A "full-scale property boom will begin in 2014"

Graham_Devon

HAMISH_MCTAVISH wrote: »

Well obviously not.

But once global credit markets returns to normal, the support currently required to restore functionality to a still-dysfunctional mortgage market will no longer be required.

And it then can and should be removed.

Can it return to normal with all that pumped in?

I don't think it can personally.

I think you can certainly get rises in numbers, and if that's what you have set out to do, then it could be classed as successful.

However, that rise in numbers, IMO, seems to be based purely on the stimulus and schemes. If they are removed, you always fall back.

A quick, but simple analogy is that champion cyclists who was basically found to be on drugs. His "on drugs" performance was far ahead of his "normal" performance. However, his "on drugs" performance became the norm. He could never repeat it without the drugs. He was therefore reliant on the drugs to keep his performance up at the normal level we expected from him. Without them, his performance would have been seen as poor. Not normal.

My issue with yourself and others if that you seem to base normality on a simple bunch of figures while not taking any notice, or indeed, not seeming to care how it was achieved. Same with the cyclist, until it all fell down around him, and what became his normal cycling performance will never be achieved by him again.

Normal to you appears to be 2007. A time fuelled by crazy loans. We appear to be trying to achieve that "normality" again, this time based on money pumping and schemes. Neither are normal. Normal would be a lot lower...based on what people are able to achieve without performance enhancers (in this case, 110%+ loans and mor recently all the schemes and props listsed).

OffGridLiving

Graham_Devon wrote: »

I mean more than just QE.

We also have, but often forgotten at times of joy over HPI:

- Funding for lending
- Lend a hand
- Increasing housing benefit bill (which itself increased 35% since 2009)
- SMI
- Low rates

In 2014, we are supposed to have full mortgage guarantee's for all.

QE is just one piece of stimulus. To have QE running alongside Funding for Lending is extraordinary in this first place. But to have mortgage guarantee's on the top of QE and funding for lending?....well, it can hardly be classed as normal, and therefore, neither can the growth achieved on the back of all these things.

To have normal growth, the majorty of those above need to be removed without the system falling down. I don't think we are at a point where we could do that yet. Neither does anyone else.

The first two are pretty insignficant when compared with QE. Once we are out of recession the payments can just stop. Housing benefit and SMI were around before the credit crunch as social security benefits, and so cannot be viewed as stimulus. Low rates were brought in because of the credit crunch to prevent the financial sector imploding and they will rise once this crisis is over.

So, to go back to the unanswered question. By 'removed', do you just mean 'stopped' or do you mean 'unwound'?

OffGridLiving

Graham_Devon wrote: »

Can it return to normal with all that pumped in?

I don't think it can personally.

I think you can certainly get rises in numbers, and if that's what you have set out to do, then it could be classed as successful.

However, that rise in numbers, IMO, seems to be based purely on the stimulus and schemes. If they are removed, you always fall back.

A quick, but simple analogy is that champion cyclists who was basically found to be on drugs. His "on drugs" performance was far ahead of his "normal" performance. However, his "on drugs" performance became the norm. He could never repeat it without the drugs. He was therefore reliant on the drugs to keep his performance up at the normal level we expected from him. Without them, his performance would have been seen as poor. Not normal.

My issue with yourself and others if that you seem to base normality on a simple bunch of figures while not taking any notice, or indeed, not seeming to care how it was achieved. Same with the cyclist, until it all fell down around him, and what became his normal cycling performance will never be achieved by him again.

Normal to you appears to be 2007. A time fuelled by crazy loans. We appear to be trying to achieve that "normality" again, this time based on money pumping and schemes. Neither are normal. Normal would be a lot lower...based on what people are able to achieve without performance enhancers (in this case, 110%+ loans and mor recently all the schemes and props listsed).

A better analogy would be the person who has a heart attack and receives emergency rescusitation by the paramedics, who is taken to hospital and given drugs to stabalise his condition until he is able to have an operation to fix his dody ticker.

In your world the guy would be left on the floor to see if he is strong enough to survive.

TruckerT

OffGridLiving wrote: »

The first two are pretty insignficant when compared with QE. Once we are out of recession the payments can just stop. Housing benefit and SMI were around before the credit crunch as social security benefits, and so cannot be viewed as stimulus. Low rates were brought in because of the credit crunch to prevent the financial sector imploding and they will rise once this crisis is over.

So, to go back to the unanswered question. By 'removed', do you just mean 'stopped' or do you mean 'unwound'?

I think you should re-read the final paragraph of the previous post.

ps - I mean the post before last...

pps - I mean post 22

TruckerT

TruckerT

OffGridLiving wrote: »

A better analogy would be the person who has a heart attack and receives emergency rescusitation by the paramedics, who is taken to hospital and given drugs to stabalise his condition until he is able to have an operation to fix his dody ticker.

In your world the guy would be left on the floor to see if he is strong enough to survive.

That's capitalism - it's a pity that the rules were changed just as soon as the incompetence of the banks was revealed.

TruckerT

ManAtHome

OffGridLiving wrote: »

In your world the guy would be left on the floor to see if he is strong enough to survive.

So maybe we should be keeping everyone alive until something turns up?

Graham - you missed the BoE remitting Gilt coupons to the Treasury (around £35 billion back end of last year). Not a lot in itself, but must need a bit of dodgy accounting to make BoE solvent as they are buying Gilts (well) above par - no coupon=guaranteed loss if held to maturity (which is how CBs tend to 'value' government bonds - see ECB+Club Med).

Thrugelmir

OffGridLiving wrote: »

By 'removing stimulus', do you mean just stopping QE or do you mean unwinding it?

I can't imagine that they would start unwinding it until the economy is at the start of a boom, in which case it'd be as good a method to slow down an overheating economy as raising interest rates.

If they unwind it too soon, then they'll just kill off a recovery and we'll be back into recession. There is a huge difference between turning off the bath taps and pulling out the bath plug.

No need to take any action to unwind. Over time the Gilts and Corporate bonds held will mature.

The impact of QE on growth is questionable. Without doubt it has inflated asset prices, reduced interest rates and ensured that the banks have adequate liquidity. Lending to business has fallen. Yet the banks do have money to lend. As they are switching away from consumer lending. Perhaps we are in an adjustment phase of the recovery.

OffGridLiving

Thrugelmir wrote: »

No need to take any action to unwind. Over time the Gilts and Corporate bonds held will mature.

Thanks Thrug, this was the answer I was going for. Some people seem to think that ending stimulus means not just turning off the taps, but tipping out the water. As you rightly say, the stimulus will unwind naturally and over a sustainable duration.

In my view, each stimulus package will be halted at a point in time when the economy can support that. The 'taps' will be slowly turned off and the bathwater will slowly evaporate over the years, until it's all out of the system and the bath is empty.

There will be no financial Armageddon because everything is halted overnight, why would the government want that when they can go for a soft landing? The guys who think that we'll have a collapse when the 'props' are taken away are the same ones who were amazed that the government stepped in in the first place to prop up the economy. Do they never learn?

Graham_Devon

OffGridLiving wrote: »

Thanks Thrug, this was the answer I was going for. Some people seem to think that ending stimulus means not just turning off the taps, but tipping out the water. As you rightly say, the stimulus will unwind naturally and over a sustainable duration.

In my view, each stimulus package will be halted at a point in time when the economy can support that. The 'taps' will be slowly turned off and the bathwater will slowly evaporate over the years, until it's all out of the system and the bath is empty.

There will be no financial Armageddon because everything is halted overnight, why would the government want that when they can go for a soft landing? The guys who think that we'll have a collapse when the 'props' are taken away are the same ones who were amazed that the government stepped in in the first place to prop up the economy. Do they never learn?

Whats your view on this? You think it's the right or wrong thing to hold up property prices?

wotsthat

Graham_Devon wrote: »

Whats your view on this? You think it's the right or wrong thing to hold up property prices?

The main 'props' are a shortage of housing and the willingness of buyers and sellers to agree prices you disapprove of.

If enough people agree with you and refuse to buy then prices will fall.

There's no right or wrong involved.