One idea for a 'blogspot that I had been mulling recently was a comparison between the UK and Japan after property price bubble popped in 1989.
John Major just let things rip - sure, a few people were repossessed but by the same token, others were able to buy property cheaply - and by about 1994 or 1995 things had really, genuinely picked up - housing was cheap and jobs were easy to find (or a lot easier compared to under Thatcher, although I'm not blaming it all on her - the UK downturn started in the early 1970s at the time of the first house price bubble).
The wily Japanese, on the other hand, embarked on a course of propping up banks (who in turn are propping up government borrowing, they invented QE) and property prices (which have been merrily sliding ever since), gradually choking off their economy, which was of no benefit to anybody whatsoever.
Quoted in The Daily Hatemail:
[Head of FInancial Services Authority] Turner also warned that imposing stricter liquidity requirements [in other words, a return to sensible minimum capital ratios] too quickly could damage the economy and should be carefully coordinated with the Bank of England's withdrawal of the £185bn Special Liquidity Scheme [a taxpayer-backed scheme to prop up mortgage lending], which is slated to be phased out from next year.
'You can't simply wean yourself off it without a shock to the economy,' he said, 'If you go from A to B too quickly, it risks making the downswing worse.'
The FSA is now working with banks to identify a sustainable funding strategy, including holding higher levels of retail deposits [whence will they come, pray tell?] and enforcing longer-term maturities on wholesale borrowing. Turner said banks were likely to reveal more bad debts, but said there were unlikely to be any 'nasty surprises’ not already being factored-into the plans of lenders and the regulator itself...
Sure, as a Ukipper, I'm supposed to hate John Major because he caved in to the EU on this, that and the other*. But back then, my main concerns were getting a job after finishing uni and the simple pleasure of being able to buy a house for roughly what it would have cost to build from scratch. And looking back, he was right, and the Japanese - and by extension the Home-Owner-Ist consensus who now want taxpayer-funded bailouts for banks and mortgage borrowers at all cost - were wrong, are wrong and always will be wrong. About everything. Ever.
* There are good and bad aspects to the EU. Until about ten years ago, IMHO, the good outweighed the bad, but since then it has gone the other way.
Thursday, 11 March 2010
Devious lying shit of the week: Adair Turner
Subscribe to:
Post Comments (Atom)
8 comments:
"...they invented QE"
Wasn't it that libertarian, near-zero gvt hero Milton Friedman that started that ball rolling?
He'd turn in his grave if he knew the gvt had taken all the QE money and spent it.
S_L, fair point. But MF was an academic, He just suggested it. The first well-known large scale application was, to the best of my knowledge, the japanese.
The Japanese did indeed invent QE.
QE is a transliteration of the Japanese term 金融量的緩和 "kin'yuu ryo-teki kanwa" and literally means to "slacken up the quantity of finance".
Sounds unweildy in Japanese. Sounds unweildy in English. Quite on purpose of course.
And don't forget the FSA has failed, and it hasn't been reformed. So why will it doing more of the same stuff that didn't work before work now? Eh? How?
Agreed. Regardless of the fate of the FSA, Turner needs to go.
AC, the bitter irony is, I used to like Turner.
When he did his pensions thingy a few years ago (which was a useful source of tables and statistics) he sort of suggested that the way forward was a Citizen's Pension, knowing full well that Gordon Brown would be against, and he got all sorts of grief for it.
He has now, unfortunately, learned his lesson and will say any old crap just to keep in with the government and keep his six-figure salary. A bit like Mervyn King.
I don't remember property being particularly cheap in 1989/1990. I'm pretty certain that houses identical to the one I'd bought in 1986 were still going for at least half as much again as what I'd paid, and that was a lot compared to four years before that (1982 ish).
B, UK properties were outrageously expensive in 1989, where did I ever say otherwise.
But... by the mid-1990s, they really were quite affordable, which I measure thusly: was the rebuild cost per insurance quote 20% more than the actual purchase price? If 'yes', then houses cheap. if 'no', then overpriced.
Problem is, housing is now a third more expensive that in 1989, this bubble was even bigger.
Post a Comment