It is Obvious

Chris Rick has got altogether too much to say

Archive for November, 2017

There is no housing shortage

Posted by chrisrick13 on November 24, 2017

It is obvious: I have lived in a hole in the ground

If I am right then we need lots of new houses for the doubling of population needed to keep GDP on its 2% exponential growth so we can pay debt out of future earnings via the bond market.

I am wrong, because the OBR have said it will be 1.5%, it is not enough to keep this economy running. The only bright spot is that the OBR is never right. Perhaps they will be wrong in the right direction this time!

(Debt at 90% of GDP is the point at which an economy enters a spiral of increasing debt and reduced ability to pay it off. The OBR has ours peaking at 89%. Lets hope this is one they do get right…they won’t.)

I wonder that there is a housing shortage. There are a few people living on the streets but not many. So everyone is somewhere under a roof. By definition there is enough housing. The problem is that it is often not the roof that the person wants to live under. Could be for many of many reasons.  I read today that there are many empty houses.

At that point I could enter the debate on why houses cost so much to buy. I’m assuming that rents also match house ownership costs because part of the cost side of rent is the interest on the money that instead of being invested in a house could be invested elsewhere…at 0.5%

The elephant in the room is that if house prices were suddenly to drop by (say) 50% then many people would find themselves in houses with loans on the houses worth much more than the house itself. Many would walk away from the debt and the banks would go bust. We might also have riots in the streets. There would be so many doing this that many might walk away and then squat in a newly empty house with plenty to choose from. Perhaps swap with their neighbours. Everyone would still have a roof but many would not be paying anything for it! This would turn around finances for many families…and the rest of us!

What interests me is building houses for the population needed to keep us afloat economically or simply to meet the shortage. Where will these houses be built? People can move around and do it very well in a mainly rented house market. It is not easy to move houses. Suppose that you build 100,000 houses in Birmingham but nobody wants to live in them. Post the war there was a thriving car manufacturing industry. It is not there now. Same for shipbuilding in Newcastle. It carries through to computer industry with ICL and not so far back to DEC. Big manufacturers to the west of London that no longer exist. The jobs and the people no longer needed in those locations.  You cannot just build houses.  A lot of other things needing building at the same time: hospitals, schools, prisons (lots of those).

So I am happy that someone will build 300,000 houses next year, but tell me where and why before you build one. (And we need 600,000 of them each year at least.)

It is obvious: I have lived in a hole in the ground – and it’s not nice.

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My house needs to be my castle

Posted by chrisrick13 on November 7, 2017

It is obvious: we’re doomed

House prices are a bubble.
They are too high from any perspective.
They are held where they are by us, the UK population who want and need house prices high. They are our wealth. At least that is the delusion that most of us are under.
The government wants them high. If they fall then the banks will go bust. A lot of people will go into negative equity and walk away leaving the banks in a mess…and the banks are too big to fail.
For the same bunch of reasons interest rates will be kept low. If not a lot of JAMS will walk away from mortgages.
The government would like high inflation to inflate away debt. But high inflation kills the JAMS as wages will not keep pace.
High inflation demands high interest rates. Kills the JAMS – they have no spare cash.  Kills us all as the government rolls over into high-priced debt.
If there is inflation then bond yields go up and the government rolls over into a lot of high-priced debt. It will default at some point. Then we look like Argentina or Iceland or even Greece.
If everyone sells the pound then it is only defended with higher interest rates.  Kills the JAMS.

Therefore the government will keep things just as they are for as long as they can. Maybe they see that they can manage up to a Labour victory in the next election (can’t believe I just said that).

(Step aside for a moment. Can you think what that nice Mr Corbyn as PM would do to the country? On Monday he talked about a national bank of reconstruction (or some such). It will spend on infrastructure and the like. It will invest in this country he said. It will borrow £1tn and spend it in short order. Who will service the loan and when will it be repaid? He might be good for us as he will bring on the reset and we need that as fast as possible. In the meantime he will put money into the NHS of which I will be big customer and he will protect pensions of which I will be relying on two.)

I think that house prices up will be kept up using any trick available. They will stay up for far longer than you think possible.

That means at least a couple more years that a house owner can hang on for and then find a bigger fool to sell to.

So there is a window to move to the Outer Hebrides (that will soon become a sub-tropical paradise) and realise a lot of cash. Keep some of it under your mattress as paper – cash will be king – but only for a short while. Put some into physical gold that you arrange to take possession of. Spread the rest into other countries and other investment types. Buy beans and shotguns. Go on a Bear Grylls survival course. Make a lot of friends in your neighbourhood.

Not very appealing. I think I’ll just hang on, put my fingers in my ears, close my eyes and sing “La-la-la” very loud.

It is obvious: we’re doomed to fail to act

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