Is London ready for the Big Squeeze?

iB1

I think the quotes in the original post perfectly highlight the difference between the current (my) generation and that of my parents. 20-30 years ago, people would budget for what they wanted to, and anything left at the end of the month would go into savings - either for the long term, or for a holiday/Christmas/rainy day fund.

Now, we basically appear to use up any excess to splurge on unnecessary goods such as gadgets, overpriced food, socialising etc. etc. Unfortunately, saving is seen as a no-no, which is scary and sad at the same time I think some of this is down to:

1) Credit Cards
2) Our materialistic society
3) Lax lending criteria of a few years ago

andyroberts1967

carolt wrote: »

Very wise post.

I was arguing with my OH last night (who studied economics and has marginally more faith in it as a science than I do), that I basically thought econmics was pants because since when have people always acted rationally?

It's no wonder all economists are male. If they were women, they'd know this rational stuff is just baloney.

Or to put it in a less sexist way, most of the stuff that really matters isn't remotely quantifiable. However much economists would like it to be.

Carolt - you and your husband have some very unethical pillow talk!

Generali

carolt wrote: »

Very wise post.

I was arguing with my OH last night (who studied economics and has marginally more faith in it as a science than I do), that I basically thought econmics was pants because since when have people always acted rationally?

It's no wonder all economists are male. If they were women, they'd know this rational stuff is just baloney.

Or to put it in a less sexist way, most of the stuff that really matters isn't remotely quantifiable. However much economists would like it to be.

Well when I studied economics (early 90s) the women professors were at least as bad as the men for falling for the rationality thing in the teeth of the exemplem that stared back at them from the mirror each morning as they shaved* (for those that are unaware, a central tenet of economics has been that all people act rationally although this is starting to change, the big theories are still mostly based on this fallacy**).

I think one of many problems with economics is that they/we attempt to quantify the unquantifiable. Now while there's nothing wrong with that as such, what is wrong is failing to quantify and then proclaiming to anyone that will listen how right you are. If you do that some poor sucker will believe you and we end up with Mao or Hitler or something running the show with the fervent belief that some nutter with a slide rule and a typewriter was right.






*To any lady economists reading this is a joke
**for me it's a fallacy anyway

carolt

Agree with you 100% on this.

Generali, reading your posts, it occurs to me that maybe you were in the wrong discipline?

If what you want to do is use economics to analise the past correctly, surely you should have followed my path and studied history?

I frequently discuss the differences between the 2 disciplines with my OH; I prefer history precisely because it is all about the unique, the irrational, the human. He prefers economics because it offers the chance to come up with grand and largely disprovable theories - at least until after the event.

Mars v Venus, perhaps?

Or am I just generalising too much here -is my grand theorising here just disproving my own point?

michaels

It is kind of difficult to get any of the maths (borrowed from other disciplines) to work without the utility maximisation assumption.

Generali

carolt wrote: »

Agree with you 100% on this.

Generali, reading your posts, it occurs to me that maybe you were in the wrong discipline?

If what you want to do is use economics to analise the past correctly, surely you should have followed my path and studied history?

I frequently discuss the differences between the 2 disciplines with my OH; I prefer history precisely because it is all about the unique, the irrational, the human. He prefers economics because it offers the chance to come up with grand and largely disprovable theories - at least until after the event.

Mars v Venus, perhaps?

Or am I just generalising too much here -is my grand theorising here just disproving my own point?

I spent half my 2nd year studying economic history and 2/3rds of my final year on markets and psychology.

Economics only really got going properly in the C20th and even then only really in and after the 1930s as far as I am aware. Before that there was the odd attempt at proper economics (eg Adam Smith, David Riccardo, Karl Marx and the latter was an utter failure*). I guess economics now could be thought to be like Mesopotamian physics.

Generali

michaels wrote: »

It is kind of difficult to get any of the maths (borrowed from other disciplines) to work without the utility maximisation assumption.

Utility maximisation is a crock. Just look at the DFW board and tell me those guys (the credit card abusers anyway) maximised their utility!

You go to the heart of the problem with rational economic players. People aren't rational but economics only works if they are so academic economists just assume they are rational.

danielanthony

Erm, where are all these 0.5% mortgages everyone is talking about?

I got my mortgage last year as an FTB with 10% deposit at 5.49% (variable) with Britannia.

fc123

carolt wrote: »

With all due respected to our respected fellow poster , I'm not sure his opinions carry as much weight as 'official' economists.

Sorry, Gen.

I dunno...why not? Pretty clued in and bases opinion on what he see's..and can articulate it well (and simple for PLM's)...much like those who are 'higher up' the food chain.

Much of it is speculation based on facts and what is going on.
I will post again...I never, ever remember reading on here a couple of years back about 0.5% IR....nothing at all.....diodn't even get a mention but here we are.

fc123

I picked up a Standard on the way home and I was thinking of this board as I read this article....to me it came over as very tongue in cheek writing and the quote below seemed quite reasonable to me.
Like, a drop in monthly costs meant he could do a lesser paid job but more enjoyable for a time...then when rates rise, he'll go back onto the hamster wheel and make more money.

"Another London homeowner, IT consultant and part-time teacher Gordon Crosby, 47, of Crouch End, says the fall in his interest-only mortgage, from £1,160 to £200 a month, :eek: has allowed him to completely rethink his lifestyle. “I'm self-employed and it meant I didn't have to earn so much so I could take on a lot more teaching work, which is poorly paid but something I love and feel is socially useful. Now I might have to get a proper job again.

The vine tomatoes/dinners/parma ham out was just a total wind up IMHO and I could feel the author chuckling as he wrote it.

I know loads of people who are tracking and each one has acted differently on it but all have experienced the high rates of the 90's, some the impact of negative equity (made it difficult to sell and move) and are ready to take high rates on the chin when they happen.

Lodgers? It mentioned queries about lodgers.....people like their privacy so low rates may have meant not having to take them in but when push comes to shove, they will go back to having a house full of paying strangers again.

Rates rises will phase in bit by bit and people will adjust month by month......the Achilles heel is change in circumstances...divorce, affairs, redundancy and ill health and those things cause problems whatever the base rate.