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Debate House Prices
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Moneyweek: 0% interest rates are dangerous...
Comments
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I see Japan's recent past problems quoted here fairly often in reference to other nation's economic outcomes when they look in similar positions. This is a red herring and folly because Japan's problems were not as popularly reported.
The fact is, government intervention not allowing a 'proper recession' to play out there nulls a lot of the assumptions made on the results of interest rate policy and the like.
Similarly America's problems would now be nowhere near as severe if the government would not have intervened in a necessary recession after the tech bubble.
They never learn.0 -
Telegraph - L&G says UK needs negative rates
But instead they'll cut to 1% and start the printing presses as part of a policy of "quantitative easing".0 -
Velocity of circulation has clearly been falling as the banks hoard cash, presumably that's why central bankers are starting to print money.
It's a very dangerous game they're playing IMO. What happens when velocity returns to normal?
I agree it is risky, but it would be riskier to allow a 1930s-style debt deflation. See my signature for my attitude for dealing with this crisis.Politics is not the art of the possible. It consists of choosing between the disastrous and the unpalatable. J. K. Galbraith0 -
Sir_Humphrey wrote: »I agree it is risky, but it would be riskier to allow a 1930s-style debt deflation. See my signature for my attitude for dealing with this crisis.
It's a tough call quite honestly. Do you allow deflation to take hold or do you risk hyperinflation which is far worse as you completely destroy all of the cash economy?
I'd be inclined to 'chose' deflation, personally. I can see why another path has been chosen though. We may still end up with deflation anyway. The US was printing money in the 1930s and it didn't work. The Japanese tried the same thing in the 1990s.0 -
I have to admit I still find this deflation business a bit baffling. Whilst house prices are clearly falling and I expect them to do so for a while, and commodity prices have fallen from their recent ludicrous highs, isn't this just a normal, reasonable symptom (NOT cause) of recession, and of prices returning to more sustainable levels.
Why do we need to 'fix' things at all? Why is this so bad? In previous downturns, house prices etc fell too, and then in due course, the economy recovered. It's not as though any of the things I buy - bar petrol - have shown any major reduction recently - food and essentials are still very high compared to recent levels and show no signs I'm aware of of reducing any time soon.
Is it just the govt trying to deflate away its own debt/the nation's?
If our RPI figures are now heading towards more reasonable levels, can't we just breathe a huge sigh of relief and leave well alone?
As fa as I can see, chucking huge amounts of money at banks or reducing interest rates has had no economic impact at all - yes, its stopped the banks collapsing, but other than that, except for a few mortgage holders on trackers, everyone else is worse off - average mortgage, loan and credit card rates are up, savers' rates are down.
Explain, please?0 -
I have to admit I still find this deflation business a bit baffling. Whilst house prices are clearly falling and I expect them to do so for a while, and commodity prices have fallen from their recent ludicrous highs, isn't this just a normal, reasonable symptom (NOT cause) of recession, and of prices returning to more sustainable levels.
Why do we need to 'fix' things at all? Why is this so bad? In previous downturns, house prices etc fell too, and then in due course, the economy recovered. It's not as though any of the things I buy - bar petrol - have shown any major reduction recently - food and essentials are still very high compared to recent levels and show no signs I'm aware of of reducing any time soon.
Is it just the govt trying to deflate away its own debt/the nation's?
If our RPI figures are now heading towards more reasonable levels, can't we just breathe a huge sigh of relief and leave well alone?
As fa as I can see, chucking huge amounts of money at banks or reducing interest rates has had no economic impact at all - yes, its stopped the banks collapsing, but other than that, except for a few mortgage holders on trackers, everyone else is worse off - average mortgage, loan and credit card rates are up, savers' rates are down.
Explain, please?
Such a massive amount of spurious credit has been created that its rapid destruction threatens to undermine the stability of the market. The economy has become addicted to it, like a junkie and heroin.
As said by 'econo' past meddling to avoid natural recessions has put us in the position where the magnitude of the eventual bust threatens to overwhelm us.
The problem as I see it is that the response of our leaders is to try to defer the recession yet again. They are attempting to 'short circuit' the operation of the market with money printing to put us back to the inflationary path that we would otherwise only have reached a few years down the line after we hit the market floor and started to recover. Who knows what sort of a precipitous position that will put us in .... when we hit a wall as we surely will, without the underlying problems being addressed.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
I
except for a few mortgage holders on trackers, everyone else is worse off - average mortgage, loan and credit card rates are up, savers' rates are down.
Explain, please?
Loads of people are on trackers - so homebuyers benefit more than renters, yet again - life is pretty sweet on trackers right now, blooming marvellous in fact. And it means that people who do buy will be securing very nice fixed rates soon too. I'm pretty happy - although if I was stuck renting I'd be quite pee'd off about things at the moment.18 May 2007 (start of Mortgage):
Coventry Offset Mortgage £220800
Offset Savings: £0
Mortgage Balance: £220,800
14 Jan 08
Coventry Offest Mortgage: 219002
Offset Savings: 28200
Mortage Balance: £190802
And still chucking every spare penny into it!0 -
No - saw recent figures showing 50-60% (can't recall exact number, but definite majority) of mortgages were on fixed rates, c. 35% on trackers and rest on SVR etc.
So majority of mortgage holders not benefitted at all.
And do none of them have loans/credit cards/savings? Really?
As a renter, I don't borrow to pay my rent, strangely enough, so mortgage rates don't really affect me.
0 -
Actually, just came across this:
http://www.ft.com/cms/s/0/77634454-cd2b-11dd-9905-000077b07658.html
Fixed-rate mortgages fail to reflect base rate cuts
The majority of deals on the mortgage market are now fixed-rate deals as lenders have pulled their tracker rate loans in reaction to the recent cuts in Bank of England base rates.
Fixed rate mortgages now account for 69 per cent of the market, compared to 51 per cent this time last year, according to financial data provider Moneyfacts.co.uk.0 -
HammersFan wrote: »Loads of people are on trackers - so homebuyers benefit more than renters, yet again - life is pretty sweet on trackers right now, blooming marvellous in fact. And it means that people who do buy will be securing very nice fixed rates soon too. I'm pretty happy - although if I was stuck renting I'd be quite pee'd off about things at the moment.
With house prices falling about 15% year on year (that must be over a thousand quid a month for the 'average' house) I'm happy that I'm renting, frankly.
The house I will eventually buy is getting cheaper, I'm saving more money with every month and if I do want to take out a mortgage, I'll be able to get it dirt cheap thanks to the nutty 'economic measures' the government are stupidly implementing.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0
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