Britain Entering Austerity Death Spiral

[Svartalf]

So instead of underwater mortgages you have a housing crisis. Because housing prices were artificially supported?

Aha. "Underwater" = US-speak for "negative equity". Now I get it.

If you want to see a real housing crisis, try Ireland. We had a mega-housing boom, and are now suffering the consequences.

Prices weren't "artificially supported" in the UK or Ireland in any narrow sense of the term. If anything, it was a lack of regulation and long-term decision making in Ireland that allowed the property boom to spiral out of control. Action should have been taken to keep house prices down.

Supply and demand, but all of a sudden, demand became negative because the economic boom that had drawn immigrants and gotten housing into a premium in the first place stopped cold, and those who could bail out did.

If I had the money, I might think about buying a residence in Dublin now.

[Tero]

"my pink half of the drainpipe..."
Bonzo Dog Band.

Sorry, UK housing always brings that to my mind.

Back to your topic.

[Schneibster]

So instead of underwater mortgages you have a housing crisis. Because housing prices were artificially supported?

Aha. "Underwater" = US-speak for "negative equity". Now I get it.

If you want to see a real housing crisis, try Ireland. We had a mega-housing boom, and are now suffering the consequences.

Prices weren't "artificially supported" in the UK or Ireland in any narrow sense of the term. If anything, it was a lack of regulation and long-term decision making in Ireland that allowed the property boom to spiral out of control. Action should have been taken to keep house prices down.

Supply and demand, but all of a sudden, demand became negative because the economic boom that had drawn immigrants and gotten housing into a premium in the first place stopped cold, and those who could bail out did.

If I had the money, I might think about buying a residence in Dublin now.

That sounds like at least some of y'all got what we got. We're lucky; we bought long ago and while we lost a lot of paper worth in the bust, our mortgage is still well above water, and low fixed interest, and heavily amortized. Our payments these days are mostly principal, we've paid off most of the interest. So even at a slight interest bonus and slightly lower payment, we'd lose money refinancing.

I am so glad I married an accountant and listened to her.

But from an economic POV, unfortunately we are not the overwhelming majority; a significant plurality of our brothers and sisters are underwater, and because they are they are afraid to spend money. That is hurting our economy, and I hope we figure out how to do something about it soon, considering all the money we gave to the banksters. I think we get some of that back. Just out of fairness.

[Jesus_of_Nazareth]

Well, that's a bit of a drag, but what about underwater mortgages? Did housing prices not fall as far there as here? Sounds like it, but I couldn't tell from your answer.

Yes they have fallen but not even remotely close enough to make a difference (and if they did it would bankrupt the country).

Most of Britain is fields with nothing of any value growing on them paid for by farming subsidies and supported by people who don't want anyone else living in nearby

But property prices could be managed downwards over the long term - rather than via a crash (would wipe out the banks). Where I llive (not saying ) the average price for a 3 bed semi (family sized house) was around £450k.....average salary something like £25k. Insane and never sustainable. Even if you earned a half decent salary (and bank would lend the money) would be mad to sign up to 25 years of a debt 6 or more times your salary.

Recently the UK Govt announced "help" for the first time buyer who only has a 5% deposit by guaranteeing some of the loan to the lending bank (I forget the exact details ) and at the outset pressurised the banks not to rush to foreclosure - it would be funny if not so sad

[Svartalf]

It's a wonder that a place with such a housing crunch has managed to draw so many incomers over the last xenty years... wages must have been really attractive to draw people in spite of the fact that mmearly getting somewhere to live would drop their disposable income so hugely.

[Coito ergo sum]

But, there are bright sides in Britain...

Heathrow has never been more efficient! Passengers' glee as border agency strike SPEEDS UP passport control
'It was the fastest I have ever come through passport control'
Passengers had been warned they could face two or three-hour delays
400 admin staff re-deployed with iPads to assist passengers with flight information and free food and water
Civil servants including airport vets believed to be manning borders
Fears terrorists and criminals could sneak into the country and exploit predicted chaos
No delays or problems reported on ferries at Dover
More than half of England's state schools close
Thousands of NHS operations and appointments cancelled

Read more: http://www.dailymail.co.uk/news/article ... z1fDxpeBzT

Yeah, boy oh boy those austerity measures sure are popular, huh?

The Devil is always in the details. Reduction in spending is necessary when you don't have the money. Some deficit spending is fine, but it can be too much. The dolt-headed idea that deficit spending always buys you out of a bad economy is overly-simplistic.

[MrJonno]

Well, that's a bit of a drag, but what about underwater mortgages? Did housing prices not fall as far there as here? Sounds like it, but I couldn't tell from your answer.

Yes they have fallen but not even remotely close enough to make a difference (and if they did it would bankrupt the country).

Most of Britain is fields with nothing of any value growing on them paid for by farming subsidies and supported by people who don't want anyone else living in nearby

But property prices could be managed downwards over the long term - rather than via a crash (would wipe out the banks). Where I llive (not saying ) the average price for a 3 bed semi (family sized house) was around £450k.....average salary something like £25k. Insane and never sustainable. Even if you earned a half decent salary (and bank would lend the money) would be mad to sign up to 25 years of a debt 6 or more times your salary.

Recently the UK Govt announced "help" for the first time buyer who only has a 5% deposit by guaranteeing some of the loan to the lending bank (I forget the exact details ) and at the outset pressurised the banks not to rush to foreclosure - it would be funny if not so sad

Which is complete wrong, the government should not be in any way helping anyone buy a house what they should be doing is making it easier for people to build them and accept that while someone has a right to say what happens in their property they shouldnt have any rights on their neighbour especially if its a field.

Won't happen of course high houses prices is how this government and to some extent the previous one get votes

[Schneibster]

The Devil is always in the details. Reduction in spending is necessary when you don't have the money.

Government is not a household. Governments get to print money.

Libertarians know nothing of economics.

Some deficit spending is fine, but it can be too much. The dolt-headed idea that deficit spending always buys you out of a bad economy is overly-simplistic.

It's never been tried. The Libertarians always throw a snit.

[Jesus_of_Nazareth]

It's a wonder that a place with such a housing crunch has managed to draw so many incomers over the last xenty years... wages must have been really attractive to draw people in spite of the fact that mmearly getting somewhere to live would drop their disposable income so hugely.

In comparison to where many come from anything is better than home (we take simply having opportunities for granted)- and housing? 10 to a room is a lot cheaper than what a local could deal with.

IMO the problem is not so much that the locals don't want to do menial jobs - it's that they can't afford to.

[Hermit]

Some deficit spending is fine, but it can be too much. The dolt-headed idea that deficit spending always buys you out of a bad economy is overly-simplistic.

It's never been tried. The Libertarians always throw a snit.

I presume you are talking about the USA. Fairly recently (2008-9) Australia was facing the prospect of having a 12-15% unemployment rate, up from 4.3%. That was the range of predictions by various, usually conservative, economic forecasters and think tanks. The then Prime Minister increased government spending to the tune of around 57 billion dollars. As a result, the unemployment rate never even reached 6%. It topped out at 5.6%. In stark contrast, that same global economic crisis resulted in the US unemployment rate rising from under 5% to more than 10%. Most of the deficit created by Rudd's propping up of the economy has been recovered in subsequent budgets, and the federal budget balance is currently estimated to be back in the black around 2013.

[Atheist-Lite]

All just re-arranging deckchairs on the Titanic. When China implodes it'll disrupt everything and everywhere. You'll see....

Krugman is over-rated. Like all economists half-right and half-wrong. You need to see the situation as a global event or you are likely to miss what is happening. At least wanting a alien invasion shows krugman is saner than most given the alternative? When the shoping stops then the fighting begins. Britain is the canary in the coal mine with so many high end dubious international financial enterprises having some dealings here. When the crooks can't make a buck here then 'merica and china will go to war.