Financial Crisis

[mccw]

USA- On the heels of the previously much detailed and discussed selective reporting to enable desired lower inflation statics ; here are More accounting tricks, this time to manipulate GDP lower:

"""The US Bureau of Economic Analysis is changing the method it uses to examine the U.S. economy as the country is addressing the national debt.

The new method will add the equivalent of the economy of a country the size of Belgium to the U.S. output, the FT reports. The Bureau will start counting spending on research, development and copyright as investment, and reflects pension deficits for the first time. Combined they are expected to add 3 per cent to the U.S. GDP, according to the newspaper. The change is aimed at more accurately reflecting the modern economy and will make the US the first country to adopt the new international standard, according to the FT.

We are carrying these major changes all the way back in time which for us means to 1929 so we are essentially rewriting economic history, Brent Moulton from the Bureau of Economic Analysis told the FT.

The changes will affect everything from the measured GDP of different US states to the inflation measure targeted by the Federal Reserve, the FT reports. At a time when the countrys government argues over the debt and spending, the revisions are likely to lower federal spending as a share of GDP by half a percentage point. They should also lower federal debt as a share of GDP by about 2 percentage points from 73 per cent in 2012, according to the article.

With the U.S. debt-to-GDP ratio nearing 100%, forexlive.com is critical as changing the GDP side of the equation is easier than addressing the national debt. """

-RT

[chiang mai]

MCCW: you've got your ear to the UK ground, what's the percentage chance that Carney will restart QE and devalue Sterling even further, I've read a couple of possibly inconsequential blogs suggesting it's greater than 70%?

[mccw]

MCCW: you've got your ear to the UK ground, what's the percentage chance that Carney will restart QE and devalue Sterling even further, I've read a couple of possibly inconsequential blogs suggesting it's greater than 70%?

Carney can not unilaterally fire up the QE. The monetary policy committee of he bank need to vote it through; these guys:

http://www.bankofengland.co.uk/monetarypolicy/Pages/members.aspx

Mervin aking was in favour of more QE but the commuter wouldn't pass it. They have guidance to follow and the inflation control target to follow. Carney has talked of his desire to change the target system which George Osborn seemed to support by talking up Carney's radical ideas, but then backed down at the final moment before the switch of head and instead reiterated that the inflation control would remain an important part of policy. So the will is there from government and the BoE head; but not it seems the committee at present although they are a majority appointed by the chancellor on fixed terms. I think they will need adjusting and bringing on side before QE comes; so it may not be as soon as some might think. But having said all that I'd wager more QE is coming with in the next 2 years.

[mccw]

A few typos above but app can't edit it but sure you can work out the words that predictive text dropped in wrong

Like commuter instead of committee

[chiang mai]

MCCW: you've got your ear to the UK ground, what's the percentage chance that Carney will restart QE and devalue Sterling even further, I've read a couple of possibly inconsequential blogs suggesting it's greater than 70%?

Carney can not unilaterally fire up the QE. The monetary policy committee of he bank need to vote it through; these guys:

http://www.bankofengland.co.uk/monetarypolicy/Pages/members.aspx

Mervin aking was in favour of more QE but the commuter wouldn't pass it. They have guidance to follow and the inflation control target to follow. Carney has talked of his desire to change the target system which George Osborn seemed to support by talking up Carney's radical ideas, but then backed down at the final moment before the switch of head and instead reiterated that the inflation control would remain an important part of policy. So the will is there from government and the BoE head; but not it seems the committee at present although they are a majority appointed by the chancellor on fixed terms. I think they will need adjusting and bringing on side before QE comes; so it may not be as soon as some might think. But having said all that I'd wager more QE is coming with in the next 2 years.

Thanks but I do understand how the MPC works, I was using the name Carney rather than MPC to highlight the change in command.

So you'd bet that more QE is comming inside two years, most pundits see inflation on the horizon so that could fit but it paints an ugly picture: inflation forces bank rates to be increased until eventually the Pound becomes uncompetitve and "escape velocity" is not reached so the Pound is devalued via QE - er, isn't that stagflation, high asset prices and an economy that's not improving?.

[mccw]

^ sorry; to explain what you already knew. The choice of words confused me; but admittedly I use shorthand like Carney this and that myself also.

Stagflation- we are in it already I think.

[chiang mai]

Yes I can agree with that, question is where we might go from here/possible options, I shall need to think on that and formulate my questions.

Edited July 31, 2013 by chiang mai

[mccw]

There are a number of possibilities. The most likely something like this as I see it short term:

- a bumping along of the real economy and stagflation much like we are in now.

- upon further rounds of QE Britain get further essentials price inflation (ie fuel, utilities, food and such) as the pound losses purchasing power on imports. Central London property could go higher in this case as it looks cheaper from a foreign perspective.

- longer term what I think is possible is drops in asset prices like property and stock market as the real economy buckles under the lack of consumer spending due to the rising cost of living / dwindling disposable income of the common worker. But prices will likely recover as the cash of the rich snaps assets up off the weaker hands; basically we see a continuation of process that is happening at the financial crises. Property will hold best I think as they continue to be in demand while british consumer focused companies will suffer or gold; as we seen already with the major chains like woolworths and comet closing last winter.

Property wise; I think student and high immigrant worker focus is safest and most profitable, because student, especially from overseas, have parents backing them up with cash, they have cash and budgeted before hand to afford the rent for set period. Immigrant workers are focused to work hard and save money and not mess about because they are not in thier own country and don't know how to game the system like the English benifits scum. Most risky areas would be rural or minor towns cities, because returns are not so go as it is, and these are the areas likely to suffer most from the above economic conditions and job losses with out replacement. If someone looses thier job it can be a long drawn out nightmare to get rid of them when they stop to pay rent, plus you feel bad for them but obviously need to take care of your self/ own families interests as well, cover mortgage, stem losses etc; I never had to evict any people with kids but it must be real difficult (I have one family as tenants and sorted them a discount on a bungalow i built them in the garden because the wife became pregnant and they had been sharing a room in a house of 7people; i made it affordable for them and let them pay weekly so we will not have any problems; the rental return to construction cost comes in at almost 40% PA so I'm still happy despite the fact I could get a another couple hundred quid a month open market.)

Rambling

Back to the point.

At some point there must be a problem when the costs of life rise so much that rent becomes unaffordable. People already sharing rooms in houses with multiple others will face problems; the people better jobs will have to take their places probably. A problem is regulation on room sizes and numbers of people per room or house. People will just have to illegally share over limits per house, live in garden buildings / sheds and things. Google London slums or you tube it, there have been a few documentaries about this happening already. Rather than trying to stop it on the stupid western human rights perspective bla bla bla they should view it as a natural effect of economy and policy, rather than kick poor people out of what little accommodation they can afford they should simply try to make sure it is reasonably safe and change planning policy to allow greater infill of already built up areas.

[chiang mai]

I see you haven't thought much at all about this subject then.

Maintaining the status quo until something happens that will be a catalyst for change, I have in mind a number of possible scenarios:

- a withdrawl of funds from the central London property market would require another market to become more attractive or the London market to become unattractive, a resurgence and increased confidence in Europe would do the trick;

- war, an oldie but goodie solution that always solves problems such as this, I rate this possibility quite highly;

- ditto a significant terrorist event in London or possibly a pandemic;

- an agreement on debt forgiveness, that has to be a very remote possibility;

But I'm not certain that we are in stagflation currently, it can be argued, despite the governements RPI and CPI numbers, that the UK is suffering from deflation, at least the non Central London property market is, most other price increase (which are quite small) can be attributed to QE and currency devaluation.

What I see from afar is a governement that is desparately "talking up" the property market and despite the flood of positive spin press releases the non-core London prices are broadly flat (see June Land Registry report) whilst many continue to fall (like many others I've been tracking twenty five properties.valued under 200k and none have sold in four months whilst the price of many has fallen, South and South West mainly).

So if the reality is currently deflation, the name of todays game continues to be, protect the UK banks/BS's mortgage books and that's what the January 14 governement mortgage lending programme is aimed at - unfortunately (for the governement) I see very low take up on that kind offer because despite theories to the contrary, not everyone in the UK is entirely dumb and reckless. And that leaves us where, unsure but still thinking?

[Naam]

this thread used to be a toenail curling, nightmare generating, coldsweat down the backs, endless global horror story listing. now a fistful of chaps discuss the most boring and irrelevant topics such as property values in Downing Street, the movements of some insignificant exotic currencies like the British Pound, the consistency of Mr Osborne's breakfast eggs and the cash owned by parents of foreign students.

where are the interesting yewtoob clips or Dyler Turd's blockshpots, e.g.

-JPMorgan is the majority shareholder of the Chinese Central Bank,

-al-Qaeda uses Szechuan ghost cities as terrorist training grounds,

-Angela Merkel exposed as Hitler's granddaughter,

-Thaivisa George now an executive member of the Bilderbergs,

-growing rice in Thailand more profitable than owning works of art,

-worthless fiat money next week worthless².

[jbrain]

this thread used to be a toenail curling, nightmare generating, coldsweat down the backs, endless global horror story listing. now a fistful of chaps discuss the most boring and irrelevant topics such as property values in Downing Street, the movements of some insignificant exotic currencies like the British Pound, the consistency of Mr Osborne's breakfast eggs and the cash owned by parents of foreign students.

where are the interesting yewtoob clips or Dyler Turd's blockshpots, e.g.

-JPMorgan is the majority shareholder of the Chinese Central Bank,

-al-Qaeda uses Szechuan ghost cities as terrorist training grounds,

-Angela Merkel exposed as Hitler's granddaughter,

-Thaivisa George now an executive member of the Bilderbergs,

-growing rice in Thailand more profitable than owning works of art,

-worthless fiat money next week worthless².

?

No kidding, I wasn't aware of anything of all this.

Since I consider you a reliable source, I gonne post all this news on my facebook page. You mind if I link to your page ?

[chiang mai]

MCCW and I apologise for staying on topic and hope that our little chatet does not upset the natural order of things, as soon as we're done we;ll revert to norm with a discussion on mating habits of wildabeast or similar.

[mccw]

CM - regards some falling asset prices; I don't think some falling prices = an actual deflation or that some rising = inflation. What we see is price discovery based on the reasoning of specific areas with in this stagflationary environment. No need to get too hung up on words and definitions though. Basically I'm calling it a general stagflationary environment because essential living costs are rising faster than wages while the broad GDP bumps around zero levels. Inside this new norm there will be winners and losers based on these fundamentals.

[mccw]

Many are always shrieking about interest rates rising; but I think the government / BoE knows a rise in rates will bring the whole house of cards down- so they would rather fire up QE to support the market to keep rates low. I think this was and will be the true reason for QE and we'll be looking at another 5, 10 or twenty years of near zero rates; only thing that would break it would be if inflation really got out of hand as in currency collapsing / loaf of bread costing a tenner and such; but if it got to this point I think its only be very briefly before some new system was announced, like a debt memorandum and a new £ , in this case other countries would likely go through a similar event , or maybe not; but either way the property assets should come through to the other side, unlike perhapse banks deposits, certain shares, bonds, and such.

[chiang mai]

Since the UK tends to emulate the US, albeit on a delayed basis, the latest Fed report suggests things may be getting better, GDP is increasing but employment, house prices and inflation remain low, as a consequence QE will be continued and the bank rate unchanged.

In the UK we're told that productivity and output are increasing, employment numbers are improved (I think this is sleight of hand and not really a fact), inflation is above par and property prices are increasing (this is also smoke and mirrors and not truly fact), as a consequence QE is halted and the bank rate unchanged.

What I get out of that comparison is that productivity and output is increasing but the source of it remains unclear:

Asset prices are not actually inflating to any meaningful degree and certainly not across the board - selective pockets are:

Unemployement and not changing the status quo seem to be key issues for both goverenements, if something is working even a little bit let's not screw with it and instead wait and see where it goes.

In the UK: the governement seems to think that employment and inflation are secondary to maintaining property prices and protecting the mortgage loan books of the banks, if property prices fall then UK banks will collapse - this would seem to support the idea of lower interest rates for longer whilst the mortgage books adjust hence ten years is not unrealistic in that respect. On the otherhand, if inflation is allowed to continue unchecked (by way of wage increases and subsequently an interest rate rise), civil unrest is probable.

Thirty seven out of forty economists see the MPC subscribing to further QE in the future - yet the Fed clearly would like to stop or at least scale back over time.

Hmm, lots of pieces of related data but no clear conclusion other than, something is slowly improving in the economy but it's not absolutely clear what or why!

[mccw]

"""Australia will post a budget deficit of $30.1 billion for the fiscal year, a gross miscalculation from its May estimate of $18 billion, but the government promises to stay on track.

Federal Treasurer Chris Bowen, speaking on the newly-released economic report, said Australia is undergoing economic transition and not a crisis. Bowen predicts weaker economic growth, increased unemployment, and more government debt on the horizon.

The forecast 2014-2015 deficit has surged to $24 billion, up from the previously $10.9 billion. The government has vowed to curb the deficit for the 2016-2017 period.

The report shows that Australias 2013-2014 deficit will be 1.9 percent of GDP, much lower than the US deficit of 5.4 percent of the economy, Japans 7 percent, or the euro zones 2.6 percent, according to April IMF data. """"

- RT

USA and Japan on this measure look like the real ones on for some serious future troubles.

[mccw]

Just on Q for what I / we were talking about CM; squeezing normal people's disposable income:

""""

Around nine million more adults are struggling with money compared to seven years ago, a report into the health of the nation's finances has found.

More than half (52%) of those surveyed are living on the edge, equating to 26 million people across the UK, Government-backed body the Money Advice Service (MAS) said.

Welfare Changes

This is a sharp increase from 35% of people who were having difficulty keeping up with bills the last time similar research was carried out in 2006.

""""""

- from Sky news app

[chiang mai]

Employment, inflation and interest rates are secondary, protecting the banks loans books is most important, and we'll not have civil unrest as long as house prices keep rising! Sad, very sad.

[mccw]

These averaged figures are fairly useless but here u go CM-

""House prices in July increased at their fastest rate in three years, according to new figures from Nationwide.

The monthly index shows the price of houses in the UK rose by 0.8% last month and were 3.9% higher compared to the same period last year.

The annual rise is the strongest since August 2010 and takes average prices to £170,825.

It comes as some lenders and estate agents say they have seen improvement in the housing market, helped by Government initiatives.""

[chiang mai]

That's pretty similar to what all the different reports have said for the past few months also, but when the last two Land Registry reports came out they showed that Central London was the only area with any real increases, all the other areas were either flat or down, I expect the next LR report to say the same thing - as you say, averaged numbers are as useful as chocolate fireguards.

[chiang mai]

Anyone for spin? We let you off of the Levenson enquiry so now you owe us (the minister said)

[chiang mai]

Here's the core problem:

"Most of the financial black hole - £120bn - is in the UK’s 25 biggest banks and building societies that each hold assets of at least £100bn".

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10220261/Bank-of-England-gives-lenders-six-years-to-plug-121bn-black-hole.html

Six years it is then!

[chiang mai]

And how's this for contradictory spin, both from the same paper no less:

"In the first quarter housing completions in England were down 8pc compared to the same period of 2012 and around 40pc below the average number of quarterly completions in 2007," he said.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10217918/Nationwide-warns-on-housing-supply-as-prices-jump-in-July.html

OK fine, but then this:

"This is the third month running that construction activity has expanded".- "While house building, which has received a boost from government initiatives to boost mortgage lending, led the way, commercial construction and civil engineering also showed signs of improvement. This is the first time in more than a year that all three sub-sectors expanded".

http://www.telegraph.co.uk/finance/economics/10218592/UK-construction-sector-bounces-back-with-growth-at-three-year-high.html

Joe Public can be forgiven for being confused when even the messengers don't know what the real message should be! I imagine a large barrel, supplied by the Ministry of Spin, in the editorial room of this newspaper where each day a pre-written article is extracted purely at random and inserted into the final copy, regardless of it's content, I wonder how big that barrel is.

[yoshiwara]

And how's this for contradictory spin, both from the same paper no less:

"In the first quarter housing completions in England were down 8pc compared to the same period of 2012 and around 40pc below the average number of quarterly completions in 2007," he said.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10217918/Nationwide-warns-on-housing-supply-as-prices-jump-in-July.html

OK fine, but then this:

"This is the third month running that construction activity has expanded".- "While house building, which has received a boost from government initiatives to boost mortgage lending, led the way, commercial construction and civil engineering also showed signs of improvement. This is the first time in more than a year that all three sub-sectors expanded".

http://www.telegraph.co.uk/finance/economics/10218592/UK-construction-sector-bounces-back-with-growth-at-three-year-high.html

Joe Public can be forgiven for being confused when even the messengers don't know what the real message should be! I imagine a large barrel, supplied by the Ministry of Spin, in the editorial room of this newspaper where each day a pre-written article is extracted purely at random and inserted into the final copy, regardless of it's content, I wonder how big that barrel is.

Joe Public reads the Telegraph?

[mccw]

Interesting bit from biz insider:

"""The US Federal Reserve has launched a blistering attack on the European Central Bank, calling for quantitative easing across the board to lift the eurozone fully out of its slump.

In a rare breach of central bank etiquette, a paper by the Richmond Fed said the ECB is hamstrung by institutional problems and acts on the mistaken premise that excess debt is the cause of the eurozone crisis when the real cause is the collapse of growth, which has, in turn, spawned a debt crisis that could have been avoided.

“The ECB lacks a coherent strategy for creating the monetary base required to sustain the money creation necessary for a growing economy,” said the paper, written in July by Robert Hetzel, the bank’s senior economist.

It called for direct action to buy “bundles” of small business loans, as well as “packages of government debt” across EMU states, including German Bunds. “The ECB will have to be clear that surplus countries will experience inflation above 2pc for extended periods of time,” and must be prepared to “explain to the German public” that this is desirable.

“Most important, the ECB needs to start by recognising that Europe’s problems are more than structural. It needs to stop using monetary policy as a lever for achieving structural changes and to end its contractionary policy.”

While the paper reflects the views of the author, there is no doubt that many Fed officials feel the same way.

The ECB brushed aside the advice on Thursday, leaving the main policy rate at 0.5pc. The decision to sit tight comes despite shrinking liquidity in the eurozone and a credit shock imported from the US, and amounts to “passive” tightening.

Mario Draghi, the ECB president, said there were signs of returning confidence after six quarters of recession, pointing to “gradual recovery in economic activity in the remaining part of the year and in 2014”.

The ECB has so far resisted calls from the International Monetary Fund and the OECD for more stimulus to ensure that recovery reaches “escape velocity”.

Long-term borrowing costs have jumped by more than 60 basis points across the eurozone since the Fed shifted gears in May and began to signal an early end to QE, aggravating the credit crunch across southern Europe.

The IMF warned last week that the tapering of bond purchases by the Fed risks reigniting the EMU debt crisis. “Recovery remains elusive,” it said.

The ECB has so far tried to counter the Fed shock by adopting a new policy of “forward guidance” and promising to keep rates low for a long time, but words alone have had little effect. Mr Draghi said the rise in yields is “unwarranted” and will be watched closely, a hint of future rate cuts if trouble persists, but it is unclear whether the German-led bloc of hawks in the ECB’s Governing Council is willing to go that far.

He may have undercut the dovish message by playing down any danger of deflation, describing the negative inflation rates in Spain, Greece and Cyprus (stripping out tax rises) as “one-off effects” or welcome adjustments in prices. “We don’t see self-fulfilling expectations of broad-based price decreases in any euro area country,” he said.

Jacques Cailloux from Nomura said the biggest worry is repayment of €1 trillion in bank loans under the ECB’s long-term lending programme. The banks have handed back roughly 60pc of the money, effectively draining liquidity from the financial system. While this is a healthy sign in one sense, it has automatically forced up borrowing costs such as EONIA rates.

“The ECB should be cutting rates to zero to offset this. We have had some improvement in confidence, and localised credit easing in some countries has helped, but it is a very open question whether this is a sustainable recovery,” he said.

The eurozone’s broad M3 money has been flat since October, far short of the ECB’s 4.5pc growth target. Business credit contracted at an accelerating rate of 1.6pc in June. Retail sales fell in both Germany and France in June, while the latest WDMA reading for Germany machinery orders showed a 7.6pc fall in foreign orders.

Optimists have homed in on the spate of good news from PMI confidence surveys, including the latest rise in the eurozone manufacturing PMI to a two-year high of 50.3. Even Italy has jumped above the “boom-bust” line of 50 as Rome pays off €40bn in arrears to contractors, a back-door form of stimulus.

Neil Mellor from BNY Mellon said the jump in PMI indices can be misleading after a long slump. “You have to take these with a pinch of salt. Europe is bumping along the bottom and there is nothing in sight to kick-start growth momentum. At the end of the day, yields in Italy are 4.4pc and nominal GDP is contracting, and that means debt dynamics are still unsustainable,” he said."""

Nice little dose of reality at the end there

[midas]

A good interview covering many topics, including China and regional war based on the prediction that Israel will attack Syria once again (on the basis that Israel didn't destroy all the missiles last time) and this time Syria will be forced to retaliate against Israel, together with other neighbours

https://www.youtube.com/watch?v=3MJs_fRE30U&feature=player_embedded

Edited August 3, 2013 by midas

[yoshiwara]

this thread used to be a toenail curling, nightmare generating, coldsweat down the backs, endless global horror story listing. now a fistful of chaps discuss the most boring and irrelevant topics such as property values in Downing Street, the movements of some insignificant exotic currencies like the British Pound, the consistency of Mr Osborne's breakfast eggs and the cash owned by parents of foreign students.

where are the interesting yewtoob clips or Dyler Turd's blockshpots, e.g.

-JPMorgan is the majority shareholder of the Chinese Central Bank,

-al-Qaeda uses Szechuan ghost cities as terrorist training grounds,

-Angela Merkel exposed as Hitler's granddaughter,

-Thaivisa George now an executive member of the Bilderbergs,

-growing rice in Thailand more profitable than owning works of art,

-worthless fiat money next week worthless².

you forgot Syria. Apparently now the epicentre of the financial crisis. Please keep up!

[chiang mai]

A good interview covering many topics, including China and regional war based on the prediction that Israel will attack Syria once again (on the basis that Israel didn't destroy all the missiles last time) and this time Syria will be forced to retaliate against Israel, together with other neighbours

https://www.youtube.com/watch?v=3MJs_fRE30U&feature=player_embedded

Have to say this is very high on my list of probable game change options, it kills so many birds with one stone (no pun intended) plus it's not in the US/UK/EU back yard.

Edited August 4, 2013 by chiang mai

[midas]

this thread used to be a toenail curling, nightmare generating, coldsweat down the backs, endless global horror story listing. now a fistful of chaps discuss the most boring and irrelevant topics such as property values in Downing Street, the movements of some insignificant exotic currencies like the British Pound, the consistency of Mr Osborne's breakfast eggs and the cash owned by parents of foreign students.

where are the interesting yewtoob clips or Dyler Turd's blockshpots, e.g.

-JPMorgan is the majority shareholder of the Chinese Central Bank,

-al-Qaeda uses Szechuan ghost cities as terrorist training grounds,

-Angela Merkel exposed as Hitler's granddaughter,

-Thaivisa George now an executive member of the Bilderbergs,

-growing rice in Thailand more profitable than owning works of art,

-worthless fiat money next week worthless².

you forgot Syria. Apparently now the epicentre of the financial crisis. Please keep up!

Yes well if you can't see the link between a regional war and the exacerbation of the financial crisis then you must be even dumber than I thought before

[NeverSure]

I see you haven't thought much at all about this subject then.

Maintaining the status quo until something happens that will be a catalyst for change, I have in mind a number of possible scenarios:

- a withdrawl of funds from the central London property market would require another market to become more attractive or the London market to become unattractive, a resurgence and increased confidence in Europe would do the trick;

- war, an oldie but goodie solution that always solves problems such as this, I rate this possibility quite highly;

- ditto a significant terrorist event in London or possibly a pandemic;

- an agreement on debt forgiveness, that has to be a very remote possibility;

But I'm not certain that we are in stagflation currently, it can be argued, despite the governements RPI and CPI numbers, that the UK is suffering from deflation, at least the non Central London property market is, most other price increase (which are quite small) can be attributed to QE and currency devaluation.

What I see from afar is a governement that is desparately "talking up" the property market and despite the flood of positive spin press releases the non-core London prices are broadly flat (see June Land Registry report) whilst many continue to fall (like many others I've been tracking twenty five properties.valued under 200k and none have sold in four months whilst the price of many has fallen, South and South West mainly).

So if the reality is currently deflation, the name of todays game continues to be, protect the UK banks/BS's mortgage books and that's what the January 14 governement mortgage lending programme is aimed at - unfortunately (for the governement) I see very low take up on that kind offer because despite theories to the contrary, not everyone in the UK is entirely dumb and reckless. And that leaves us where, unsure but still thinking?

Very nice and thoughtful post.

I don't know the British real estate market at all other than what I read. But I did draw some theories or whatever you call them from the US housing boom and then bust.

1. The population gets a perception that "real estate will go up" or "real estate will go down" and then there's a self-fulfilling prophecy.

2. Right now I believe the one single thing that's stopping the US market from recovering sooner is this doubt. After all, a lot of people got burned.

3. Right now you could buy a new or used home in the US for substantially less than replacement cost. This of course slows building which is normally a significant part of GDP, and pays a lot of taxes. Still, as inflation continues to drive up the cost of building new, people are reluctant to buy existing homes at fire-sale prices.It's improving, but slowly.

4. Just before the bust, "everyone" believed that housing prices would always rise and some people were buying multiple homes on speculation. It was that bad.

5. The boom was created IMHO by a government that believed that everyone should be able to buy a home, and made financing ridiculously easy and there was even a lot of fraud in applications.

cliffnotes version: Momentum in either direction, once begun, is hard to stop regardless of what common sense would should say. But when it stops, it's abrupt and hard to reverse. Government interference supplanting the laws of supply and demand didn't work. The people have to be willing, and the control must be supply and demand both for building and for prices, and not government.