who mentioned investment apart from you?

 

are you suggesting the 100's of trillions of dollars worth of credit given in the last 15 years was all backed by savings


meanwhile in the real world

 

I didn't say that, no. Fractional-reserve banking systems obviously mean the concept is scewed slightly at a glance, but I think you'll find if you use a bit of logic you can see how credit in the real world would require savings.

 

You can't invest without savings.

 

i thought the definition of savings is that they are saved - as in Japan. where they have had a stagnated economy of the last 20 years


i think we might be going around in circles here

 

So build an unsustainable consumer economy based on accumulating more and more debt (public and private).

Watch also how the trade deficit becomes more and more unsustainable.

Lurch from one credit crisis to the next.

Head towards inevitable bankruptcy?

 

You are advocating a socialized capitalism; privatize the profit, socialize the losses.

If the average Joe needs bailing out then he is NOT supporting the economy but the economy is supporting him.

 

i am not making any value judgements about whether it is right or wrong -- I am just trying to understand how it all works thats all

 

I did not say bail them out .Far from it ,I said make sure they can survive and not end up as yet another claimant spending our Taxes .!!!!!!

Those with cash in the bank have done Ok for themselves already ,they need no support .

 

I disagree .Many people invest borrowed money .Thats what the banks do dont they .Lend to people who invest in businesses to create wealth for themselves and their families .

Most people dont start out using their own funds .

 

Well if you're strictly talking about GDP growth then I suppose you're right. But if money is saved, where is it being saved? If it's in a bank then that enables the bank to lend - contributing to 'growth'. All money will be spent eventually, so it doesn't matter whether or not it's spent on consumption now or later. Consumption now is at the expense of future consumption and future GDP figures, so it doesn't make any difference when it's spent, it still contributes to so-called growth.


The traditional concept of a bank is that it is a place to keep your wealth. They then loan it out to people for productive uses and give you a slice of the profit. Therefore credit requires savings, although obviously this is difficult to understand because it seems like money can just be made 'out of thin air' in limitless amounts.

Savings have to be there to borrow from.

 

Analysis by one of the countries biggest auctioneers of its latest auction (last week) sent to me via email



XXXXX two day September sale (14th and 16th) at London's Cumberland Hotel has raised £38m (78%).

This was the first auction after the summer recess and there is no doubt that the correction that we witnessed at our July sales (£43m and 83%) heralded tougher times ahead. The market has weakened further.

We are increasingly noticing a difference in buyer sentiment to lots in the South-East and those in the regions. We have historically held two day sales, one day offering regional stock, the other concentrating on London and the home counties. The recession has brought with it a flight to quality as debt-starved investors shun risk and stick to the safer locations.

This was evidenced by a strong attendance at our 16th September sale when 232 South-East lots were offered and 207 were sold. £28m was raised and 89% achieved.

Lenders have continued to show forbearance towards borrowers struggling to service mortgage debt. This is particularly true of the partly nationalised institutions for whom large scale repossessions would cause political embarrassment. Many have opted for the fixed charge receivership route to recovery. The appointment of a Receiver leaves the mortgagor in possession whilst offering a fast track route to market to the lender. Our in- house insolvency team now specialises in such a service and is one of the firm's busiest departments. We see this continuing for some years to come.

In summary, the following points are worthy of note from the sales:

. Less well located investment stock will only attract interest at high double digit yields. This reflects the risk of a difficult sale in the event of vacant possession. (Lot 50 AST Middlesborough 21%, Lot 95 AST Prestwich 16%)

. Better regional locations show lower returns. Buyers need to have confidence in vacant possession values and a sustainable owner-occupier market. (Lot 75 Tenancy Stockport 4.28%, Lot 105 AST Wetherby 5.7%)

. The regions, particularly the North-East and North-West conurbations, are increasingly weaker. Market confidence is being eroded by proposed public sector cuts.

. The traditional investment market in London and the South-East remains strong with no perceptible variation on results from our May and July sales. (Lot 276 AST Lauderdale Mansions, Maida Vale, London W2 7.4%)

. 100% of all regulated tenancy investments sold.

. The ground rent market is still showing great resilience. 79 investments sold from a total of 80 offered.

. Vacant homes in good areas remain particularly saleable.

. All sites with planning permission or potential for residential development were sold. This sector of the market showed early signs of correction around 18 months ago. We therefore attribute this success to vendors adopting a more realistic approach to pricing based upon recent market evidence.

Average Yield Analysis Summary:

Assured Shorthold Tenancies 8.8%
Assured Tenancies 5.3%
Regulated Tenancies 5.0%
Ground Rents over 80 years 6.0% (16.7 YP)

 

Analysis by one of the countries biggest auctioneers of its latest auction (last week) sent to me via email



XXXXX two day September sale (14th and 16th) at London's Cumberland Hotel has raised £38m (78%).

This was the first auction after the summer recess and there is no doubt that the correction that we witnessed at our July sales (£43m and 83%) heralded tougher times ahead. The market has weakened further.

We are increasingly noticing a difference in buyer sentiment to lots in the South-East and those in the regions. We have historically held two day sales, one day offering regional stock, the other concentrating on London and the home counties. The recession has brought with it a flight to quality as debt-starved investors shun risk and stick to the safer locations.

This was evidenced by a strong attendance at our 16th September sale when 232 South-East lots were offered and 207 were sold. £28m was raised and 89% achieved.

Lenders have continued to show forbearance towards borrowers struggling to service mortgage debt. This is particularly true of the partly nationalised institutions for whom large scale repossessions would cause political embarrassment. Many have opted for the fixed charge receivership route to recovery. The appointment of a Receiver leaves the mortgagor in possession whilst offering a fast track route to market to the lender. Our in- house insolvency team now specialises in such a service and is one of the firm's busiest departments. We see this continuing for some years to come.

In summary, the following points are worthy of note from the sales:

. Less well located investment stock will only attract interest at high double digit yields. This reflects the risk of a difficult sale in the event of vacant possession. (Lot 50 AST Middlesborough 21%, Lot 95 AST Prestwich 16%)

. Better regional locations show lower returns. Buyers need to have confidence in vacant possession values and a sustainable owner-occupier market. (Lot 75 Tenancy Stockport 4.28%, Lot 105 AST Wetherby 5.7%)

. The regions, particularly the North-East and North-West conurbations, are increasingly weaker. Market confidence is being eroded by proposed public sector cuts.

. The traditional investment market in London and the South-East remains strong with no perceptible variation on results from our May and July sales. (Lot 276 AST Lauderdale Mansions, Maida Vale, London W2 7.4%)

. 100% of all regulated tenancy investments sold.

. The ground rent market is still showing great resilience. 79 investments sold from a total of 80 offered.

. Vacant homes in good areas remain particularly saleable.

. All sites with planning permission or potential for residential development were sold. This sector of the market showed early signs of correction around 18 months ago. We therefore attribute this success to vendors adopting a more realistic approach to pricing based upon recent market evidence.

Average Yield Analysis Summary:

Assured Shorthold Tenancies 8.8%
Assured Tenancies 5.3%
Regulated Tenancies 5.0%
Ground Rents over 80 years 6.0% (16.7 YP)

 

This is where CDO's and CDS's come in. Basically, the debt is sold on by the bank as an investment. Buyers will get a return on these "investment vehicles" as debtors pay back their loans, or they can wrap them up with other investment vehicles and sell them on again. Ratings of these investment vehicles determine how sound these investments are. So it seems that the debt is never "owned" and more is added to them before it is packaged up and sold on again.

 

i have had enough trouble trying to explain money as a commodity -- I was not going to tell them debt was too, that might just tip them over the edge

 

Yep, very complex stuff. Or at least it comes across that way on the surface.

Plenty of these investments were given the highest (best quality) ratings during the housing boom, and of course plenty of those related to the sub-prime market in the U.S. have now gone to zero, the investors penniless.

 

DingDongler - Cheers, interesting insight.

 

by the same muppets who rate our debt at the moment -- scary stuff

 

Yip. Does make you question how much credence should be given to them for any rating they issue, particularly government debt. They're paid by the issuer of the debt they're rating.

 

http://www.telegraph.co.uk/finance/p...gage-boss.html

Even the Head of the Council of Mortgage Lenders is now admitting the new lending rules (ie which will signifcantly restrict how much people can borrow and costs of repayments) which push down house prices. Obviously by saying this he probably wants the new rules to be relaxed, but this looks unlikely.

Big falls in house prices over the new few years look like an absolute certainly, with prices probably drifting down further for some time after that.

 

All fiat money is debt money.

 

Can't see it personally. If your house is worth 20% less than what you paid for it, then why would you sell it? Interest are low so paying of your mortgage has never been so easy. I just think people will stay put rather than seeking the next big house purchase. Obviously this means there will still be a shortage which means prices should stay healthy. Plus, the economy is in a much better position than what the press will have you believe!

 

Maybe you want to move?... If trading up then its likely the house you're moving to has lost more value than the one you are selling, so quids-in! Or maybe you have to move - job loss, divorce etc. The forced sales will always happen and bring prices down, even if subborn sellers who dont HAVE to move refuse to lower their prices.

This has been covered extensively earlier in the thread! There could be 100 potential buyers for a home, but if none can borrow the money to buy, then either the house won't sell or the price will fall to a level where there are buyers.

The economy has had billions pumped into it, and it's still struggling along. I don't know what makes you think its in a better position than the press believe!

 

Orders for the commercial marine industry! This year has been our busiest for 4 years!
We supply transmissions.
Obviously someone out there thinks it is still worth building boats!

 

Well pleased things are going well in your business! I work in the IT/Telecoms industry, and a lot of my firms customers are stuggling or have gone out of business. Most recent one is Connaught.

All the new contracts coming in are very 'safe'. Companies just dont have the money to spend, so want to now lease equipment rather than buy etc.

 

So that's why everyone on here is so pesimistic....they all work in IT!

 

Lol. Yep ,you could be right there .!!!!!!

 

"The golden age of home-ownership is over, for the moment"

Mr Coogan was citing a footnote in the FSA's consultation document, which was published in July.

This said that economic modelling of the consequences of its proposals "did project significant falls in house prices from the reduction in lending".

"In addition, the impact of a drop in lending on house prices was also modelled using the Oxford Economic Forecasting model, another model of the global macroeconomy," the FSA document said.

Source:- http://www.bbc.co.uk/news/business-11390764

 

It just means there will have to be more social housing as there is still a massive housing shortage

 

The apparent 'shortage' is just talked up by Estate Agents and Mortgage Lenders. I don't think the situation is anywhere near as they make out.

Either way, even if there was a big shortage, it isnt going to prevent the big falls in prices which have almost certainly started.