Comments on: That was the week that was

By: Colin Hart

Colin Hart — Sun, 07 Sep 2008 09:34:12 +0000

What causes inflation? Too much money chasing too few goods.

Why did house prices soar? There was too much money. And it was funny money now depreciating even further.

Whose fault? The banks – central, investment and retail who between them expanded the supply of money and debased the coinage.

Who pays now? All of us.

The last laugh? Gordon's little stamp duty giveaway will be paid for by cutting the budgets of the Regional Development Agencies.

By: Stuart Fairney

Stuart Fairney — Sun, 07 Sep 2008 07:27:19 +0000

Dubai does not artificially restrict the supply of new housing, or anything else for that matter. Thus, fantastic, affordable homes. Rather better than having the local council force you into a cramped expensive flat by refusing consent for sufficient alternatives I suggest.

Next time you see a protest group a la "No new homes in wherever" stick around, about ten minutes later they start moaning about unaffordable house prices without seeing the absurdity and the inherent contradiction of their position.

By: Stuart Fairney

Stuart Fairney — Sun, 07 Sep 2008 07:22:08 +0000

In fact it would have been better to allow housebuilders to meet demand rather than restricting supplies by stupidly restrictive planning policies which in part, created the inflationary pressures on house prices.

As always, it all comes down to the fundamantals of supply not being allowed to expand to meet demand. Can anyone be surprised when prices rise under such circumstances?

By: PT

PT — Sun, 07 Sep 2008 03:33:13 +0000

So what's your solution to the crisis John? Keeping prices high will have dire social and economic consequences, so getting the correction over with as quickly as possible with the collateral of repossessions and negative equity is the only answer. We had a chance to deflate the bubble rather more gently in 2005, but no, political thinking meant they had to keep the party going and simply pretend there's no danger ahead.

I'm disappointed you subscribe to those la la land economics, John. Not what I expected.
REPLY:I have set out how I would achieve greater stability of prices through proper monetary management, which a government and Central Bank has to do. It is just that we have lived through six years of bad money management, inflating too much and now deflating too much.

By: John

John — Sat, 06 Sep 2008 23:28:11 +0000

Just in case Gordon Brown is in any doubt how bad things have become for the motor trade and car owners as a result of Government Taxation and the recession he should hear about this.

A motorist with a 3 year old Mercedes ML450 enquired at the local Mercedes dealership about the trade in value of his car against the cost of a new ML.

The dealer offered him just £1,000 for it…

True story.

By: Promise of Avalon

Promise of Avalon — Sat, 06 Sep 2008 22:24:39 +0000

Surely it is all pretty academic whether we want house prices to stay up or go down. The market will decide. House prices inflated well above the 'natural' market rate because of massive injections of money into the housing market through loose credit. Now that ludicrous credit has disappeared house prices will fall back to the equilibrium level.

House prices are falling because the market has bitten back. End of story. We can express approval or disappointment but it will not affect the price.

By: mart

mart — Sat, 06 Sep 2008 21:47:42 +0000

Dear John, house prices will find their level. I agree the government ought to have provided economic measures to prevent the boom. But it's not possible to go back and change things now.

Broadly speaking, this is a time when private individuals and the government (one can only hope) are paying back loans.

Some private individuals have borrowed and spent too much. Some have not. The government has very evidently spends too much and seems unrepentant.

Anyone (including the government) who has borrowed too much should be encouraged to spend a while paying it back and get themselves back on track.

So, IMHO, lowering interest rates now would get the inflation and the borrowing going again, just when we need it to be at a much *lower* level.

When is the time we need to have borrowing at a low? When we're heading into a recession. We are heading into a recession now, yet we (both private and public, remember) are indebted.

The principal lever the government should pull is not interest rates, but tax levels. Lower the taxes, reduce the spending.

By: mike stallard

mike stallard — Sat, 06 Sep 2008 20:22:56 +0000

I can see where most of the above people are coming from.
Where house prices make a huge difference, of course, if for the people who are (like ALL my 4 children and their families!) thinkning of moving abroad where, starting at France, house prices are much more compatible with what people on ordinary incomes can afford.
Actually, come to think of it, why are English prices so high?
Honestly, is this country that much better than, say France of Spain, Dubai or Australia?

By: Robert

Robert — Sat, 06 Sep 2008 19:03:13 +0000

John,
Firstly, if one has been profligate and irresponsible then you have to suffer the consequences! Secondly, what about the level of our savings ratio as a nation? We need to get back to a more sensible attitude to both debt and how we fund out 'lifestyle'. The phrase of living within your means may just become more meaningful and relevant to people. Finally John, as I have posted before, it sad that people will be 'hurt' by the recession, but frankly many people have been as irresponsible as the current government and only have themselves to blame. Financial discpline is needed both in the personnal sector and by government. I wonder whether the conservative 'government in waiting' has the 'guts' to do what is necessary to revitalise and unclog our stultified economy. I suspect not, and just like on the EU issue, the Tories will yet again fall at the first hurdle. I would love to be wrong for our country's sake, but my instinct tells me I am not.

By: Robert

Robert — Sat, 06 Sep 2008 19:00:16 +0000

John,
Firstly, if one has been profligate and irresponsible then you have to suffer theconsequences! Secondly, what about the level of our savings ratio as a nation? We need to get back to a more sensible attitude to both debt and how we fund out 'lifestyle'. The phrase of living within your means may jst become meaningful to people. Finally, John as I have posted before, it sad that people will be 'hurt' by the recession, but frankly many people have been as irresponsible as the government and only have themselves to blame. Financial discpline is needed both in the personnal sector and by government. I wonder whether the conservative government in waiting has the 'guts' to do what is necessary to revitalise and unclog our stultified economy. I suspect not, and just like on the EU issue the Tories will yet again fall at the first hurdle. I would love to be wrong, but my instinct tells me I am not.