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Debate House Prices
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Bank of England says British banks need fresh capital
Comments
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HAMISH_MCTAVISH wrote: »Yep.
It's called the "wealth effect", and it's an established economic principle.
Rising asset values cause a positive increase in consumer confidence, which leads to a self fulfilling cycle of positive economic activity.
Just as excessive savings make a country poorer, as detailed in the paradox of thrift.
Your problem Graham is that your worldview is so narrow you can't understand complex or counter intuitive economic principles.
The "wealth effect" is not, as you assert, an established economic principle.
It is a debt-junkie principle.
As in ..... "oh look, someone has said my house has increased in value by 20k - I can now buy a new car"
You are a silly boy McTittish."The problem with quotes on the internet is that you never know whether they are genuine or not" -
Albert Einstein0 -
Why does it need an explanation?
Because it doesn't make much sense.
Let's say tommorow we wake up. The news tells us the government have decided to intervene in the housing market and all house prices have risen 15%.
However, they also tell us base rates have risen 4%
Would we all be suddenly richer and splashing the cash?0 -
Graham_Devon wrote: »Because it doesn't make much sense.
Let's say tommorow we wake up. The news tells us the government have decided to intervene in the housing market and all house prices have risen 15%.
However, they also tell us base rates have risen 4%
Would we all be suddenly richer and splashing the cash?
I'll agree it doesn't make much sense but irrational behaviour plays a large part in economics.
Plenty of economists argue that people spend more and save less if they just think they are richer (presumably whether they are or not). Don't know how big the effect is but "splashing the cash" is likely a bit extreme.
I'm loving your scenarios tonight - I'd take that one as well!0 -
Thrugelmir wrote: »Again? I would have said continually for a while now. Same old record playing
Talking of same old records.....
You've been constantly predicting prices would plummet for the last 3 years, yet they're still significantly higher now than then.
That record's broken. Time to change it.;)“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
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