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Inequality and the top 10%

Discussion in 'off topic' started by sean99, Oct 13, 2021.

  1. laughingboy

    laughingboy pfm Member

    Prices have a relationship to affordability, but to cite only Interest Rates is to see only one part of the picture. Changes in bank lending criteria, buy-to-let mortgages, globalisation (Chinese, Russian and other money flooding into the market), securitisation of mortgages as CDOs, etc. all had an effect.
     
    Le Baron likes this.
  2. ks.234

    ks.234 pfm Member

    No. If by ‘printy printy’ you mean printing money, when has that ever happened in the UK?

    House prices have risen because of the lack of available housing stock, much of it taken up by people Buying to Let.
     
    vince rocker, PhilofCas and Le Baron like this.
  3. Ponty

    Ponty pfm Member

    Of course there are externalities but IR’s are the primary driver. If they were wound back to pre ‘emergency’ levels of 5% tomorrow, what would happen to prices?
     
  4. laughingboy

    laughingboy pfm Member

    Bradbury pounds (1914)? ;)
     
  5. Le Baron

    Le Baron pfm Member

    It's never much use debating with rentiers. They're only looking for a free payday from particular government monetary policy and spending policies.
     
    vince rocker and ks.234 like this.
  6. ks.234

    ks.234 pfm Member

    Interest rates are to control inflation, they don’t cause inflation unless those big brains at the BoE can’t do sums.
     
  7. laughingboy

    laughingboy pfm Member

    I agree that IRs are an important component of house prices but (apart from a dip in 2003, where the lowest rate was 3.5% for four months) we had interest rates of around 5% until November 2008. And the facts show that houses were unaffordable at that time. I'll repeat this, because it is crucial: when interest rates were 'normal' in the decade to 2007 house prices were already out of reach of average earners. You can download a spreadsheet of bank rates here (Bank of England).

    Looking at interest rates alone doesn't show why prices rose from 1997-2007. So it fails to qualify as a 'primary driver' in that period - there must be other explanatory factors. And therefore a return to normal interest rates is not - unless accompanied by other changes - going to fix things, unless your definition of fixed is to take us back to 2007.
     
  8. ks.234

    ks.234 pfm Member

    Printing money and issuing bonds are two very different things.
     
  9. Mike Reed

    Mike Reed pfm Member

    Not sure about political purposes. The aim was for council tenants to become leaseholders (owners, in effect), by which they would look after and improve their assets as well as increasing the 'stock' of home-owners. One could argue that the properties were sold off too cheaply but there's no question about the effect on down-trodden council estates. The idea was for the proceeds to generate new social housing, but that was down to individual councils to implement and many didn't.

    You only have one set of inhabitants in a property. To my mind, pride of ownership will always surmount paying rent and nobody was made homeless. Only a soothsayer would predict such returns on leaseholders' investments at the time, esp. as leasehold longevity declines (125 years in my patch).
     
  10. Yank

    Yank Bulbous Also Tapered

    If you include the whole world, including Africa, Asia and South America, all of us are easily 1%ers.
     
    James and cutting42 like this.
  11. laughingboy

    laughingboy pfm Member

    The BoE printed unbacked ten-shilling and pound notes during World War One. There's a better explanation here (wikipedia), with a link to the FOI request that confirms it (click the pdf icon at the end of the text).
     
  12. Ponty

    Ponty pfm Member

    I’d suggest houses have been ‘unaffordable’ since around 1997. The pre 2008/9 base rate of 5% was historically very low. Maybe rates higher than this are required to flush out the excess and bring prices back to ‘affordable’ levels relative to salaries. Of course that’s unlikely to happen because debt levels are off the chart.
     
  13. PaulMB

    PaulMB pfm Member

    Don't know how "political" it is, in the narrow UK sense, given that the situation is exactly the same in Italy and Israel, with a rapid rise over the past 30-odd years of the relationship between wages and home prices.
     
  14. ks.234

    ks.234 pfm Member

    Yes, but Britain was on the Gold Standard in WWI. MMT describes the economy after the gold standard.
     
    Le Baron likes this.
  15. Le Baron

    Le Baron pfm Member

    Well the political-economic ideology (monetarism/neolib) is not national in character, it is pretty international. They work from the same failed crib-sheet.
     
  16. Ponty

    Ponty pfm Member

    They’ve kept going with ZIRP. What’s happened to prices (and not just houses)? Time for a stiff increase I’d say.
     
  17. Tony L

    Tony L Administrator

    Indeed. It tends to be the case as the alternatives need to be imposed with police state authoritarianism! Even the countries we view as far more balanced and left-leaning than the ridiculous situation we have in the UK and US (e.g. much of Scandinavia, parts of the EU) still run on this basic model.
     
  18. Le Baron

    Le Baron pfm Member

    What a surprise. No government is contemplating it, so bad luck old chap.
     
  19. Le Baron

    Le Baron pfm Member

    I'm not sure what you mean. Since the current ideology is also imposed with 'legal' authority.
     
  20. ks.234

    ks.234 pfm Member

    I had a T-shirt saying ‘I don’t give a f*ck how much your house is worth’ in the 80’s when house price inflation had already become absurd. ZIR didn’t happen until three decades later. The fact that house price inflation has become more absurd is a product of speculation on that absurdity by those in a financial position to take advantage of it, it is not a product of ZIR itself.
     
    Le Baron likes this.

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