Telegraph: wages collapse at fastest rate in 60 years

carolt

JonnyBravo wrote: »

And so if rates do shoot up soon, as you predict, will house prices drop enough before this happens for FTBers to buy or will the rates rise at the same time (or before) prices drop and then it never "makes sense"?
OK I've over simplified it here, but you get my drift, is it possible with your scenario that it never makes sense?

Yes, it's possible that it could 'never make sense'. In which case I might continue to rent, or I might buy anyway.

But personally, I don't think house prices can stay so high above historic earnings multiples for long - unless you think today's interest rates are to stay. The evidence from Japan or the US in the Great Depression was that house prices fell for a long time.

Personally, even if I thought it were a great time to buy a house now, due to interest rates, I wouldn't want to, as in other, non-financial terms, I don't want to buy now. I'd like to buy towards the mid/end 2010, so I'm hoping prices will have fallen further then, and interest rate direction be clearer.

It makes more sense to stretch yourself to buy with a high interest rate, in an era when interest rates are widely expected to fall - as was the case when the early '90's crash started to bottom out.

Interest rates are clearly going to rise now, which is why long term fixes aren't cheap.

So I don't see I gain anything by buying now.

dopester

Dan: wrote: »

You could be right.

I just don't see any Government raising interest rates while in recession.

Really the mystic thinking on this forum is sometimes so frustrating (not you Dan in this post). You were warned, over and over and over for 16 months or more. Pay-cuts, rising unemployment, and deflation. Yes it wasn't nice to project, but how could the conclusion be denied .

"One thing I don't like about your posts Dopester is the cold bleak future you'd have for so many people." (mid 2008) ==== well it isn't my fault that these are the obvious consequences and fall-out of credit-expansion and house values trebling, supported with very little real savings and capital in the system. It was just so obvious.

Interest base rates are low for a reason.

One of the reasons interest rates are so low is that assets such as houses are depreciating in value.

If house prices are rising, you are forced to pay a price for your gains. When they are falling, banks are grateful just for the repayment of principal.

What you gain on the cost of your mortgage you more than lose on the size of your debt, which is inflating relative to your equity and income.

Don't you get it yet? Even with low rates, capital values are and will continue to plummet.

The only inflation some might see is when their incomes are cut, or through job loss, where everything becomes even more expensive, despite having fallen in price. And the high debts many have taken on which become even more unbearable to service.

Banks and building societies may raise their own lending interest rates to those seeking to borrow, for those who don't meet high standards credit-ratings - or stay low, but just refuse access to borrow at those lower levels.

JonnyBravo

carolt wrote: »

It makes more sense to stretch yourself to buy with a high interest rate, in an era when interest rates are widely expected to fall - as was the case when the early '90's crash started to bottom out.

Fair enough!

dopester

Heyman wrote: »

So what you're saying is -

(1) Slash the wages of 6 million people in the middle of a recession.
(2) Risk the wrath of the Unions and a national walkouts over pensions...again (they've already been down this road)
(3) Slash public sector employment sending unemployment through the roof at a time when the Private Sector is on its knees. Also resulting in huge cuts in public services presumably whilst keeping Council Tax at the same level. Happy for your rubbish to be collected once a month and for potholes to start appearing in the main roads then?

Now I'm all for tough decisions but your suggestions would make things considerably worse on the ground and would be political suicide for any government, let alone one which is already expected to lose the next election.

Just so long as you know that your plans for spending at these levels are entirely dependent upon the goodwill of the markets.

The public sector accounted for 37% of the workforce when the Conservatives passed power over to Labour. It was 48% in 2006, and many crazy-high salaries now within all areas of the public sector.

How they've gone about over-seeing many projects are a disgrace. Sick.

From The Sunday Times
May 3, 2009
Poverty staff share £65m bonuses

STAFF at a government-backed fund supposed to help some of the poorest people in the world have been awarded £65m in bonuses – equivalent to an annual £350,000 per employee.

The bonuses have largely come from investments intended to tackle poverty in the developing world. The fund was part of the Department for International Development (DFID) until it was part-privatised in 2004.

Charity workers say the government has allowed the fund, Actis, to skew Britain’s priorities overseas in its pursuit of high returns by depriving poor rural communities of investment. Actis manages funds for DFID’s investment body, CDC, tasked with reducing poverty, and has been praised for its success. But it has been awarding staff bonuses of up to £3m out of investments built up over years in developing countries.

Average pay for employees in 2007 was on a par with those at Goldman Sachs, the US investment bank.

Worship Labour and all the good measure you believe they are taking to limit pain - but the money they are relying on comes from the market. This bloody country has rewarded gambling speculation above those who can add value to the country over the last 10 years.

Daily Mail. 1st May 2009

In the meantime, the government machine has broken down and civil servants are in despair. Ministers complain that it is impossible to get a decision out of Downing Street, while others say that any decisions that are made are done so for irrational, purely political reasons.

One permanent secretary complained about the Budget, saying the Chancellor's financial figures do not add up. He said: 'We either need spending cuts, or a larger departmental budget. We are in a situation where the official figures are just not deliverable.'

Another civil servant is even gloomier. 'We are moving towards a crisis which can only be resolved by an emergency statement to the House of Commons in the autumn,' he warned. Other Treasury officials are pressing for the setting up of an emergency committee to investigate the need for drastic cuts in public spending.

But No 10 will not permit such a move. This, in turn, has led to a growing dread inside the Treasury that the Debt Management Office (which sells gilts for the Treasury) will be unable to fund the budget deficit on international markets. In all this, there is one crucial contrast between what is happening now and the final months of Callaghan and Major's administrations.

Whereas both these men recognised the severity of the financial crisis that was facing the nation and took radical steps to cut public spending (and therefore reassure the City markets), Brown has ignored the problems and left any economies until after the next election.

StevieJ

Hey Dopester, where have you been? I have missed your cheery outpourings :beer: Game on Tuesday.

dopester

StevieJ wrote: »

Hey Dopester, where have you been? I have missed your cheery outpourings :beer: Game on Tuesday.

Hi Stevie. I was going in to 3 months of self-imposed exile, but lasted a clear month (April) before energy recharged.

It is draining when you're almost a lone-voice in not believing capital can be created from nowhere. That they expect boom-conditions to continue even though the paradigm has been smashed. How young-people are supposed to keep getting in to ever more debt to support their old-expectations from a Labour distorted reality.

Chelsea deserve to be thrashed, although Chelsea can be dangerous enough if they hit their stride and get their confidence. My money is on Barca if this time Chelsea don't play so negatively. Barca thrashed Real Madrid 6-2 at the weekend. :j

StevieJ

dopester wrote: »

Chelsea deserve to be thrashed, although Chelsea can be dangerous enough if they hit their stride and get their confidence. My money is on Barca if this time Chelsea don't play so negatively. Barca thrashed Real Madrid 6-2 at the weekend. :j

You mean they beat the whipping boys of La Liga even Liverpool did them 5-1.

Out of interest have you built your Ark yet

dopester

StevieJ wrote: »

Out of interest have you built your Ark yet

If the Ark was a saviour to the floods, then savings/deposit built-up money should be a saviour to the financial crunch.

A bit like Elwood and the overwhelming compulsion to build in his backyard, with every spare hour he could get and for over a year. Regardless of how ridiculous others thought him to be.

Except with building savings, and for longer than the year Elwood worked.

Whilst others were bragging about their equity and home values or the size of the mortgages, some of us were just trying to prepare for the future like Elwood... except saving and resisting the general new belief that debt is wealth. Refusing to follow the path of taking on incredible levels of debt to afford even a basic home.

What makes it run, then? I don't see any sails. What kind of motor is in it? Steam?"

Elwood bit his lip. Strangely, he had never thought of that part. There was no motor in it, no motor at all. There were no sails, no boiler. He had put no engine into it, no turbines, no fuel. Nothing. It was a wood hull, an immense box, and that was all. He had never thought of what would make it go, never in all the time he and Toddy had worked on it.

Suddenly a torrent of despair descended over him. There was no engine, nothing. It was not a boat, it was only a great mass of wood and tar and nails. It would never go, never never leave the yard. Liz was right: he was like some animal going out into the yard at night, to fight and kill in the darkness, to struggle dimly, without sight or understanding, equally blind, equally pathetic.

What had he built it for? He did not know. Where was it going? He did not know that either. What would make it run? How would he get it out of the yard? What was it all for, to build without understanding, darkly, like a creature in the night?

Toddy had worked alongside him, the whole time. Why had he worked? Did he know? Did the boy know what the boat was for, why they were building? Toddy had never asked because he trusted his father to know.

But he did not know. He, the father, he did not know either, and soon it would be done, finished, ready. And then what? Soon Toddy would lay down his paint brush, cover the last can of paint, put away the nails, the scraps of wood, hang the saw and hammer up in the garage again. And then he would ask, ask the question he had never asked before but which must come finally.

And he could not answer him.

Elwood stood, staring up at it, the great hulk they had built, struggling to understand. Why had he worked? What was it all for? When would he know? Would he ever know? For an endless time he stood there, staring up.

It was not until the first great black drops of rain began to splash about him that he understood.

JonnyBravo

"It was not until the first great black drops of rain began to splash about him that he understood. "

Well I'm glad he finally understood. I'm not sure I'm any the wiser.

Was he building it to stand underneath in case of a late afternoon shower? :rolleyes:

mewbie_2

I read Dopester's novel with great interest and am going to buy an umbrella immediately. Finally MSE has taught me something.