The mysterious case of the vanishing money

HAMISH_MCTAVISH

Pobby wrote: »

Why do think there are bail outs. Because the banks over lent.

False.

It's because banks lent long and borrowed short, and the sources of funding dried up.

Not an opinion by the way, a verifiable fact. NR being the prime example.

Hence we had massive rises in house price properties.

Massive rises in house prices are solely due to supply and demand imbalances.

The expansion of lending allowed more people to have a chance to buy a house. Hence, demand increased. And we don't build enough to keep up with growing population, hence the supply shortage.

Hamish, because he is ever so clever, will most likely deny.
.

And Pobby will most likely come on here with another homespun yarn about something or other to do with HPI being the root of all evils.

But the facts about lending, supply, and demand are a matter of record and cannot be disputed.

chucky

shortchanged wrote: »

How about reeling off all your economic credentials then Mr Yeah but, no but?

so you can't name a balanced economy and come up with this post to deflect you don't have the answer... very predictable. well done, you're consistent.:T

i'll ask the question again as you avoided it the first time... when you say that you want a balanced economy that wouldn't have been affected by the last economic crisis, how about naming one of those countries? tick, tock...

harryhound

HAMISH_MCTAVISH wrote: »

False.

The expansion of lending allowed more people to have a chance to buy a house. Hence, demand increased. And we don't build enough to keep up with growing population, hence the supply shortage.

.

Absolutely nothing to do with the breakdown of irresponsible relationships resulting in a rapid increase in "households" (many subsidised by state funding).

Absolutely nothing to do with immigration both legal and illegal.

Absoluitely nothing to do with the nuclear family no longer living in multi generational families.

Absolutely nothing to do with commercial promotion of property !!!!!! encouraging consumers to borrow to acquire all those must have extra rooms to make space for extra "stuff".

Absolutely nothing to do with the falling numbers of adults per habitable room.

Absolutely nothing to do with all of the above being financed by "cheap" "bubble" money and deficit government spending.

Absolutely nothing to do with the baby boomer generation hanging on to their empty nest property, because they have seen inflation, caused by deficit spending, wreck the value and yield on their fiat currency savings, several times in their lifetime?

myhouse_2

HAMISH_MCTAVISH wrote: »

False.

Massive rises in house prices are solely due to supply and demand imbalances.

The expansion of lending allowed more people to have a chance to buy a house. Hence, demand increased. And we don't build enough to keep up with growing population, hence the supply shortage.

To use your own schoolmasterly overtones...FALSE!

Supply and demand was manipulated by excessive and unusual lending practices which distorted the normal market.
Of course supply and demand is important, but supply and demand is affected by so many factors that it's meaningless to talk in terms of just supply / demand while ignoring the actual root causes of the supply and demand.

HAMISH_MCTAVISH

myhouse wrote: »

Supply and demand was manipulated by excessive and unusual lending practices which distorted the normal market.

1. The expansion of lending enabled more people to buy.

2. This created more demand.

3. The percentage of houses in owner occupation rose to an all time record high as a result.

4. Housebuilding failed to keep up with demand and prices rose as a result.

All of these things are established facts and beyond debate.

Now where "the bears" and "the bulls" disagree is how much of the increase in demand (and therefore prices) was down to "excessive and unusual" lending practices, and how much of the expansion of credit that enabled more effective demand was perfectly sensible and right and just enabled the increasing population to fulfill their needs in a sensible way.

Bears seem to think that 3.5 times income is a sensible mortgage multiple. Bulls note that the average mortgage multiple for FTB-s never exceeded 3.5 times income even at peak.

Bears seem to think it's unfair for millions of people to be "priced out" of houses. Bulls note that mortgage restrictions "price out" millions of people as well, so you've just substituted one group with another on the housing exclusion front. Which makes no sense.

Bears claim that irresponsible lending was responsible for the vast majority of the boom in prices during the 2000's. Bulls note that prices today are just 10% or so below peak and now rising again, AFTER 70% of mortgage funding was withdrawn from the market and mortgages became tougher to get than they have been at any time since around the 1970's.

Bears claim that only low rates are causing the market to remain at current prices, and that an increase in base rates will cause mass repossessions. Bulls note that most mortgages are now not that much below 2007 rates, and cite the recent research which showed a rise in base rates to 5% would only cause another 17K repossessions a year.

As for who is right, I guess we'll have to wait and see, but almost none of the more common predictions the bears have made so far have been remotely accurate.

Bears overestimated the levels of UK sub-prime, repossessions, price falls, unemployment levels, arrears, defaults, etc.... And seriously underestimated the affordability of housing and severity of the housing shortage. Which is why they've been so very wrong about prices.

Now all we hear is the same old tired and discredited arguments for why we're about to see another 30% to 50% crash in prices. And all that in an economic environment that is massively better than it was in 2008/2009.

You didn't get it then, you're even less likely to get it now, IMO, but we'll see soon enough.

Of course supply and demand is important, but supply and demand is affected by so many factors that it's meaningless to talk in terms of just supply / demand while ignoring the actual root causes of the supply and demand.

Supply and demand is everything. There is nothing else.

All the factors you discuss are components of supply and demand, true enough, but ultimately the biggest factor by far is fulfilling the need for housing of a growing population.

If you doubled the number of houses in the UK tomorrow, prices would fall no matter how much credit was available. It's really as simple as that.

ruggedtoast

HAMISH_MCTAVISH wrote: »

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.

Partly its to do with fractional reserve banking. A concept you don't seem to really understand.

Alongside other concepts like not scrounging off your parents, standing on your own two feet, and not repeatedly judging people on the internet less fortunate than yourself by standards you have never once achieved yourself.

Yes, basically that.

shortchanged_2

chucky wrote: »

so you can't name a balanced economy and come up with this post to deflect you don't have the answer... very predictable. well done, you're consistent.:T

i'll ask the question again as you avoided it the first time... when you say that you want a balanced economy that wouldn't have been affected by the last economic crisis, how about naming one of those countries? tick, tock...

Well I can't think of any off hand but look at the various factors that were seriously skewed in some countries like Ireland, ridiculous housing boom.
Same in the UK, this combined with a surge in oil prices........... 'POP'.

I know there are some factors that governments have little direct control over, oil prices being one of them. But better regualtion in certain sectors such as banking may well have softened the blow a little.

DervProf

There seems to be an influx of "competition" for the bulls.

Hamish is getting a good old "grilling" (trying to think of a "Bear Grylls" punchline).

HAMISH_MCTAVISH

DervProf wrote: »

There seems to be an influx of "competition" for the bulls.
).

Happens every spring....

Prices start rising, bears get nervous and feel the desperate urge to try and persuade a few people on obscure internet boards that the 50% crash they've been promising since 2001 is really, really, really going to happen this time.

DervProf

HAMISH_MCTAVISH wrote: »

Happens every spring....

Prices start rising, bears get nervous and feel the desperate urge to try and persuade a few people on obscure internet boards that the 50% crash they've been promising since 2001 is really, really, really going to happen this time.

OK, I'll wait to see if it happens again.