole incomes policy mess was just desparation IMO.

Sir_Humphrey

Generali wrote: »

Didn't they have monetarism forced upon them as a condition of the IMF bailout? The whole incomes policy mess was just desparation IMO.

Yes. In his autobiography (which is actually very good - even Paxman has praised it) Denis Healey states so.

Healey never believed in monetarism (he describes it as "mumbo-jumbo"). He did not have much time for economics, as he realised the difficulty of implementing policy with poor data. He claims that had Treasury forecasts for 1976 been correct, he would not have had to call in the IMF at all, (the decision was made on forecast data). He famously called the day the IMF was to stop their aid as "sod-off day".

The incomes policy was actually pretty successful for 1977 and 1978 (inflation stats back up his claim here). He admits that he was wrong to try to force it further in 1979.

Incomes policies seem to only work for short periods. They also only work with collective bargaining and strong Union barons. The "beer and sandwiches" with Unions in reality tended to result in Unions doing what the Labour govt wanted rather than the other way around. Resulting resentment amongst Union members tended to lead to moderate Union leaders being replaced by left-wingers such as Scargill.

I do not see how Incomes Policy could be implemented in the current labour market.

mr.broderick

ginvzt wrote: »

Ok, so the news:
Halifax -1.7% MoM

i wasn't a million miles away

WTF?_2

Lotus-eater wrote: »

No, it works the way it works this time, who knows, we can guess it will be similar to last time, but we simply do not know.

Yes, this time around the rug has been pulled straight out from under house prices by a financial industry crisis.

Hence the sudden opening of a yawing gap between asking prices and what people will pay (ie can borrow to pay), which sellers are still having problems adjusting to.

That's definitely different but what won't be different is the effect of the resulting recession to reinforce price drops. I can't see any upward pressures on pricing coming along to rescue the market any time soon.

With any luck, prices will come down quickly and then the market can get moving again. So maybe recovery will be quicker than otherwise. But given the reticence of buyers to lower their prices don't overestimate the amount of time it will take for asking prices to reflect market reality. The longer it takes for prices to hit a sensible level, the longer it will take for recovery to start.