harrison - boom bust; house prices, banking and the depression of 2010, 2e (2005)

[...]... representative of the conventional views the words and deeds of the Governor of the Bank of England and the Chairman of Boom Bust 7/1/10 xiv 11:19 Page xiv Boom Bust the US Federal Reserve They believe that the rate of interest can be manipulated to iron out the business cycle I will explain why this is based on a fundamentally deficient understanding of the internal mechanisms of the market economy As it is at... purchase of their homes and the amount they must save to meet the needs of their children and their retirement years If I am correct, the onus is placed on people to take control of their fate The booms and busts over three centuries have slipped through the sophisticated financial and organisational defences invented by the most ingenious of entrepreneurs, they have overwhelmed the most powerful of governments... with the finances of households and the budgets of nations – remains a mystery The problem is with the way that the N xi Boom Bust 7/1/10 xii 11:19 Page xii Boom Bust data is interpreted The representatives of the people fail to comprehend what we can see with our eyes We walk all over the facts, but we cannot make sense of them Despite the best brains at the disposal of governments, despite the vast... increase in the capital gain on their homes, owners felt wealthier if not wiser They withdrew equity at record rates so that they could buy the luxury goods that created the trade imbalance between Britain and the rest of the world They also borrowed more to ‘trade up’ to more valuable properties – the home-owner’s way of speculating in the capital gains of the future The hothouse finances of the nation... with the insights that I offer, it is no longer possible to resign ourselves to the inevitability of feverish booms and ruinous busts We must cease to demonise the hate-figures of history, notably the landlords Socialists continue to fight the wars of obsolete doctrines The New Statesman, for examples, the voice of the British Left, in a cover story (September 20, 2004), shrieked: ‘Hands off our land!... could neutralise the propensity of the economy to surge to the peaks that terminate in a valley of tears Having failed to set in place the preventive measures, the Brown boom bust of 200 5-1 0 would go down in the history books as yet another dismal failure in the quest for sustainable growth But that outcome was not on the minds of the journalists who gathered to hear the chancellor Most of them were willing... would Spend, Spend, Spend the economy out of the recession before anyone noticed! They spent more on their credit cards than the rest of Europe put together By 2003 those credit cards were loaded with a debt of £120bn Shoppers in the other 14 nations 8 of the European Union (EU) spent just £45bn between them The financial and psychological key to the spending spree was an out -of- control housing market... denied the dwellings they need at prices they can afford From the agricultural 18th century through the heyday of industrialism in the 19th and 20th centuries to the so-called ‘New Economy’ of the 21st century, the same pattern may be traced: the same social processes that deprive people of that most basic of needs, the shelter that is supposed to be the family nest I take as representative of the conventional... view A slow-down in the Boom Bust 7/1/10 11:19 Page 17 Britain’s Housing and the Business Cycle 17 rate of increase of house prices, he wrote, was not the same as a crash, and the boom- bust cycles of the 1970s and 1980s ought not to be 20 repeated’ Hedging its bet was the prestigious National Institute of Economic and Social Research (NIESR), which claimed that the chance of a housing crash was 50/50... irrevocably associate their names with severe economic volatility (Table 1:1) In each of the post-World War II housing boom busts, house prices became so unaffordable that they had to plummet – dragging the rest of the economy down with them TABLE 1:1 UK Housing-Driven Boom Busts Chancellor of the Exchequer House price peaks Bust: business cycle’s trough Peak ratio of house prices to earnings House price falls: . conventional views the words and deeds of the Governor of the Bank of England and the Chairman of Prologue xiii Boom Bust 7/1/10 11:19 Page xiii the US Federal Reserve. They believe that the rate of interest. alt="" Boom Bust Boom Bust 7/1/10 11:19 Page i Boom Bust 7/1/10 11:19 Page ii Boom Bust HOUSE PRICES, BANKING AND THE DEPRESSION OF 2010 Fred Harrison SHEPHEARD-WALWYN (PUBLISHERS) LTD Boom Bust. account of the causes of booms and busts, the implications are profound. It becomes possible for people to plan with greater confidence, to time the pur- chase of their homes and the amount they