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The mysterious case of the vanishing money

HAMISH_MCTAVISH
Posts: 28,592 Forumite


Immensely curious as to where the bears think money spent on housing benefits, house prices, mortgage interest, rent, etc, actually goes...
We've had several weeks of comments that "money spent on house prices/rents/benefits" is "taken/removed from the economy".
So where exactly do you think it goes?
Could anyone describe the mechanism where they think lending higher amounts of money to buy housing actually decreases the money in circulation within the economy?
Or for that matter, the mechanism through which they think allocating tax revenue to pay for goods and services through housing benefit actually removes money from the economic system?
And if not, lets put this tiresome and fallacious bear meme to bed once and for all.
We've had several weeks of comments that "money spent on house prices/rents/benefits" is "taken/removed from the economy".
So where exactly do you think it goes?
Could anyone describe the mechanism where they think lending higher amounts of money to buy housing actually decreases the money in circulation within the economy?
Or for that matter, the mechanism through which they think allocating tax revenue to pay for goods and services through housing benefit actually removes money from the economic system?
And if not, lets put this tiresome and fallacious bear meme to bed once and for all.
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
0
Comments
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It increases net government debt and therefore pays interest to investors, often not UK based, removing it from the UK.
What do I win?0 -
For the high majority one word - Overseas.
Whether in cash form to banks or investors, investment in property or merely spent on imported product and overseas travel.0 -
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It increases net government debt and therefore pays interest to investors, often not UK based, removing it from the UK.
What do I win?
Nothing at all.
You can only allocate a small portion of housing benefits to the deficit, and furthermore only allocate a portion of the deficit funding to overseas investors. Who may well then turn around and use their profits to re-invest in the UK.
So back to the topic at hand.....“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »We've had several weeks of comments that "money spent on house prices/rents/benefits" is "taken/removed from the economy".
I don't think you have.
I think what you have had is comments suggesting that selling houses to each other, and landlords cashing in on the 4.5m people on housing benefits, does not provide or stimulate any growth for the UK.0 -
Thrugelmir wrote: »For the high majority one word - Overseas.
Whether in cash form to banks or investors, investment in property or merely spent on imported product and overseas travel.
Yes, nice try, but we're not talking about whether to start a Buy British campaign.
The argument is that it removes money from the economy, but if you want to convert it into a balance of trade issue then buying chinese tat, japanese cars or egyptian apples is no different.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Graham_Devon wrote: »I don't think you have.
*sigh*
..........if people have more money to spend on things other than rent, then the money will go into the economy rather than landlords pockets.
.Oh the joys of HPI . Housing benefit, how much is taken from the economy to sort that problem out?
etc, etc, etc“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
I guess the point is that although money is not destroyed the utilisation and redistribution of it is done in a way that is uneven, taking often from less well off (middle classes down) and ending up in the hands of the providers of finance.
Whilst they may well recycle this money, a lot of it will end up being horded in ways that are not productive, or used in ways that does not stimulate demand at the lower end of the scale.
If the general population is not spending in 'local' shops or businesses then these will close. The fact that the money ends up with a richer demographic may help say the bently dealership or whatever, rather than a larger group of the population.
Of course whether one way of the other is better depends on individual viewpoints.0 -
HAMISH_MCTAVISH wrote: »You can only allocate a small portion of housing benefits to the deficit, and furthermore only allocate a portion of the deficit funding to overseas investors. Who may well then turn around and use their profits to re-invest in the UK.
What deficit?
Aren't we talking about the money borrowed to fund the rise in property prices i.e, interest that's being paid to service the debt. Also the equity that's been cashed in from both realisation of the asset and equity withdrawl.
The economy that grew on the back of the property boom. Estate agents, mortgage brokers, surveyors, building trades, conveyancing solicitors and mortgage lenders has contracted enormously already. Also may have some way to go yet.0 -
HAMISH_MCTAVISH wrote: »Yes, nice try, but we're not talking about whether to start a Buy British campaign.
The argument is that it removes money from the economy, but if you want to convert it into a balance of trade issue then buying chinese tat, japanese cars or egyptian apples is no different.
Hamish perhaps things have changed a little since you were awarded your economics degree from Harvard.0
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