£1.2tn given to old from young

Graham_Devon

Deleted_User wrote: »

OK. So a house is a better investment than a phone, car or even gold. I agree.

But that doesn't explain this idea that money spent on property somehow doesn't exist. In THIS respect how is it different from buying a car or a phone?

Let me remind you of the bit I'm responding to:



I've heard a lot of comments like this and I'm struggling to understand.

Money doesn't sit in property. Any more than it sits in cars and mobile phones.

Sorry, I give up

[Deleted User]

Graham_Devon wrote: »

I've explained in the only terms I can really think of why the money doesnt really exist.

Here's an idea. If you think that 200k exists, go and buy a 50k car with it. Though I want you to continue living in the same house and take no loans or products.

That doesn't make any sense. Of course you can't spend outwith your means. Most people buy a house because they want a nice home. The fact that they don't have to pay rent AND that the house can be sold at any time - normally for substantially more than they paid for it, is a bonus.

Lets go back again to the comment I was responding to:

I would imagine that the bulk of that 1.2tn is just sitting in property and not doing the vast majority of people any good young and olds alike.

Again I would say that money isn't 'just sitting in property and not doing the vast majority of people any good'. The money is in circulation.

The £200k that I spent on my house went to someone else. They might have spent it on property or they might have spent it on a new business, a holiday...or they might have put it in the bank.

The point is, the money IS in circulation and as such is doing good. Money does not 'sit in' property. Any more than the money spent on a car, a watch or a painting 'sits in' that item.

Graham_Devon

Deleted_User wrote: »

The point is, the money IS in circulation and as such is doing good. Money does not 'sit in' property. Any more than the money spent on a car, a watch or a painting 'sits in' that item.

Then buy a 50k car using the money you bought you house with, but keep your house and use no products secured against the property.

I notice you ignored this part!

[Deleted User]

I didn't igore it. I responded by saying:

That doesn't make any sense. Of course you can't spend outwith your means. Most people buy a house because they want a nice home. The fact that they don't have to pay rent AND that the house can be sold at any time - normally for substantially more than they paid for it, is a bonus.

You can't buy a car, or anything else, using the money you've already spent on a house, or anything else. That doesn't mean that the money is 'sitting in' the car or the house. The money is in circulation - being spent by others.

Now if you chose to keep your money under your matress then yes. It is out of circulation and it is just 'sitting' under your matress. But by the same token you can't buy a 50k car using the money under your matress without taking the money out from under the matress or using products secured against the money under your matress.

The only difference I see between buying a house and a car is that the car depreciates whereas the house (over the long term) doesn't.

So if you spend your money on a car then you'll get the use of that car for a number of years and then nothing. The car is gone and the money has gone. You will get something for it if you sell it within a certain number of years but much less than you paid for it.

If you spend your money on a house then you'll get the use of that house for life and if at some time in the future you choose to sell it then it will typically be worth substantially more than you paid for it.

HAMISH_MCTAVISH

Deleted_User wrote: »

I didn't igore it. .

I would have ignored it, because like most of "Devonian Economic Theory" it just makes no sense at all.

Really2

Graham_Devon wrote: »

Nope.

Cars fall in price.

Not if you purchased a second hand one at the start of last year.

Graham_Devon

HAMISH_MCTAVISH wrote: »

I would have ignored it, because like most of "Devonian Economic Theory" it just makes no sense at all.

Yes it does. You choose to ignore it as it doesnt suit.

If he has 200k and he spends that 200k on a house, it's locked in to the house.

If he has 200k and spends 100k on the house, 100k is locked into the house, and he has 100k he can spend.

He cannot spend the 200k he "owns" unless he releases the cash by selling the house. He has therefore unlocked it and can spend it.

Trouble is, you need somewhere to live. Therefore, you are going to have to again lock up some of this 200k in a house.

Sorry it doesn't suit y'all.

Really2

Graham_Devon wrote: »

Yes it does. You choose to ignore it as it doesnt suit.

If he has 200k and he spends that 200k on a house, it's locked in to the house.

If he has 200k and spends 100k on the house, 100k is locked into the house, and he has 100k he can spend.

Graham the guy is saying if you spend £200K on a house that money goes to someone else. You have a £200K asset the other person has £200K in cash, so the £200k has gone back in to the economy.

Your example is the same
If you had £200K and spend it on a house £200K goes to someone else, that is back in to the economy.
If you had £200K and spent £100K on a house and £100K spent on tat, £200K has gone back in to the economy.

You seem to be failing to realise the spending of the money makes it goes somewhere. It leaves the buyer and goes to the seller that means £200K is now available for the seller to spend, it has not disappeared.

Harry_Powell

Graham_Devon wrote: »

Yes it does. You choose to ignore it as it doesnt suit.

If he has 200k and he spends that 200k on a house, it's locked in to the house.

If he has 200k and spends 100k on the house, 100k is locked into the house, and he has 100k he can spend.

He cannot spend the 200k he "owns" unless he releases the cash by selling the house. He has therefore unlocked it and can spend it.

Trouble is, you need somewhere to live. Therefore, you are going to have to again lock up some of this 200k in a house.

Sorry it doesn't suit y'all.

I think what scarter is saying is that while the £200k your test bloke spends on the property is now locked into his house (as you have pointed out above), the person he bought the property from now has £200k to spend. He can choose to buy another property with this (and lock the £200k away) or if the property was an investment and not his primary home, he could spend/invest elsewhere.

Mind you, if he did buy a house, then the £200k+ he spend on the house would go to the former owner of that house, and so the cycle continues....

Not everyone will use the money released froma house sale to buy another house, some people will be selling investment property, some selling inheritance property and some downsizing to release cash. The cash exists, it's just invested in an asset.

Harry_Powell

Graham_Devon wrote: »

Sorry, I give up

Now you know how everyone else feels during discussions with you.