Until the second quarter of 2009 (i.e. quarter 10), the current house price crash had been tracking the previous one very closely, then New Labour hurled everything they had at it, and managed to stall things for a year or so. As much as the Lib-Cons would love to continue propping up house prices, it appears that there's not enough left in the kitty* so the pattern seems to be reasserting itself.
The blue series shows quarter-on-quarter price changes from Q1 1989 onwards; the red series shows quarter-on-quarter price changes from Q1 2007 onwards. The post-1989 crash continued for another few years after the end of that chart, but rises and falls were no longer so spectacular.
Source: Nationwide's UK House prices adjusted for inflation (choose from the drop down box labelled 'UK series').
* They are resorting to far more bizarre strategies, such as depressing interest rates, which is merely a random transfer of £30 billion a year from 'savers' to 'borrowers' (with their chums at the banks being able to double their profit margins).
Of course they did
1 hour ago
6 comments:
£185bn SLS, £134bn? CGS, £200bn QE = £519bn to get that bounce I make it MW.
Do we count the equity injections? That makes it closer to £600bn.
What's that? 10% of so of the total housing market?
SL, from memory SLS + CGS + equity = £300 or £400 billion = about about a quarter of all o/s residential or commercial mortgages.
The fun bit will be seeing what excuses the Lib-Cons use to postpone repayment thereof, due to kick in later this year IIRC.
QE was just smoke and mirrors, ignore that.
I disagree with your accountant's view on QE.
Pulling gvt debt out of the system in favour of cash means there are less financial assets to buy and more cash to buy them with.
It inflates the value of financial assets.
SL, I am a proper old fashioned accountant who has actually looked at bank of england and commercial bank balance sheets, and you can take it from me...
a) Most of the QE 'cash' received by comm banks is now on deposit with BoE (which is merely a branch of HM Treasury).
b) 99% of the 'financial assets' acquired by BoE were govt. bonds issued by Debt Mgt Office (another branch of HM Treasury).
c) So the people in BoE in Room 47 have a filing cabinet full of bits of paper issued by their colleagues in the DMO in Room 46. These 'assets' are effectively cancelled - if they were all burned or lost, liabilities of DMO would reduce and assets of BoE would reduce and this all nets off to nothing in HM Treasury master accounts.
So the overall effect is much the same as swapping 502p in coins for a £5 note. The comm banks keep the 2p profit and pop the 500p in coins back under the same mattress from which they retrieved the £5 note in the first place.
So what about the reverse operation?
Are you saying if the BofE started selling all the DMO paper on the market for cash it wouldn't force interest rates up?
Isn't this how Volcker broke inflation and burst the gold bubble in the 80's?
Sure, they could cancel it out and lower government debt, but maybe they need it for something? To paraphrase Return of the Jedi:
"Hold here."
"You mean we're not going to write off the debt?"
"I have my orders from Bernanke himself, we've only to stop the banks from going bust, the next President has something special planned!"
SL, that depends on who buys it. If the BoE then sells the DMO paper it has back to the comm banks; and the banks use up their deposits with BoE to pay for it, then this is (also) entirely self-cancelling.
To continue with my analogy, the BoE has lots of £5 notes it bought from the comm banks and the comm banks have lots of coins under the mattress. So they swap the two, the BoE gives the coins back to the Royal Mint to melt down and the comm banks tuck all the fivers back under the mattress.
PS, if the lads in Room 47 owe the lads in Room 46 £200 billion, then that is not public sector debt. It's like me 'lending' my wife some money, that does not change the assets or liabilties of Family Wadsworth one iota.
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