Can we end boom and bust?

Graham_Devon

I actually think, in terms of the property market, yes, there are steps we can take, maybe not to end it, but to at least stem it.

It's called a responsible mortgage market.

Many people will say you cannot regulate things. But you can, and you do not have to regulate things so badly that the regulation harms markets.

Things such as responsible lending at a responsible multiplier.

Stopping gambling and speculators (happening again in the oil market right now).

Stop lending based on prospective rises (look at the wilsons here for an example).

Make people more responsible for themselves. I.e. don't downgrade bankrupcy to a point where people think "oh well, got nothing to lose".

We need a responsible solution to debt. I think the easiest solution is to seperate the banks into the "peoples banks" who provide mortgages like building societies used to and then the gambling side of the bank, the hedge funds, the speculation etc.

So no, I don't think we can end boom and bust, but I think we can do a hell of a lot to protect us all from it.

penguine

JayScottGreenspan wrote: »

There are lot of things they could have done better, to ease the magnitude of the cycle and make sure we end the rollercoaster a little better off than otherwise.

I guess there wasn't really any financial incentive for the government to stem boom and bust, given that they were making money off stamp duty from all those properties being bought at inflated prices. And it's a bit difficult to kill the goose that lays the golden eggs, especially as it's making the populace feel all warm and happy knowing their houses are worth so much and will spit out money like a cash point whenever they want it.

I think probably whoever was in power would have done more or less the same. Except maybe the Lib Dems if Vince Cable had been their leader.

Entertainer

Yes, it can be regulated.

Policy can change, such as interest rates or restricting lending, if politicians and regulators have the mind to care about controlling asset prices. Unfortunately, most politicians understand nothing about economics and the short term expediency and lack of moral hazard prevents them from doing so.

Basically, all these people are not risking their own money- banks, regulators, politicians- they make decisions which do not effect their own pockets. John Prescott can burn £2 billion with the Pathfinder scheme and still swans about in his mansion in Hull. Andy Hornby destroys a bank and then lands a top job at another company. Adam Applegarth uses a FTSE 100 company like his own personal harem, wrecks it, gets a huge payoff and wiles away his hours playing cricket.

mewbie_2

If I say socialism as my answer will the thread get moved? Sorry if it does, what I'm trying to say is that the capitalist model relies on boom, bust, human greed to keep going. Not knocking it btw - just facts innit.

kriss_boy

Wont the new home report thingy help propoerty prices rise at a sensible and sustainable rate?

I was speaking to an estate agent a few weeks ago and she said long gone are the days of 15% over the asking prices or heated price wars due to the new home report legislation.

She reckons it means now that when people do get the report and see that the bricks and mortar theyve paid 150K for are only really worth 130K then people will reconsider their offer...

seeya23

n o no no no no we can not

kriss_boy

seeya23 wrote: »

n o no no no no we can not

Care to explain?

Thrugelmir

penguine wrote: »

I recently suggested on another thread that we really need to end boom and bust this time this time around, because it's damaging to those individuals caught up in a property crash as well as to society as a whole. It seems to me that every decade a large number of those who bought at or near the height of the boom get shafted when prices fall and/or interest rates rise -- and since these are usually people in their 20s or 30s who have just stepped onto the property ladder and often have a young family, this has knock-on effects for their own children.

Another poster told me that you can't eliminate boom and bust, it's just "Mother Nature".

But I don't think it's "Mother Nature", it's human behaviour and as such we can take steps to eliminate it -- through regulation, first of all, but also by working to change attitudes towards renting and better education about managing one's own personal finances.

What do others think? Can boom and bust be eliminated? And if so, how?

Like the USA, the UK is burdened with a huge amount of Government, Corporate and Consumer debt. So if nothing else we are all faced with a period of austerity while the debt mountain is reduced. This in itself will cap the boom. Plenty of bust for a while longer.

Certainly incentives to encourage saving and penalise excess would be a start.

chucky

unfortunately we live in a commercial and corporate world.

people make money when asset prices drop and there are people that make money when asset prices rise. it's what happens.

mewbie_2

Er. slight omission there of the people who lose money when assets drop?