Mortgage rates / interest etc

[johna.clements]

There are ~500k second homes in the UK. Of these ~200k (39%) are holiday homes or weekend cottages.

Liberating these would add ~1% to the available UK housing stock. The impact would be rather less than suggested by the numbers as the geographic distribution of holiday homes is unlikely to be well aligned to the availability of jobs, schools, public transport etc.

The other 60% are a mix of rented as holiday homes (tourist industry), for future retirement, living or working away from main residence. There may be rather less of a case for "liberating" these as they already serve a socially or economically useful function.

As usual dogma dominates rational analysis.

You are correct about the distribution of second homes. But that causes its own problems with some places having no one living them for half the year. And the people who are needed to work there being priced out.

 

[julianf]

It's sad to see house price increase being blamed on "the breakdown of the family unit" etc when there is accepted economic thinking that explains things on a somwhat more sophisticated level.

After 2008 we saw significant quantitative easing. For those who done know what this is, the bottom line is that it increases the money supply in the economy.

However the injection is at the higher wealth levels.

An undisputed effect of QE is that it bolsters the asset market.

What's the "asset market"? It's a fancy way of saying stuff that's considered an asset.

So, after 2008 whilst half the nation was experiencing the effects of austerity, we also saw massive increases in the value of, say, classic cars. And house prices.

I mean, it happened, it's accepted economics. I'm sure someone here will disagree but that's just how it is.


So why did the hose prices go up, at the same time as austerity?

Because QE does not inject the cash into the economy evenly. It injects it at the wealthy end.

Wealthy people generally "consume" as much as they want to anyway, so additional cash does not increase their consumption in the same way as it would with someone at the lower end of the wealth scale.

So what do they do with the additional money? They invest it. Supposedly in "beneficial to society" things, if you're a supply side economics advocate, but also, absolutely irrefutably, in other "stuff" that are considered assets.

Like classic cars, antique vases. And houses.


So, after 2008, when half the population was feeling the pain of the banking errors, the other half (well, not half...) were busy driving up the price of housing stock.


But, yes, blame it on people getting divorced if you like. That probably fits with prejudice better than understanding one of the generally accepted results of QE.

 

[julianf]

As a follow up,

I mentioned previously that the government injected about £600b into the money supply over COVID.

I mentioned that, averaged out, this was about £15k per person, and, if you didn't have £15k per person more in your family unit, then someone else had your share.

I understand this was difficult to grasp. I likened cash to water - it may evaporate (get spent) but ultimately still exists... Somwhere...


(excluding bonfires)


Someone, I can't remember who, said about people spending their COVID grants and that was their "fault" which was somewhat missing the point... But still - like water in the water cycle that money exists. Somwhere.


And the reality is that it's at the high end of the wealth spectrum.


So we have the cost of living crisis with not just the "workshy scum" (and nurses, civil servants, etc. etc) feeling the "pinch" but well into the middle class too.

Keep a good eye on house prices. I know some people find it hard to understand, because "they [the other people] spent their COVID grants" but that money still exists...

And my bet is it's now looking for a home in the asset market.

 

[Jacob]

There are ~500k second homes in the UK. Of these ~200k (39%) are holiday homes or weekend cottages.

Liberating these would add ~1% to the available UK housing stock. The impact would be rather less than suggested by the numbers as the geographic distribution of holiday homes is unlikely to be well aligned to the availability of jobs, schools, public transport etc.

2nd homes etc actually cause deterioration in local services, schools, shops etc. Towns and villages become depopulated for various lengths of time. This is very noticeable here in the Peak District, empty villages and hamlets as the area becomes a playground for the better off or for transient holiday makers, squeezing out the locals

The other 60% are a mix of rented as holiday homes (tourist industry), for future retirement, living or working away from main residence. There may be rather less of a case for "liberating" these as they already serve a socially or economically useful function.

Arguable. Housing the homeless and the inadequately housed should take priority and be regarded as an emergency

As usual dogma dominates rational analysis.

Why not try rational analysis then, instead of grasping at straws? You can do it!

 

[Blackswanwood]

It's sad to see house price increase being blamed on "the breakdown of the family unit" etc when there is accepted economic thinking that explains things on a somwhat more sophisticated level.

After 2008 we saw significant quantitative easing. For those who done know what this is, the bottom line is that it increases the money supply in the economy.

However the injection is at the higher wealth levels.

An undisputed effect of QE is that it bolsters the asset market.

What's the "asset market"? It's a fancy way of saying stuff that's considered an asset.

So, after 2008 whilst half the nation was experiencing the effects of austerity, we also saw massive increases in the value of, say, classic cars. And house prices.

I mean, it happened, it's accepted economics. I'm sure someone here will disagree but that's just how it is.


So why did the hose prices go up, at the same time as austerity?

Because QE does not inject the cash into the economy evenly. It injects it at the wealthy end.

Wealthy people generally "consume" as much as they want to anyway, so additional cash does not increase their consumption in the same way as it would with someone at the lower end of the wealth scale.

So what do they do with the additional money? They invest it. Supposedly in "beneficial to society" things, if you're a supply side economics advocate, but also, absolutely irrefutably, in other "stuff" that are considered assets.

Like classic cars, antique vases. And houses.


So, after 2008, when half the population was feeling the pain of the banking errors, the other half (well, not half...) were busy driving up the price of housing stock.


But, yes, blame it on people getting divorced if you like. That probably fits with prejudice better than understanding one of the generally accepted results of QE.

Yes, that is undoubtedly a factor. It goes alongside the fact that the divorce rate has increased and what were the social norms of the family unit having changed. There are many factors that makes the housing market what it is.

Some of the money created has accumulated in pension funds (both via increased contributions and dividends resulting from more consumer spending). Interestingly some pension providers are investing it back in the housing market - Legal & General are a good example of this. (I'm not arguing that's a solution to the overall problem or that it justifies how QE has been managed).

 

[Jacob]

...... Interestingly some pension providers are investing it back in the housing market - Legal & General are a good example of this. .....

A simple example of the failure of QE - money in the wrong hands pushing up house prices.
People with surplus money buy assets and push up prices. OK perhaps if it's traditional; art work, silly cars or jewellery which nobody needs, but not if land or housing which everybody needs
To make economies work for everybody money has to circulate - to be moved from the well-off where it is not needed, to where it is needed.
This is the Gary Stevenson message - at least I think it is I've got another hour to listen to yet!
It's also what you learn from the Monopoly board - which was designed to show exactly this. History of Monopoly - Wikipedia
Economics is simpler than you think! But not as simple as Liz Truss thinks.

 

[Jameshow]

As a follow up,

I mentioned previously that the government injected about £600b into the money supply over COVID.

I mentioned that, averaged out, this was about £15k per person, and, if you didn't have £15k per person more in your family unit, then someone else had your share.

I understand this was difficult to grasp. I likened cash to water - it may evaporate (get spent) but ultimately still exists... Somwhere...


(excluding bonfires)


Someone, I can't remember who, said about people spending their COVID grants and that was their "fault" which was somewhat missing the point... But still - like water in the water cycle that money exists. Somwhere.


And the reality is that it's at the high end of the wealth spectrum.


So we have the cost of living crisis with not just the "workshy scum" (and nurses, civil servants, etc. etc) feeling the "pinch" but well into the middle class too.

Keep a good eye on house prices. I know some people find it hard to understand, because "they [the other people] spent their COVID grants" but that money still exists...

And my bet is it's now looking for a home in the asset market.

I think your getting mixed up...

The covid cash wasn't a hand out in top of your usual income, it was instead of your usual income which you weren't able to earn. Therefore those people in furlough were no better off than anyone else. It was the companies that too the hit in productivity.

Fraud cases excepted.

 

[julianf]

I think your getting mixed up...

The covid cash wasn't a hand out in top of your usual income, it was instead of your usual income which you weren't able to earn. Therefore those people in furlough were no better off than anyone else. It was the companies that too the hit in productivity.

Fraud cases excepted.

No, really, I'm not getting mixed up at all. I'll explain again using different terms and hopefully you'll be able to understand -

If I have 10 people in a room and I give each of them 10 marbles, then they each have 10 marbles, right?

But what if all the marbles go into a bucket, and then people take out handfuls until there are none left, and then they count how many they have.

Evreyone has 10 still, right?

No... Some people have 6 and some people have 18...

You know that, unless you have 10 marbles, someone else has your share of those marbles given out.

I'm unsure why I have to keep saying this. I've used the water cycle analogy before, and now I'm onto children's toys....


That £600b was a cash injection into the economy. Someone came along with a whole load of marbles and dumped them into the population.

Regardless of who did what then, what those marbles were for, and who just "spent their COVID grant" or whatever, if you don't have your marbles, someone else does.

That's the simple way of looking at it.

We can discuss how the money was injected or whatever, but the long and the short of it is that, unless you have, in your account, be it as cash or assets, an ADDITIONAL 10 "marbles" per person in your household, then those marbles are somwhere else.
With someone else.

 

[Jameshow]

No, really, I'm not getting mixed up at all. I'll explain again using different terms and hopefully you'll be able to understand -

If I have 10 people in a room and I give each of them 10 marbles, then they each have 10 marbles, right?

But what if all the marbles go into a bucket, and then people take out handfuls until there are none left, and then they count how many they have.

Evreyone has 10 still, right?

No... Some people have 6 and some people have 18...

You know that, unless you have 10 marbles, someone else has your share of those marbles given out.

I'm unsure why I have to keep saying this. I've used the water cycle analogy before, and now I'm onto children's toys....


That £600b was a cash injection into the economy. Someone came along with a whole load of marbles and dumped them into the population.

Regardless of who did what then, what those marbles were for, and who just "spent their COVID grant" or whatever, if you don't have your marbles, someone else does.

That's the simple way of looking at it.

We can discuss how the money was injected or whatever, but the long and the short of it is that, unless you have, in your account, be it as cash or assets, an ADDITIONAL 10 "marbles" per person in your household, then those marbles are somwhere else.
With someone else.

No because marbles were taken out due to the lack of productivity in factories, offices and building sites around the country. The only thing that did change was there was a load of debt the gov created.

Which was done to stop companies going under, people becoming homeless, people starving etc etc.

 

[julianf]

Yes, that is undoubtedly a factor. It goes alongside the fact that the divorce rate has increased and what were the social norms of the family unit having changed. There are many factors that makes the housing market what it is.

Some of the money created has accumulated in pension funds (both via increased contributions and dividends resulting from more consumer spending). Interestingly some pension providers are investing it back in the housing market - Legal & General are a good example of this. (I'm not arguing that's a solution to the overall problem or that it justifies how QE has been managed).

Two points i'd like to reply to -

You've gone back to divorce -

Me spitting out the window if there's a flood is a "factor", but I wouldn't try and use it as a cause of the flood.

This is one that, really, I don't need to try and convince you of though. QE correlated with a massive increase in asset prices. If you think that correlation should be talked about in terms of the divorce rate, then so be it.
But I think you may be trying to fight against the tide.


The second point -

You mention pension funds buying up housing stock. Just to be sure, you realise thats exactly what I was saying, right?

 

[julianf]

No because marbles were taken out due to the lack of productivity in factories, offices and building sites around the country. The only thing that did change was there was a load of debt the gov created.

Which was done to stop companies going under, people becoming homeless, people starving etc etc.

Where did the marbles go?

Did someone have a bonfire and burn all the cash?


You are using economic output interchangeably with money supply. They're not the same.

 

[Jameshow]

Of course they are not the same....but the factory / office output dropped yet the payroll remained the same and thus the employees had the same money in thier bank acc..

 

[D_W]

In ordinary language, an average is a single number taken as representative of a list of numbers, usually the sum of the numbers divided by how many numbers are in the list (the arithmetic mean). For example, the average of the numbers 2, 3, 4, 7, and 9 (summing to 25) is 5. Depending on the context, an average might be another statistic such as the median, or mode. For example, the average personal income is often given as the median—the number below which are 50% of personal incomes and above which are 50% of personal incomes—because the mean would be misleadingly high by including personal incomes from a few billionaires.

There is no such thing as redefining mathematical terms and calling it ordinary language. It's not subjective.

 

[Terry - Somerset]

Money is merely a means of exchange enabling trade within a complex economy and society. In its absence we would be back to barter - as far as I know this only works well in small self contained communities with basic needs.

Most economies fail to deliver all desires - hopefully the deficiencies are aspirational not essential.

In a very simple economic model:

• output (the aggregate of goods and services) remains stable
• putting more money into the economy (borrowing or printing) initially increases demand
• more money is chasing the same quantity of goods and services
• prices go up to match the money available - inflation

This is simplistic as it ignores other pressures - international trade, exchange rates, circumstances (war, pandemics etc), savings ratios, interest rates etc. But for this purpose it suffices.

In (rightly) providing support during the pandemic the UK borrowed or printed ~£400bn and output fell. To a great extent these actions were mirrored across the international community - financial support provided and output reduced.

There can only be one of two consequences:

• reduced future consumption allowing loans to be repaid
• inflation as cash has been created with no increase in output

Politically the former is unattractive - increased taxes and reduced public expenditure. Truss tried to avoid this by stimulating growth - an experiment universally damned by the financial markets.

Sunak and Hunt seem to be gearing up to try the more tax/less spend approach - the financial markets seem encouraged and as a "fiscal conservative" I agree.

However inflation has its part to play in resolution of the pandemic loans - the real value of loans which need to be repaid diminishes (as a proportion of GDP) as does the real value of any cash assets held (bank accounts, government bonds etc).

In the earlier posts the marbles are the output of the economy. The pandemic reduced the 10 marbles the game started with to 8 as output fell and some consumed. There are no extra marbles hiding.

 

[John Brown]

There is no such thing as redefining mathematical terms and calling it ordinary language. It's not subjective.

Take it up with the dictionary compilers, who will probably respond by saying that they reflect common usage.

 

[johna.clements]

Where did the marbles go?

Did someone have a bonfire and burn all the cash?


You are using economic output interchangeably with money supply. They're not the same.

Your marbles in a bucket allegory is incorrect.

There was more than one bucket. You are asking why you did get marbles from another bucket.

Many people got marbles from the bucket set up for people whose jobs were closed or disrupted by covid.

Companies that were forced to close had their own bucket.

Money was used to buy PPE, set up vaccination stations etc from a different bucket.


If everybody had the same share of all the different buckets how would that work. Would you give some of your marbles to your employer so that they can pay their bills when they could not trade. What about the local pub. Would you give some of your marbles to the local doctors and hospital so that they can swap them for PPE.

All the marbles were not in the same bucket.

Now if you want to talk about investigation of fraud and mismagement of the marbles and the different buckets I would support that.

 

[Jacob]

Finally got to the end. 1hr 32minutes.
He's brilliant, covers lots of ground and comes to a devastating conclusion.
He says we must organise - there's far more of us than them.
He covers all the issues raised on this thread and a lot more.
https://novaramedia.com/2022/10/09/...ermanently-poorer-aaron-meets-gary-stevenson/ Now having a look at this https://www.youtube.com/c/garyseconomics

 

[johna.clements]

There is no such thing as redefining mathematical terms and calling it ordinary language. It's not subjective.

In the UK, this is a UK forum, average a general term for mean, median and mode.

Here is an extract from A level Maths revision notes. A levels are taken at 18 and form the basis of University selection.

"What are mean, median and mode?​

• Mean, median and mode are measures of location
  • A measure of location gives information about where data is in the number system
  • Mean, median and mode are measures of central tendency
  • They describe where the centre of the data is
• They are all types of averages
  • In Statistics it is important to be specific about which average you are referring to"

https://www.savemyexams.co.uk/a-lev...al-measures/2-1-1-basic-statistical-measures/
You will note that importance is placed telling people which average you are using.

Obviously people will choose a miss leading type of average and then may be unwilling to tell people which type they used as it will undermine their argument.

 

[Spectric]

In the UK, this is a UK forum,

It may have UK in the name but it is not a UK forum, it is global and anyone is welcome that has an interest in wood. To this end we have to accept there will be variations on the meaning of various words and terms as we all know from our American colleagues.

 

[Jacob]

Money is merely a means of exchange enabling trade within a complex economy and society. In its absence we would be back to barter - as far as I know this only works well in small self contained communities with basic needs.
........

The problem is that money itself has become a commodity and is traded and betted upon in the financial market, barely connected to the real world.
It connects to the real world when the rich convert their money into assets, which may deprive others of life's necessities. Housing being number one; a desirable asset for the rich but also a necessity of life for everybody.
Beautifully explained by Gary The Plan Is to Make You Permanently Poorer | Aaron Meets Gary Stevenson | Novara Media