Who should pay for social care ?

[paulfromcamden]

Edward Chancellor says the MMT doesn’t work, and cites inflation as the result, but doesn’t really say why

Even Kelton concedes in the article:

Being the issuer of a sovereign currency means never having to worry about how you are going to pay your bills. The Japanese government can afford to buy whatever is available for sale in its own currency. True, it can spend too much, fuelling inflationary pressure, but it never needs to borrow Yen.

 

[Seanm]

Do you have any stats for the demographics of Red Wall switchers?

Not handy, just this analysis that does some correlation:

https://jonn.substack.com/p/its-the-demographics-stupid

The "Grey Wall" thing can be overdone too, and I've seen articles that suggest that younger homeowners in "red wall" towns also make up a significant part of the Tories' new vote, but it's hard to deny that age coupled with home ownership and not working is a key factor here.

 

[Ponty]

People have been prophesying a collapse in house prices for as long as I’ve been on the internet. Let’s just say that anyone who decided against buying a house on the basis of such predictions has had a long wait, and would have been well-advised to ignore them.

Indeed. However, prices are inversely proportional to IR’s. If you believe in ZIRP and forbearance forever, crack on.

 

[Ponty]

Actual collapses don't happen easily unless a lot of people default on their mortgages. Stalled markets with only emergencies like death sales are far more likely.

Prices are set on the margin and depends if someone actually needs to sell. I know someone who recently sold a place for a 17% loss after owning it for 10 years. This is in a very affluent part of the south east.

 

[paulfromcamden]

As a layman with a scientific inclination, I too was looking for an even handed discussion and found this ft.com article, “Can governments afford the debts they are piling up to stabilise economies”. The main proponent of MMT argues the “yes” case, and an economic historian argues against.

https://www.ft.com/content/53cb3f6a-895d-11ea-a109-483c62d17528

Not sure if it’s paywalled, I was able to view by googling the title of the article and clicking through from the search result.

Looks like no-one really knows if MMT would work, it certainly sounds too good to be true. We might find out soon if Biden is able to pass his multi trillion dollar agenda through Congress.

Thanks for the article. Reading a bit more around MMT now. I can't say the article really convinced me of it's validity. The author makes a few assertions that I struggle with, not least that governments only borrow because they've forgotten they don't have to(!) and that they can borrow at whatever rate they choose - bond auction failures suggest it's the market that sets the rate i.e. buyers won't take on risk without an adequate return.

And yes, 1939 etc.

Perhaps it's just the format of a short article that means a lot of detail is lost. She's an economist with a PhD so is no dummy.

 

[matthewr]

Thanks for the article. Reading a bit more around MMT now. I can't say the article really convinced me of it's validity. The author makes a few assertions that I struggle with, not least that governments only borrow because they've forgotten they don't have to(!) and that they can borrow at whatever rate they choose - bond auction failures suggest it's the market that sets the rate i.e. buyers won't take on risk without an adequate return.

The problem with the MMT debate is that its basically a debate that is happening in graduate schools so it's hard to have a definitive view as a lay person. Although mostly I would stress that MMT and Modern Keynesianism have way more in common than they differ. The real outlier is the hair shirt, self flagellation nonsense of the right which is always banging on about asset bubbles and inflation and uses that as an excuse to inflict pain on working people and the vulnerable.

I am though slightly sceptical about it, just because I find such a seductive idea that ticks all my boxes for a better world means I need to be more sceptical than usual.

 

[Joe Hutch]

Indeed. However, prices are inversely proportional to IR’s. If you believe in ZIRP and forbearance forever, crack on.

I don’t believe in anything much. Personally I’m immune from any of the house price collapse stuff, and to interest rate increases. But I’ve read enough scare stories to be just a little sceptical about impending apocalypse.

 

[matthewr]

Thanks DV. I've seen that posted in loads of places over the years but never watched it as it always seemed to be posted by Zero Hedge / goldbug types (present company excepted). The filmmaker isn't an economist and accepts that he got some stuff in the film a bit wrong. I guess I should get around to watching it but wondered if there's a less contentious / more mainstream source.

That video has done more harm to economic thinking than just about anything else. He is basically confused about how money works and confuses accounting effects with reality. He also seems to basically ignore the time axis and the fact that work happens.

Ironically, the best explanation of why this stuff (or at least it's conclusions and consequences) is wrong is by Steve Keen and you can almost hear the exasperation in his words as he is trying to take down the dominant world of of the economic establishment and all people can do is post that bloody video from youtube.

https://www.forbes.com/sites/stevek...-and-interest-on-debt-myth-2/?sh=4d7d9dea1c76

 

[Ponty]

I don’t believe in anything much. Personally I’m immune from any of the house price collapse stuff, and to interest rate increases. But I’ve read enough scare stories to be just a little sceptical about impending apocalypse.

Sure, and that’s all fine if you’ve got a house that’s paid for. If you’re young, looking at ploughing everything you own into a deposit and taking on a mammoth debt at a time of record low IR’s and record high house prices, that’s a very different (and scary) proposition.

 

[matthewr]

We had a housing bubble in Malaysia, fueled by Hong Kong and Mainland Chinese money. This has had a painful correction. Several projects were not even intended for local buyers due to their location.
There are still similar projects in London only marketed abroad

I have a very good book on the history of housing price collapses in the UK and Europe of which there have been many. But if you want a shift that makes house purchase by normal people like it was in the 1970s or even anything close to that, then like I say you can literally make millions from very little capital at minimal risk.

 

[Joe Hutch]

Surely if you were young etc you’d have locked in at a low interest rate for several years? Of course that doesn’t protect you much in the event of job loss/divorce/serious illness, but what does?

 

[Tony L]

The "Grey Wall" thing can be overdone too, and I've seen articles that suggest that younger homeowners in "red wall" towns also make up a significant part of the Tories' new vote, but it's hard to deny that age coupled with home ownership and not working is a key factor here.

I suspect you will also find a lot of younger to middle aged folk who are hoping to inherit their parents house or some substantial asset thereof so won’t be too keen on a market rebalancing. By saying that I think you also need to grasp that whilst still expensive to many working folk northern ‘red wall’ property often isn’t expensive. I live in a fairly large 3 bed victorian terrace in a fairly nice quiet bit of a Lancashire ex-mill town 20 minutes on the train from Manchester and it is only worth about £70-80k! The exact same house would be about £1.5m in Shepherds Bush! The north is a very, very different place to the south and the property market reflects this.

 

[Joe Hutch]

I suspect you will also find a lot of younger to middle aged folk who are hoping to inherit their parents house or some substantial asset thereof so won’t be too keen on a market rebalancing. By saying that I think you also need to grasp that whilst still expensive to many working folk northern ‘red wall’ property often isn’t expensive. I live in a fairly large 3 bed victorian terrace in a fairly nice quiet bit of a Lancashire ex-mill town 20 minutes on the train from Manchester and it is only worth about £70-80k! The exact same house would be about £1.5m in Shepherds Bush! The north is a very, very different place to the south and the property market reflects this.

And house prices have remained relatively low/stable in many parts of the north. In my brother’s road, for example, house prices are still where they were five or so years ago, whereas in our road they seem to keep on rising year on year.

 

[Bob McC]

Most of the north is not like your town Tony.
My original two up two down bought for £7000 in the 70s in Fallowfield, Manchester a stones throw away from City’s old ground, is now well over £100K.
It’s always location, location, location.

 

[Seanm]

I suspect you will also find a lot of younger to middle aged folk who are hoping to inherit their parents house or some substantial asset thereof so won’t be too keen on a market rebalancing. By saying that I think you also need to grasp that whilst still expensive to many working folk northern ‘red wall’ property often isn’t expensive. I live in a fairly large 3 bed victorian terrace in a fairly nice quiet bit of a Lancashire ex-mill town 20 minutes on the train from Manchester and it is only worth about £70-80k! The exact same house would be about £1.5m in Shepherds Bush! The north is a very, very different place to the south and the property market reflects this.

Yes, part of why a merely generational account doesn't catch everything about the situation. But I think that wherever you are, owning your own home and not being directly dependent on the productive economy for your income is likely to feed into the relative priority people give to economic vs other issues, as well as what areas of the economy they want to see prioritised by government.

 

[Bob McC]

So Boris finally comes clean.
When challenged about how no one will have to sell their houses his reply is that he has set up a structure that will now allow private insurance companies to come in and sell policies to cover customers.

 

[Joe Hutch]

Is any town like any other town?

What seems to be happening in this town (well, city) is that areas that used to be shunned by anyone with more than a minimal income are being re-colonised by the middle-classes. I don’t know where the displaced poorer people are going.

 

[dweezil]

Most of the north is not like your town Tony.
My original two up two down bought for £7000 in the 70s in Fallowfield, Manchester a stones throw away from City’s old ground, is now well over £100K.
It’s always location, location, location.

Very much so, the house i own hasn't gone up much in 20 years despite improvements.

Daughter has just bought a flat in town and they're doing well. Cheap money, walk to work, low energy costs, borderline student area; the balance is very different today.

I've just fixed a big chunk of overdraft into a 10 year loan, very small premium for a bit of certainty.

 

[Seanm]

So Boris finally comes clean.
When challenged about how no one will have to sell their houses his reply is that he has set up a structure that will now allow private insurance companies to come in and sell policies to cover customers.

Ah. Back to May's plan then, and the creation of new financial markets.

 

[Tony L]

My original two up two down bought for £7000 in the 70s in Fallowfield, Manchester a stones throw away from City’s old ground, is now well over £100K.
It’s always location, location, location.

£100k is still really, really cheap for a house!

Yes, part of why a merely generational account doesn't catch everything about the situation. But I think that wherever you are, owning your own home and not being directly dependent on the productive economy for your income is likely to feed into the relative priority people give to economic vs other issues, as well as what areas of the economy they want to see prioritised by government.

True, but there is way more too this. Debt is the really big one, e.g. if you look out of your That London window chances are the property opposite will be on a mortgage, the nice car outside paid for with borrowed money etc. Meddle with things too much and you crash the whole thing forcing many working folk into negative equity, bankruptcy, even mental illness and suicide. I remember this well from the Thatcher era which absolutely destroyed much of the north. I had nothing (more than a hi-fi, some records and a bass) and survived ok in the counterculture/black economy, but I saw many others absolutely destroyed by it. I am now in a distinct minority in this country by genuinely being in credit/having zero debt. Prod this bubble too hard and all hell will break loose and it isn’t me or your largely mythical working class Burnley home-owning pensioners who will be destroyed, it is everyone else.