UK "one of the wealthiest countries on the planet & getting wealthier by the day"

Graham_Devon

wotsthat wrote: »

If you want to take the argument to the extreme fair enough. You make out I'm advocating that if a house goes up by £10k then £10k has to be spent. It doesn't.

If net worth falls I'd expect spending to fall too. It really isn't rocket science.

I actually said £50 a month if it went up 10k. Not that little things like that seem to matter. You'll take from it whatever suits.

Was trying to get a feeler of what you actually mean. As so far all we know is that they can spend more of their income, so long as they fall into your "requirements" and don't spend too much. They should take risk, as that's good, but not be careless.

All seems a bit made up as it moves along.

Now we have Hamish suggesting that they could start a business.

HAMISH_MCTAVISH

the_flying_pig wrote: »

why do higher house prices mean that, in aggregate, UK living standards are higher than french ones,

Once again....

the_flying_pig wrote: »

but what am i missing? i refer you to my post 17 - given that we know the GDP per capita [income] figures already, what, in very simple terms, is the story as to why higher house prices in the UK tell you something meaningful about UK living standards vis-a-vis [say] French living standards?

OK, in very simple terms, but only because you asked nicely.;)

Your question is a strawman.

House prices don't, in isolation, tell us anything about living standards.

They only tell us something (and an incomplete thing, at that) about wealth.

However in general terms, countries with higher wealth tend to have higher living standards than countries with lower wealth. And countries with higher wealth tend to have higher house prices than countries with lower wealth.

Living standards in the UK, for example, are vastly higher on average than those in Bangladesh. As are house prices, on average.

Indeed, house prices even tell us a lot about distribution of wealth within a country.

The average resident in Laughton is vastly more affluent than the average resident in Loughborough.

Rising house prices tend to be both cause and effect of rising wealth.

A virtuous circle.

what's the equivalent story for housing wealth?

e.g. might it be that we have higher quality housing stock than the French, giving us higher living standards? a plausible story perhaps, but obviously changes in the market value of that same stock wouldn't change our living standards... or would it?

You're thinking about input changes.

What you need to be thinking about is output changes.

ALL wealth stored within housing will eventually be released and either recycled to future, younger, generations or spent in the economy. Via taxation, inheritance, downsizing, etc.

The housing market is many things....

It's a wealth creator, it's a wealth multiplier, but above all else it is a wealth accumulator.

And that wealth is always, ultimately, released.

chucknorris

Graham_Devon wrote: »

I thought the basic principle laid out was that if your house goes up in value, you can spend more income.

Now you are talking about what they shold have done earlier which sidesteps the question on the point raised entirely.

If you want to access your property value to boost retirement income then you have to plan accordingly. We will be able to enjoy more capital/income in retirement from property because we have planned our finances and put ourselves in a position to do so. If you haven't created an opportunity to downsize and/or sell investment property then it is unlikely that you will be able to boost your retirement income. If you wait until you have retired before even considering this then you will probably get what you deserve i.e nothing extra.

As the defined benefit pensions have more or less been withdrawn from the private sector at least for new entrants, I can see that pension poverty is going to be significant in the future. Those that can plan their finances and produce pension income will have an advantage over those than cannot.

ILW

HAMISH_MCTAVISH wrote: »

Sometimes, yes.

And sometimes they're releasing equity through downsizing or selling an inherited house.



Not necessarily.

Savings rates in recessions and when house prices fall (usually the same, as one tends to cause the other) tend to be excessive.

Excessive savings rates make us all poorer. (see 'paradox of thrift')

So after a recession/price crash it is required that savings rates reduce in order for the economy to recover.

This isn't "storing up problems"... It's a reversion to normality.

Also borrowing against equity to invest, improve your house or yourself, or start a business, can be "good borrowing".

Not all debt is bad....

This "normality" seems to be a situation where the majority do not have sufficientnt savings or pension to support themselves in the case of old age or just short term job loss. Is that a good thing?

Graham_Devon

ILW wrote: »

This "normality" seems to be a situation where the majority do not have sufficientnt savings or pension to support themselves in the case of old age or just short term job loss. Is that a good thing?

It's what the Bank Of England seem to be aspiring to.

Martin Wheale has stated today (Article on the telegraph) that we may need more QE as people may start saving money again.

Which appears to be a threat and unwanted outcome.

In an interview with The Daily Telegraph, Martin Weale, one of four external members of the committee, said he could “certainly envisage circumstances in which it would be sensible to undertake further asset purchases” on top of the Bank’s recently announced policy of “forward guidance”.




These circumstances might include further shocks from the eurozone or, with fresh turmoil in emerging markets, from the developing world. It was also “perfectly possible consumers will start paying more attention to saving again”, thereby snuffing out the recent recovery in consumption.

It appears to me they simply need to keep people spending and getting into debt to keep the house of cards held up.

HAMISH_MCTAVISH

Graham_Devon wrote: »

It appears to me they simply need to keep people spending.

That is how economies work.

If people save too much instead of spending then we all get poorer over the long run.

ILW

HAMISH_MCTAVISH wrote: »

That is how economies work.

If people save too much instead of spending then we all get poorer over the long run.

All depends what is meant by too much.
Is being able to support yourself through say 6 months unemployemnt too much?
Is putting money into a pension bad for the economy?
Or is it best that we all just rely on the state?

Graham_Devon

HAMISH_MCTAVISH wrote: »

That is how economies work.

If people save too much instead of spending then we all get poorer over the long run.

An economy built on consuming stuff you don't actually need (therefore by cutting back families are able to save, hence the fear from the BOE member) is always going to be a volatile economy prone to shocks.

Wouldn't it be better therefore to have a more measured economy rather than an economy on everyone spending as much as they have?

It's also interesting that the rich appear to be quite fond of saving. It seems the burden of spending and consuming unwanted goods falls heavily on the shoulders of the poor and middling classes.

This forum is rife with richer people stating how much they save by not spending on unwanted crap, while hoping those below them take out as much debt as possible to consume goods.

I find you often contradict yourself. You fall over yourself to have a go at anyone buying an iphone, take aways, trainers etc, but you then claim people have to do exactly that to save us all? You should surely be commending those people you lay into?

antrobus

HAMISH_MCTAVISH wrote: »

....Excessive savings rates make us all poorer. (see 'paradox of thrift')....

So it is argued.

Not however much of a problem here in the UK. Quite the reverse if anything. The UK savings ratio managed to hit 0% in 2007.

the_flying_pig

antrobus wrote: »

So it is argued.

Not however much of a problem here in the UK. Quite the reverse if anything. The UK savings ratio managed to hit 0% in 2007.

yeah, there's something called a 'golden rule savings rate' that maximises steady state growth.

on planet pwoperdee this rate is, of course, considerably less than zero.