Meanwhile in China....

cells

Generali wrote: »

Yes, lots.

The Irish and Spanish housing bubbles led to massive over-production of houses.

The dot com boom led to massive overproduction of internet companies (pets.com anyone?).

The current boom in Chinese stock markets is leading to the overproduction of companies being created for the purposes of floating on the stock markets.

The financial bubble in the mid-2000s led to the overproduction of financial services. That can be seen by the fact that in 2007 there were 500,000 people in financial services in The City whilst the last time I looked there were 350,000.

Im not fully convinced

Ireland now still has fewer homes than France or Germany and only a little more than the UK (per capita). I don't think that they overbuilt homes (of course they did build some shoddy eatates which didn't meet building regs and safety byt that happens at the beat of times too and it doesnt mean an over production)

Spain Probably did over build homes but only slightly and its an over production that will be eaten up very rapidly as spains population is expanding rapidly.

Overproduction of financial services....you would know more about this but surely the rise of computers could explain some/all of the drop from 500k employed to 350k employed. Also I am very skeptical about either number being at all accurate or true. Also how do you define financial services. Is spread betting glorified gambling or a financial service.



Clearly you can misallocate capital. But im leaning towards misallocated capital being called a bubblr in hindsight rather than a bubble creating an excess of x

antrobus

cells wrote: »

Im not fully convinced

Ireland now still has fewer homes than France or Germany and only a little more than the UK (per capita). I don't think that they overbuilt homes (of course they did build some shoddy eatates which didn't meet building regs and safety byt that happens at the beat of times too and it doesnt mean an over production)....

There are 621 ghost estates across the Irish Republic now, a legacy of those hopeful years. One in five Irish homes is unoccupied.

http://news.bbc.co.uk/1/hi/world/europe/8653949.stm

According to the Guardian, Ireland had 400,000 empty homes in February 2014. That's an awful lot for a nation with a population of 4.6m people.

http://www.theguardian.com/society/2014/feb/23/europe-11m-empty-properties-enough-house-homeless-continent-twice

Thrugelmir

cells wrote: »

Spain Probably did over build homes but only slightly and its an over production that will be eaten up very rapidly as spains population is expanding rapidly.

Perhaps you should actually go and see for yourself. Quite jaw dropping.

antrobus

Thrugelmir wrote: »

Perhaps you should actually go and see for yourself. Quite jaw dropping.

From the NYT of 2011. One entire airport vacant.

Spain’s Building Spree Leaves Some Airports and Roads Begging to Be Used
http://www.nytimes.com/2011/06/25/business/global/25iht-transport25.html?_r=0

Good news, though. Ryanair has announced it will start flights to Castellon in September.

http://www.independent.co.uk/news/world/europe/spains-ghost-airport-finally-gets-ready-to-welcome-its-first-flights-as-ryanair-confirms-routes-between-castellon-and-the-uk-10101602.html

Not sure what any of this had to with China, mind you.

cells

padington wrote: »

You'vet a really interesting take on things cells, how did you come across your way of looking at economics ?

Its just me thinking out aloud don't pay much attention to it I've not checked or looked to confirm if there is any merit to it.

Generali

cells wrote: »

Overproduction of financial services....you would know more about this but surely the rise of computers could explain some/all of the drop from 500k employed to 350k employed. Also I am very skeptical about either number being at all accurate or true. Also how do you define financial services. Is spread betting glorified gambling or a financial service.



Clearly you can misallocate capital. But im leaning towards misallocated capital being called a bubblr in hindsight rather than a bubble creating an excess of x

When I said financial services I meant specifically Investment Banking. There was a bubble in asset prices and that fuelled a massive increase in the quantity of investment banking.

The drop in employment really is as a result of banks doing less investment banking. I can't prove it but I am pretty close to it and can see clearly what has happened over the last 7 years.

It doesn't really matter which way round it is. A misallocation of capital as a result of market inefficiencies dragging investment to the 'wrong' place causes later economic problems as we have seen. It's the reason growth hasn't returned to its trend path in most of the world.

wotsthat

Generali wrote: »

It doesn't really matter which way round it is. A misallocation of capital as a result of market inefficiencies dragging investment to the 'wrong' place causes later economic problems as we have seen. It's the reason growth hasn't returned to its trend path in most of the world.

Graham posted the BIS annual report and I read the section on interest rates (I know it's not the done thing to read source material).

It wasn't very well written (as if English wasn't the first language) but it seemed to be saying that we should consider interest rate rises because low rates lead to such market imbalances. The opinion was that inflation is overly considered in decisions because it's reasonably easy to measure whereas market imbalances are not.

So where you're saying market inefficiencies cause a misallocation of capital they say it's caused by rates lower than their 'equilibrium'.

Also Cells argues that low interest rates are a natural consequence of progress. BIS say rates are too low and only remain low because 'low rates beget low rates'.

cells

antrobus wrote: »

There are 621 ghost estates across the Irish Republic now, a legacy of those hopeful years. One in five Irish homes is unoccupied.

http://news.bbc.co.uk/1/hi/world/europe/8653949.stm

According to the Guardian, Ireland had 400,000 empty homes in February 2014. That's an awful lot for a nation with a population of 4.6m people.

http://www.theguardian.com/society/2014/feb/23/europe-11m-empty-properties-enough-house-homeless-continent-twice

I'm not convinced that the info on either of those two links is credible enough to draw any conclusion

also empty homes does not necessarily mean an oversupply.

Ireland has the equivalent of an ONS I forget what they call it nut if you can find an empty homes figure on that it would be more concrete

also as I've mentioned before. Ireland has fewer homes than France but more than the UK (per capita) so its hard to say they have a great surplus

Generali

cells wrote: »

I'm not convinced that the info on either of those two links is credible enough to draw any conclusion

also empty homes does not necessarily mean an oversupply.

Ireland has the equivalent of an ONS I forget what they call it nut if you can find an empty homes figure on that it would be more concrete

also as I've mentioned before. Ireland has fewer homes than France but more than the UK (per capita) so its hard to say they have a great surplus

I think you're convinced because you don't want to be convinced.

It's pretty obvious: if people are prepared to overpay vastly for an asset then investment will be directed to producing more of that asset. If that overpayment is a temporary thing then the price signal makes for a production of a whole lot of assets that are likely to end up under-utilised.

Read up on the South Sea Bubble or the Railway Mania for older examples.

cells

Generali wrote: »

When I said financial services I meant specifically Investment Banking. There was a bubble in asset prices and that fuelled a massive increase in the quantity of investment banking.

The drop in employment really is as a result of banks doing less investment banking. I can't prove it but I am pretty close to it and can see clearly what has happened over the last 7 years.

It doesn't really matter which way round it is. A misallocation of capital as a result of market inefficiencies dragging investment to the 'wrong' place causes later economic problems as we have seen. It's the reason growth hasn't returned to its trend path in most of the world.

surely economic activity is not a zero sum game. Eg if the UK upped its house building to 400,000 units a year spending £60B a year extra creating that housing it doesn't mean we spend £60B a year less on constructing other stuff?