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I was only 16 at the time so not paying much attention to interest rates and mortgages etc... more time watching Neighbours and riding my bike!
I remember interest rates went up to 15% very quickly which obviously increased mortgage repayments. But did this lead to new buyers not being able to afford anything and therefore sellers had to massively drop their prices, or did it lead to people having to sell up because they couldn't afford to pay their mortgage any more - and as it was a distress sale, supply increased very quickly and they sold at whatever price would get them a quick sale... or a combination of both.
And what led to the big increase in prices in the first place? Was it excess demand/restricted supply or too much cheap mortgage money?
It's an interesting facet of bubbles and the period before crashes which is that lots of people say 'it's different this time' which is what some people are saying about the current dip in prices - especially in London. But if we have another crash now it will actually be the 4th in 40 years - there were 2 in the early 70's and the big one in the late 80's.
Prices are based on sentiment and expectations of the future as muh as any factual/structural factors like the balance between supply and demand, and one of the key facets of deflation in any market is that as prices begin to fall, buyers hold off their purchase on the basis it would be daft to buy now when the thing you're after will be cheaper in the future. And when you're talking hundreds of thousands of pounds of debt over 25+ years, this desire not to overpay is likely to be much stronger than cheaper things...
So how similar were the circumstances in 1989 to now and does it look likely to repeat? And does it even matter how similar circumstances are - if buyers think prices are falling, a crash will inevitably follow?
Thatcher and Lawson....
Here's something to look at:
http://www.housepricecrash.co.uk/forum/index.php?/topic/45010-press-articles-1989-1996/
[url= http://en.wikipedia.org/wiki/Black_Monday_(1987) ]Black Monday[/url]
[i]interest rates went up to 15% [/i]
I paid 17.5% interest on my first mortgage at about that time.
This tosser....
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One of a multitude of things he will have to answer for come the glorious revolution, comrades 👿
Yes the rate move was a big part of the price decline. As for the world crash, I wouldn't use that then or or now. Irish property is still down 50% versus 2007 whilst UK is now higher in many places. I think a better word is "correction".
This tosser....
I thought the accepted defence was "worldwide financial crisis"?
Or does that defence only apply to them what ended boom and bust? 😉
It's an interesting facet of bubbles and the period before crashes which is that lots of people say 'it's different this time' which is what some people are saying about the current dip in prices - especially in London.
http://en.m.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds
Ninfan - financial incompetence seems to be territory that both main political parties share equally, unfortunately. But I don't think we can blame Gordon for 1989. Though no doubt George Osbourne would make a case against him 😉
We had a 100% mortgage that went to nearly 17% , I was a hod carrier for Bryant homes at the time -layed off and we ended up having to take 2 lodgers in just to survive . Not a good time 👿
My memory says it was something to do with mortgage tax relief changes but I'm happy to be rubbished on this one.
I remember sitting on the stairs with head in hands over the 15% plus rates being the Black Wednesday ERM debacle in 1992 and Lamont.
Can't recall what they were in 89, I know we'd bought the year before and it not being such a thing.
Rates (bank base) in the 70's were also up in that region
mortgage tax relief - Yes I think that was a trigger
Mudshark - that review of news headlines is interesting - we're seeing exactly the same again - as sentiment has gone bearish and the figures are published which prove that demand is falling away and prices are dropping - certain vested interests either comment in very vague terms that 'this is a slowdown' or 'price rises are easing temporarily' or 'growth of xx% forecast over the next xx years'
A bit of googling shows that hedge funds are all shorting stocks related to housing - e.g. Foxtons, Rightmove (they have to publish particularly large short positions that they take)
Plus, Foxtons share price has dropped from 399p in Feb to 165p in Sept - and the private equity firm who bought them sold 50% of its stake.
So very clever people who spend their days getting rich on speculation and investment are expecting prices to fall, not rise, which is in opposition to press releases from estate agents and mortgage lenders who stand to lose - the same trick they tried in 1989
I remember immediately after that crash the Head of the Bank of England stating publicly that they would never allow such a thing to happen again. I wonder if they still regards that as their policy.
I believe it was caused by me buying my first house, sinking a whole heap of overtime into it as equity. At the age of 20. And losing the whole ****ing lot when I had to move down south for work.
Luckily, I moved back north under the governance of the mighty messiahs Blair and Brown, made a heap on the house in Sussex, managed to buy up here before prices went daft again, and as of last week I'm mortgage free.
The irony is that the Tories destroy the housing market and Labour got me all my money back. Who'd have thought, eh?
It's an interesting facet of bubbles and the period before crashes which is that lots of people say 'it's different this time'
It probably is. The results may or may not be the same though!
lets face it.
you will never buy a house brooess as prices will always be going to get lower in your mind.
not seen evidence of a crash or even a slump yet....
how ever i expect a knock on shortly as the big boys are streamlining operations.
They abolished joint mortgage tax relief and advertised it in advance. As a result there was a surge of demand in an already overheated market that, once the tax change came in, resulted in the botom tier of demand being kicked out of the market with a resultant crash.
There were other factors but that started it off.
I had the combo of a low start mortgage, negative equity and crappy endowment policy that impacted my finances for at least 15 years. Having said that, i'd still rather be buying in the market as it was then than now.
TrailRat - you're kindof right. Basically I'm struggling to afford to buy anything at current prices, and neither can a lot of people...There is however a lot of evidence of falling prices (in London at least) if you track asking prices on Rightmove, and selling prices on Land Registry...
They abolished joint mortgage tax relief and advertised it in advance. As a result there was a surge of demand in an already overheated market that, once the tax change came in, resulted in the botom tier of demand being kicked out of the market with a resultant crash.
This is kind of what happened in London last year - prices hadn't dropped since 2008 but no-one was buying. Help to Buy led to a surge in demand, which has driven up prices beyond the reach of all but the very wealthy, leading to a sudden halt in demand as there's hardly anyone who can get the sums together to buy, especially now lending is being restricted...
Houses are not moving around our way i.e. Northants. Market has been stagnant for months on end, even estate agents are admitting it. We're looking at moving up, but no joy selling and nothing interesting to buy. Pretty much given up looking for the time being. Certainly no housing boom happening here, but I notice developers are building more at the moment. Quite a few new estates popping up.
I just got a new mortgage deal this week.
I bought the house in the SE just over 2 years ago.
I was worried about getting the "loan to value" down to where the good deals are.
I needn't of worried, they price index system reckoned it had increased by 20%.
No down turn around here then? Is it ever going to stop?
House prices increasing like that don't help many. The people who really seem to gain are those people, from a family with only 1 or 2 kids, who inherit the family home, which is now worth a fortune.
@brooess, the performance of Foxtons is driven by fees (ie turnover) not house prices. Foxton's shares have fallen as turnover is down markedly. Yes, there is a correlation between turnover and price, ie a rising market tends to have more turnover but that's secondary.
@slowoldgit - it's daft the BoE making statements like "we won't let that happen again", they cannot absolutely control the markets. i would be willing to bet they didn't actually say that.
But that's what I remember hearing.
As I recall, you can (or could, maybe it's different this time) show a correlation between average house prices and average income - I think the multiple was 2.5 to 3, which would tie in with mortgage multiples at 3.25, but I could be wrong.
Whenever that had been stretched previously it was followed by inflation, particularly but not exclusively wage inflation, which corrected the multiple until it became affordable.
But the ERM effectively meant governments had to take action to control inflation so the correction could only be by house price reduction low wage inflation has also generally been seen as a good thing by Conservative governments. A bubble pre-MIRAS changes didn't help.
Now prices have been very high for a long time, possibly explained by low interest rates and relatively low supply of housing stock, but the conditions look about right for a correction...
Nigel Lawson is an anagram of We all sign on!
oh they do IGM ... but the powers that be wont let that happen till after the election..... and who ever gets in will blame the whole mess on those that were in power before....
Couldn't pin it on one single thing, but the three or four years before it i was working 70+ hours a week and banging all the extra cash on the mortgage, by the time the crash hit we were mortgage free.
Then like a daft **** moved house and started all over again.
Through the late eighties the government made house ownership more fashionable and 'the thing to do'. In the same period the lenders fuelled the rises by drastically raising the multiples of buyer's incomes they were willing to lend and coming up with ridiculous deals such as 105% mortgages and deferred interest that meant your loan increased over the first few years on the assumption that the value of your house would continue to rise ahead of it. I worked with several people at the time who bought back street terraced houses in Swindon for £20000 and sold them less than a year later for £40000. That sort of thing was happening in ripples emanating from London. That was when mega-commutes of 100 miles or more started to become more normal.
The following crash was a result of high interest rates and job losses. Then because house prices had dropped so drastically even people who could afford their mortgages started defaulting and walking away to buy elsewhere as it was cheaper than selling their house for far less than they owed on it. Some people were chased by their lenders, a lot got away with it. In '91 a girlfriend bought a studio for £22000 that had previously been sold for £50000. 6 out of 12 in that block had been reposessed within 3 years of it being built.
In the current climate there are too many folks now clued up as to the investment potential of property for there to ever be another crash like the early nineties. As soon as there is a small drop they will be rushing in to pick up a bargain.
It was too much cheap money. Inflation was taking off and Lawson over extended the money supply, so then had to reign it all back in by upping interest rates.
In the current climate there are too many folks now clued up as to the investment potential of property for there to ever be another crash like the early nineties.
Five years ago approximately one million people were affected by negative equity. The fact that it was less than the 1.6 million of the early nineties has less imo to do with "too many folks now clued up" and a lot more to do with the levels of unemployment ...... unemployment, irregular work, and stagnant/falling incomes, affects people's ability to secure mortgages.
And the reason that despite the worse economic crises since the 1930s for the considerably lower unemployment levels than the early nineties ? Because of government policies ..... stimulating demand and expanding the public sector as the private sector severely contracted. The private sector certainly didn't come to the rescue.
It's worth reminding people when they whinge about the last Labour government a likely reason why they didn't lose their jobs and their homes.
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During 13 years of New Labour in power the only thing which truly impressed me was Gordon Brown's and Alistair Darling's handling of the global economic crises.
Mind you US Republican president George Bush followed simular policies. For a while it was a case of [url= http://en.wikipedia.org/wiki/We_are_all_Keynesians_now ]We are all Keynesians now.[/url]
jambalaya - Member
Yes the rate move was a big part of the price decline. As for the world crash, I wouldn't use that then or or now. Irish property is still down 50% versus 2007 whilst UK is now higher in many places. I think a better word is "correction".
I think a better question is; why do we allow the artificial over inflation of house prices. homes are one thing I would restrict profiteering on.
The shockwaves from the October 1987 stock market were still rippling through the economy. Any time when lenders will offer 5X joint income loans you can be certain another property slump is bound to follow. And the "we're all too clued-up to let prices fall - we'll Buy the Dip!" argument? Perleeaze!... That could've been said in 2006. We all should be much wiser but seemingly there are still some True Believers out there... P.T Barnum was indeed right...
Oh dear oh dear. Housing is impacted primarily by supply and demand. We are a growing population and demographic factors more people are divorcing and living alone after are affecting. It is also much easier to borrow money today than it was 50 years ago, my parents had to wait in a mortgage queue having saved with a specific building society for a number of years. However that sort of restriction on credit would be politically impossible now even if it would avert the sort of financial crises we say in 2008 ever happening again.
What I would advocate is a Singapore style system where government builds affordable housing available to citizens plus we need to rebuild our social/council housing stock.
@ohno - 5x income with interest rates above 10% is very different to the situation today. Loans are now made on the basis of affordability, ie post tax income versus mortgage payments.
FWIW house prices are now way above the levels of 1989, hence my use of the word correction
What caused the 1989 house price crash?
I'm sorry, it was me, I wanted to get on the housing ladder at a young age, bought into the hype at the time and then lost 25% of the value when my relationship broke up and needed to sell up.
Then spent another several years paying back the neg equity with my next mortgage, causing financial problems for me and my (next) partner which helped that relationship break down too.
Thanks 80's housing boom, you set me up for life.
However that sort of restriction on credit would be politically impossible now even if it would avert the sort of financial crises we say in 2008 ever happening again.
Have you got some sort of evidence to back up that claim or is it just a hunch ?
If people are willing to accept ideologically motivated spending cuts packaged as "austerity measures", or "difficult decisions" as politicians like to describe unpopular policies, then it is perfectly feasible that they would accept and recognize the benefits of credit controls to cool down an overheated housing market.
Ah 1989, 5 years into our mortgage and child number 3 on the way. Can't seem to remember much about it, probably because I was working every extra hour available. 🙁
If people are willing to accept ideologically motivated spending cuts packaged as "austerity measures"
No one is silly enough to believe that surely?
Intervention into in markets such as housing, interest rates, lending, FX have caused more problems than they have solved.
UK house Price-earnings ratio higher than in 1989 now - heaven help us if the Tories stop fixing IR artificially low and messing about with the housing market. * But lemmings love to follow bubbles.
* mortgage payments / income well below average since early 80s
Intervention will never happen directly but the memory of what happened back in 89 etc. must also weigh heavily with people as they continue to prop up the housing market. The number of people who now own houses and have borrowed heavily to do that makes it unpalatable to let prices drop too far.
No one is silly enough to believe that surely?
Oh look, THM rolls in with his usual arrogant and patronizing persona.
David Cameron himself made it very clear only a couple of days ago that the "austerity measures" are not just about deficit reduction but an ideological and [u]permanent[/u] commitment.
[url= http://www.huffingtonpost.co.uk/2013/11/12/david-cameron-austerity_n_4258733.html ]David Cameron Says Austerity And 'Leaner State' Should Be 'Permanent'[/url]
A "fundamental culture change", as he calls it, proves that it is an ideological commitment, not simply a commitment to reduce the deficit.
Presumably you think that David Cameron is lying THM, if according to you anyone who believes that the austerity measures will be permanent is being "silly" ?
I reckon DC is pretty silly so....
Oh look, EL rolls in with his usual incorrect analysis/spin
FTFY - the first version was a little pot and kettle.
DC lying? (Although tbc, did he use the word austerity?)
Of course he is. Pretty silly if folk don't spot that too. Tax cuts coming.... yes right!?!??As the FT has been analysing all week, despite all the austerity headlines, we are barely half way through the cuts that they (the Tories) believe are required. They haven't even started on the tough stuff yet. Even the insiders are puzzled by the tax cuts stuff. So make your own mind up if he is lying or just being silly himself. So if this is, as you claim, ideologically driven, then they are very weak followers of said ideology. But you only have to look around the world to see that this has bugger all to do with ideology, that is just (surprise, surprise) spin. But then again if you think GB had a good financial crisis then you are obviously keen on spin. And darling too????? Rabbits and headlights spring to mind more than "good crisis."
I also sat through Black Tuesday and I remember having a mortgage payment of £270 and a monthly pay of £440 not much fun. However I currently find the gap between the haves and have nots (I am in the haves group) difficult to stomach - I think what is kinda lost in the current view (C4 how rich are you etc) is the gap at the bottom end, I was a kid in the 70s in a semi rural community and had a pretty good view on how well people lived, I still live in that community and see some fairy awful "gaps" people on minimum wage 30 hour a week jobs who get layed off as the work is seasonal then the employer jumps in his range rover and drives to the airport for three weeks in the sun?
Just for the record in my business no one gets layed off and the lowest salary I pay us £18k.
This very obvious imbalance is not healthy and the housing market suffers from the same imbalance however it's fed by fear and greed (fear of not getting on the housing ladder and equity greed ) we need lots more houses (probably millions) and lots more jobs - as ever it's all about supply and demand.
Oh look, EL rolls in with his usual incorrect analysis/spin
Incorrect analysis ? Only a dyed-in-the-wool Thatcherite like you would come out with this very silly comment : [i]"Intervention into in markets such as housing, interest rates, lending, FX have caused more problems than they have solved"[/i]
In contrast sensible opinion recognises that deregulation goes to the very heart of the causes of the worse financial crises since the 1930s.
Even the neo-conservative administration of George Bush was forced into massive and unprecedented intervention due to the catastrophic failures of the unregulated financial markets.
DC lying? (Although tbc, did he use the word austerity?)Of course he is. Pretty silly if folk don't spot that too.
So you reckon that David Cameron, despite what he is very clearly saying, intends to boost public spending back to the pre-austerity levels ?
I know that you are a Tory THM but have you always gone through life treating people as idiots ?
Not even a nice try this time Ernie, come on keep the standards up.
You really do have a thing for Mrs T don't you, not just the collection of photos.
The crisis was a crisis of leverage, the trigger was the flawed intervention - artificially low interest rates (to address/compound past errors) combined with flooding the world with excess liquidity. Oh and then encouraging banks to lend to those who shouldn't be lent to. So sorry, you diagnose is worn again as is the weak, clichéd attempt to pigeon hole people. The burden of dragging around political allegiances must be weighing in your shoulders.
DC is lying about taxes and where we are in the cycle of cuts. But try the actual question, did he mention austerity? They are not even half way through the required deficit reduction and remember what a deficit is when mis-applying the word austerity. GO talked tough but acted much lighter than others with different ideologies.
Idiots prove themselves, they do not need my encouragement. I take people for what they are.....
DC is lying about taxes
A classic THM tactic which you share with your fellow Tory Z-11, when in a sticky change the subject completely.
I haven't mentioned anything about David Cameron's tax policies, no one else has mentioned anything about David Cameron's tax policies, this thread isn't about David Cameron tax policies.
Of course for you it is more desirable to argue against something which no one has even suggested than to challenge the widely held view that deregulation goes to the very heart of the causes of the worst global financial crises since the 1930s. A view that is shared by Noble Prize winning economists but which you would arrogantly dismiss as too silly to believe.
the widely held view that deregulation goes to the very heart of the causes of the worst global financial crises since the 1930s.
Wasn't the regulation brought in because of 1929?
Therefore regulation = stability, no?
Has it been a tiring week? Come on raise the bar a bit.
ernie_lynch - Member
A classic EL tactic, when in a sticky change the subject completely.
FTFY. Remind me what the thread was about before the sidetrack?
I haven't mentioned anything about David Cameron's tax policies,
Correct I did, as an example of DC essentially lying. There will be more of this to come as we head to an election. Must be tough being a Tory if you have to defend this. Bit like Andy Burnham defending Wallace yesterday.
Of course for you it is more desirable to argue against something which no one has even suggested than to challenge the widely held view that deregulation goes to the very heart of the causes of the worst global financial crises since the 1930s. A view that is shared by Noble Prize winning economists but which you would arrogantly dismiss as too silly to believe.
Very happy to - it is/was a crisis of leverage. Pure and simple. Misdiagnose the problem and you get the wrong solutions. The Noble guys you refer to and I share similar thoughts on other things though, but I doubt this extends to praising the unlikely duo of Kirchner and Brown. I admire your tenacity in fighting lost causes. Admirable, if flawed.
Anyway, the housing market....
I admire your tenacity in fighting lost causes.
You really don't ever have an occasional day off from being arrogant and patronizing do you ?
Yeah, claiming that deregulation goes to the very heart of the causes of the worst global financial crises since the 1930s is a "lost cause".
We'll leave it there shall we as having an intelligent discussion with you is clearly impossible.
Just for teh record you both look like absolute ****ers right now. HTH
HTH
Yes thanks Northwind, that was a hugely useful contribution.
Have you got something to say on what caused the 1989 house price crash ? Or are you limited to just one useful contribution per thread ?
What ernie says THM you really do like to patronise folk to death.
I think its hard to argue that the Tories are not ideologically wed to the idea of a low tax* low spend small state as they are slowly achieving bia "austerity" measures.
It may well be fair to debate whether they have delivered on it but not whether they want to deliver it.
* IIRC CMD said this was a moral imperative recently
@ NW I quite enjoy watching a Bighitathon....then again I would
ernie_lynch - Member
Yes thanks Northwind, that was a hugely useful contribution....Have you got something to say on what caused the 1989 house price crash ? Or are you limited to just one useful contribution per thread ?
Ernie +1 😀
As an aside, heavy rainfall and rising water levels not restricted to the South I see.....
has no one blamed fatcha yet?
thats my leftytrackworld contribution
greed is good* always seems to get us in the shit in the end
though recently it seems the shit is being shovelled downhill to the bottom of society, another 10 years of similar income inequality and Russel Brand may well end up having his revolution- imagine that!
newsnight apparently modeled a SNP-PLaid Cyrmu-Green coalition last night, wed be more socialist than cuba!!!
*currently selling our house and am guilty of that too
kimbers - Member
has no one blamed fatcha yet?
Her not-so-secret admirer mentioned her indirectly, but I think he got away with it.
What ernie says THM you really do like to patronise folk to death.
😆 oh the ironing 😆
Can we have a league table of who the bighitters are?
Oh yes I am guilty of it for sure. Out of interest what did I do to you as you never miss the opportunity to have a dig about this but I have forgotten you 😉
See what i did there
As an side something strange about the South written in tongues with an abbreviation no one else UFTAFW
Anyway riding to be done
Enjoy play time...and be nice to each other
I am crushed 😆
I needn't of worried, they price index system reckoned it had increased by 20%.No down turn around here then? Is it ever going to stop?
But 2 years ago the market was well down on the previous peak. This is more a sign of a recovery, but not future price trends. Our house (and most UK houses) have increased in value significantly over the last couple of years. Our estate agent has openly said that the market was looking good at the tail end of last year but has completely stalled again in the last 6 months. My accountant wife thinks the recent tightening on bank lending criteria has hurt the market. Large ratio loans are much harder to get under the new regime.
It's too early to tell.
Keep an eye on Scotland's prices over the next year. Due to tax changes we are seeing an acceleration in expensive houses changing hands before April. The analysis is that the cheaper housing stock will slow to April, then after accelerate. But I'm not sure, due to the supply demand issues, and think it may cause a re-correction of the market post April, we shall see. As they say watch this space.
If the Lloyds data is correct, Scotland is the only region where current price-earnings ratios are close to average since '83. Not surprisingly in our heavily distorted market, greater London is now a historic high and other areas in the south getting close.
Some free market.....?
Mortgage repayments as a percentage of income in Scotland are actually close to historic lows. Canny folks north of the border in housing and knowing how to vote.
Some free market.....?
Whaddya mean?
Occasionally, the UK is mistakenly described as being being a free market with ruling parties fixated and driven by certain ideologies. The housing market is an excellent example of why this is false. Even a supposedly RW government, actively intervenes in and distorts the housing market as a deliberate instrument of policy. This has two predictable consequences (1) nice sources of revenue for their coffers and (2) exacerbated booms and busts. But they can't help themselves, even the Tories.
Some free market.....?
Whaddya mean?
Deliberate shortage of supply from lack of building for years and years, followed by deliberate adding in more money when prices become unaffordable rather than letting prices fall as per free market supply and demand - Funding For Lending and Help To Buy.
Falling house prices will make people feel poorer even though rising house prices make people actually poorer as they're left with lower disposable incomes. The market's being manipulated - otherwise prices would have fallen back to historical income multiples after the 2008 crash... how else do you get 20% increase in prices (in London) whilst during the same period wages are stagnant. The London population didn't increase 20% last year so clearly there's more than your free market supply and demand going on...
It's surprisingly naive IMO - if governments have as much control over markets as they seem to think, they'd have prevented the 2008 crash, surely? How they think they'll prevent a correction in house prices is a mystery
the last statements released by carney on why he didnt raise interest rates shows that the wool of artificially propping up the housing market to create "economy" hasnt been pulled over his eyes.
our economy hasnt recovered - the only thing we seem to be mass producing is housing. we cant export that.
Plus consumption in the UK represent about 65% of total aggregate demand - boy, can we consume! Rising house and other asset prices boosted consumption via the wealth effect. Everyone "feels" better and the incumbents get voted back in. Simple really except for those who get caught in the aftermath. There will be many when IR finally normalise as they should if the market was free and allowed to function properly. Alas, we prefer to kick the can down the road....
Don't mention wages. Another example. Our productivity continues to decline in absolute and relative terms. And the response, let's intervene in the labour market and put up the price of labour despite all of this. And we wonder what happens to UK competitiveness.
Some free market.....
http://www.ft.com/cms/s/0/45f29b50-69b4-11e4-8f4f-00144feabdc0.html
Anyway, I digress, back to housing.
Even a supposedly RW government, actively intervenes in and distorts the housing market as a deliberate instrument of policy.
That is because not even the RW governments trust the market to deliver. I doubt anyone does tbh even you.
Re housing it is unlikely that any govt will remove all planning restrictions- ie it will never be "free" as the results are unpalatable. Housing at Stonehenge anyone - the market would deliver as they would make loads with them ...ditto wales/Snowdon, the lakes etc
We have a mixed economy all the parties do is vary slightly between how "free market" [ which means low intervention] and higher intervention/regulatory they are.
The same applies to wages - very few are willing to remove the MW which is interference or NI or sick pay or ....ah you get the point we want folk who work to have a certain standard of living.
No one trusts the markets as they are [ literally] amoral and human beings are , almost exclusively*, not.
* Not a personal dig to be clear.
Don't mention wages. Another example. Our productivity continues to decline in absolute and relative terms. And the response, let's intervene in the labour market and put up the price of labour despite all of this. And we wonder what happens to UK competitiveness.
What's the alternative?
As i see it, in the current climate it's either -
- push up wages
- subsidise wages via in-work benefits such as tax credits, child benefit etc etc
both of these are market distortions. Withdraw them both and the economy would fall through the floor in very short order, no?
...related -
found this article interesting. It's from a strongly pro-capitalist website, but argues that we do need some forms of regulation / interference for capitalism to be successful
One of the roles of government is to save capitalism from itself, by maintaining a competitive environment
http://www.capx.co/capitalists-would-be-crazy-to-ignore-inequality/
Not really, two things have/can happen - (1) wages are depressed until we become competitive - our output per head is well below US, Germany and France (2) a falling exchange rate with help. A relief that we at least have a flexible exchange rate unlike our poor friends in Spain who have been restored to competitiveness but the crude measures of massive wage deflation and unemployment. God bless the €!!!
If you increase wages without increasing productivity, the result has to be fewer people in work but earning more money (cough, more inequality). Economics 101, not that those politicians arguing about inequality have taken that course. Too much to hope.
Of course we need genuine supply side reforms but they take far too long for most politicians. Still at least there is one politician talking about them and he's a socialist with the lowest popularity ratings in Europe (I think). Funny old world.
Back to the housing market, of course letting the housing market return to correct levels would crush consumption and politicians are no turkeys! Economical with truth certainly, but rarely stupid.
Poor productivity has been blamed for the lack of earnings growth and the squeeze on real incomes in Britain over the past five years, though the Bank of England is expecting output per worker to pick up during 2014.
So given that for the majority of British workers over the past decade or more COLA increases have outstripped pay growth, particularly when you add in 0 hour contracts. Are British workers dis-incentivised?
Particularly as they see the richest's pay growth exceeding COLA by a large margin?
Whilst the 'crash' was happening I was busy getting loaded and shooting everything that moved. Corr it was glorious times.
greed
many factors that 'helped' it over the tipping point. Over-valuing and over-borrowing were the primary causes just like the 2008 and 2016 crash.What caused the 1989 house price crash?
🙂 yes everyone was urging me to buy in '88 but all I could see/hear was a strobe light and a thumping beat.