"Housing Market Slumps"

GreatApe

economic wrote: »

i think it has the potential to solve a lot of todays problems, particularly in the medicine. AI and robotics coupled with stem cell advancements and other medical advancements have the capability to imrprove healthcare at a low cost. i can see huge potential. and not in 100 years but more like 20-30 years.

agree however its the first time that I think it is justifiable to be afraid of additional technology

economic

GreatApe wrote: »

no you misread or maybe I miss typed as I dont know which post in particular you are referring to

its one of the multiple reasons why rates (real rates not nominal) tend down as an economy develops. So not 'rates low for longer' but 'rates low from now on, forever'

take two economies, say the UK and Turkey and lets look back 20 years to today. Looking back is easier as we know what has happened rather than try to project forward as we will then be guessing

Anyway, if we look at the UK the birthrate was about 2 or less than 2 with turkey it was a hell of a lot more than 2. This means in the UK each generation was saving and adding wealth to the next generations pot. While in turkey where they were having, i dont know lets say 5 kids per woman, then even if the previous generation has a somewhat positive rate of savings it was being diluted by the simple fact that inheritances and gifts were shared between 5 rather than 2 kids.


so in the uk and countries with 2 or fewer kids per woman then the next generation gets a huge amount of capital, as per the discussion here where its £77 billion in just 2013/14 and perhaps the same again in gifts also this is a figure that is increasing each year and being passed onto fewer than 2 kids. The natives for some time have been having fewer than 2 kids.

This means the next generation has less need for capital, they just inherit it. Given a long enough timeline and low migration this will also mean the population itself is falling. Take this and extend it forward, imagine japan shrinking over time its population towards just 50 million people. Well these 50 million will inherit a country and infrastructure built for 150 million. capital will be worthless or rather worth-a-lot-less.

its no surprise that japan entered this zero rate stage first, less than 2 kids and no migration.
theory fits in so many ways

The west, Europe in particular and even the USA are at 2 kids or below but much higher migration than japan who has virtually nil migration in comparison means we are entering the zero rate world later but its the same things at play.


Why would rates be high, why would rates even be positive, on the most risk free assets (bank deposits and gov-bills) when people have so much capital gifted to them. These people then try to rent out their capital and the price of capital crashes


In turkey now or the west back in the days when the west was having 5 kids per women none of the above was true. Each generation needed to build out so much more capital so there was need for more building more capital more infrastructure so capital could demand a return. but not with 2 kids per women and definitely not with less than 2 kids per women


sorry for the long posts just typing as I think

i see what you are saying. what about china? i cant see any long enough data on rates in china but has the 2-child policy effected anythign and fits your thesis?

ukcarper

GreatApe wrote: »

yes that sounds fair, so what would the midpoint of the £500k to £1m point be on a weighted average? maybe towards £650k?

In which case my statement goes from at least x number of people get more than £300k to at least x number of people get more than £271k

Do you feel the overall discussion points change much with £271k instead of £300k?

I think it would be quite low and no I don't think there is much difference between £271k and £300k in fact I think for a lot of people £100k would make all the difference, but I don't see how you can conclude that all of that money will go to people who need or want to buy. Average age of beneficiary is 53 and what's to say that will be passed on.

economic

ukcarper wrote: »

I think it would be quite low and no I don't think there is much difference between £271k and £300k in fact I think for a lot of people £100k would make all the difference, but I don't see how you can conclude that all of that money will go to people who need or want to buy. Average age of beneficiary is 53 and what's to say that will be passed on.

no the point is that potentially there could be a lot of gifts passed on before death. if there is that much in inheritance it would be fair to say a lot would have been gifted prior. especially as housing becomes more unaffordable, more gifts are given to help their children.

GreatApe

economic wrote: »

i see what you are saying. what about china? i cant see any long enough data on rates in china but has the 2-child policy effected anythign and fits your thesis?

I dont know enough about china however it may have low children per women but it is still poor (low stock of capital) so risk free capital may still have a positive rate of return in china for now.

Housing is actually a good metric to look at because it is the biggest stock of capital in virtually every country in the world.

They have a huge need for additional capital to get to USA/EU type levels of development.
For example much of the EU has a rate of persons to homes of about 2.0-2.3.
If we take say 2.2 as a developed nation status then China 1.4 billion people will need about 630 million good quality homes

China does not have anything like that, it is why they are building at such a fast rate. I recall reading it was over 20 million units a year?? If that is the case they are building England, all of England, top to bottom, everything, each single year.

Many commentators look at this with awe or claim its a bubble however it is simply a poor country catching up fast.


China too will enter the zero rate world (I have no idea if they are already there, is their 'risk free' capital returning a positive yield over inflation? Also if it is state run banks setting prices it might not be an actual indicator)

It will certainly enter that world much sooner than India due to its fewer children per women

it is a different dynamic so harder to understand, for instance a peasant subsistence farmer family might as well be invisible to all the stats. However if they migrate to urban areas then they become visible and important to consider. So while births per women might be low, migration for poorer areas to richer areas act in many ways like 'births'

Japan was first to enter the zero rate world as they had fewer than 2 kids quite a long time ago plus not accepting any migrants meant they got there first. EU second especially with germany very low kids per woman rate. USA third. China probably 4th. India has some time to go maybe an additional 30 years after china. Africa last simply because they have the highest children per women now and for the foreseeable (but of course Africa is a lot of different nations with different trends)


Its not a difficult idea/theory. if women have just 1 child then a child inherits everything from 4 grand parents. If women have 6 children then a child gets 1/18th of each of their grandparents inheritance. In the low birthrate enviroment the young have a huge amount of capital and no one to rent the capital to (as all their peers also inherited huge sums). In the high birthrate environment the young have little to no capital gifted/inherited to them and their peers are in the same boat. The price of capital is high as all the young ones want to borrow capital as they havent enough themselves at that point in time

chucknorris

ukcarper wrote: »

Does anybody actually win an argument on here?

Yes, in fact, on this very thread economic recently won an argument by a technical knockout:

Windofchange wrote: »

I've got a headache. I'm done.

ukcarper

economic wrote: »

no the point is that potentially there could be a lot of gifts passed on before death. if there is that much in inheritance it would be fair to say a lot would have been gifted prior. especially as housing becomes more unaffordable, more gifts are given to help their children.

Could and does is not the same, some people are obviously helped by an inheritance but the majority are not.

ukcarper

chucknorris wrote: »

Yes, in fact, on this very thread economic recently won an argument by a technical knockout:

Did you actually change posters mind.

GreatApe

ukcarper wrote: »

I think it would be quite low and no I don't think there is much difference between £271k and £300k in fact I think for a lot of people £100k would make all the difference, but I don't see how you can conclude that all of that money will go to people who need or want to buy. Average age of beneficiary is 53 and what's to say that will be passed on.

so what are you trying to suggest?

that few people get gifts or inheritances that its impact on various economic considerations is negligible and can be ignored?

GreatApe

ukcarper wrote: »

Could and does is not the same, some people are obviously helped by an inheritance but the majority are not.

why does the majority 50.1% need to get an inheritance for it to be a very important consideration?