It is Obvious

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Archive for August, 2013

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Posted by chrisrick13 on August 28, 2013

It is obvious: a change is a good as a rest

I’ve been on holiday.  Though with no job I find it difficult to distinguish when a holiday starts and ends.  I have been watching a little of the economy in Oz but mainly watching The Wiggles with a 1-year-old.  Thereby upping the information content of my viewing.  Australia has just cut interest rates.  They have a nice housing bubble that is deflating quite..nicely.  The Chinese have decided that they no longer need most of Australia to be moved to China.  In a nice repeat of the rest of the world, Crafty Coyote is running in mid-air off the edge of the cliff in Oz and is just starting to look down.  They have an election next month – at least there will be no more economic engineering of a win in the election by those in power.

I arrive back in the UK and discover that house prices are on the move upwards.  Shaun Richards spoke of his boss saying of bubbles and their deflation that: we always expect it too early.

House prices are down from their peak in real terms by 25% but that is being eroded by recent ‘gains’.  I suppose they are gains but only if you started a long time ago.  After a 25% reduction you will be a long time before you consider them a gain.

In the meantime the government is creating conditions where people with no possibility of buying a house are being lent money cheaply so that they can afford to buy a house.  Northern Rock was doing a similar thing with their 125% mortgages only a few years ago.

The net worth of the UK was recently quoted are £7trillion and a bit, of which over £4tr was in houses or property.  If the UK was to put itself up for sale tomorrow I bet you would not get anywhere close to £4tr.  That won’t happen but what if there were no buyers?  A lot of people would simply not sell.  A lot of people would have no choice and many of those would be people who just walked away from their house.  Then all the banks that you and I own and all those government guarantees that you and I are backing will need some money off…you and I.

So the bubble has not burst (well only 25%)  yet because the government is busy on the hand pump.  So, expect it.  The only thing wrong is that we are expecting it too soon.

I read the writing of a genius earlier in the week.  He said that if there is an economic collapse and for example hyperinflation there were ways around it.  Long before a loaf of bread got to £100 other ways of paying would be developed.  Maybe another currency, cigarettes, or simple barter.  His advice was to acquire useful skills that could be swapped for bread or anything.  Invest in yourself!  He must be a genius as he agrees with me.

It is obvious: a change is a good as a rest so a rest must be as good as a change?

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