House Prices

[Gareth Barry Conlon]

Maybe I'm a bit thick with finance etc but I dont see how a bank can just create money on a computer.

When you pay a seller for a house it has to be real money, like actual money. Banks cant give you pretend money. They have to get that money from investors.

Correct - Banks don't create money. That video is very misleading.

When you borrow from a high street bank that money is 100% covered by deposits / capital held by the bank. There is no exception to that statement.

Central Banks can create (print) money and they do - but ordinary people don't access central banks. They serve a function to their owners (governments) and that function is around facilitation and oversight - it is non profit. And central banks dont just print new money on a whim - the basic concept is that if you double the money supply you half the value (in comparison to other currencies and asset types). The Bank of england has the remit to print money with a target of 2% inflation - so it is expected to print money but at a rate that keeps the value relatively stable.

 

[Nethermoor]

Bought my house 4 years ago for £204k

It's now worth at least £300k.

That's in Farsley, Leeds. Which is now a sought after area.

My mum and dad tried to buy in the village, but couldn't afford it and were gazumped numerous times

 

[inbetween]

Correct - Banks don't create money. That video is very misleading.

When you borrow from a high street bank that money is 100% covered by deposits / capital held by the bank. There is no exception to that statement.

Central Banks can create (print) money and they do - but ordinary people don't access central banks. They serve a function to their owners (governments) and that function is around facilitation and oversight - it is non profit. And central banks dont just print new money on a whim - the basic concept is that if you double the money supply you half the value (in comparison to other currencies and asset types). The Bank of england has the remit to print money with a target of 2% inflation - so it is expected to print money but at a rate that keeps the value relatively stable.

This is why the 2008 crisis was not a debt crisis, it was a lack of money crisis. If I lent you £200k to buy a house and one day you couldn't afford to repay it then I haven't lost my £200k because I can take your house. However, if the value of the house drops then I've lost my £200k.

Multiply this by hundreds of thousands and you have a big problem as in 2008. The banks basically ran out of money and had the government not stepped in then they'd of gone down taking savings with it too.

 

[stablemcfc]

At the beginning of the Pandemic we were told house prices would fall by 30 or 40% due to people being in strife with mortgages, due to losing their jobs, limited viewings of houses for sale, the share market plummeting and a host of other reasons. With the whole world shut down this seemed inevitable.

House prices have done the opposite over the last 2 years. Prices rises as much as 40 or even 50% !! Average price in Brisbane is now $1 Million
I know similar has happened in NZ, Canada, (prices have soared in these countries) parts of the USA and big increases in the UK.

What do you think has caused this, I find it hard to explain.

My ideal goal is to move to Aus in around 3 years time. The house prices over there though do seem to have gone insane which will make it that much more difficult getting started out there. From what I’ve read renting isn’t much easier.
Hopefully the higher salaries will make it a bit less painful.

 

[Mr Kobayashi]

Correct - Banks don't create money. That video is very misleading.

When you borrow from a high street bank that money is 100% covered by deposits / capital held by the bank. There is no exception to that statement.

Central Banks can create (print) money and they do - but ordinary people don't access central banks. They serve a function to their owners (governments) and that function is around facilitation and oversight - it is non profit. And central banks dont just print new money on a whim - the basic concept is that if you double the money supply you half the value (in comparison to other currencies and asset types). The Bank of england has the remit to print money with a target of 2% inflation - so it is expected to print money but at a rate that keeps the value relatively stable.

No sorry you are wrong. The Loanable funds model is not an accurate description of real life.

Steve Keen - Money Matters - Brave New Europe

This is a popular version of the second chapter of Steve Keen’s upcoming book “The New Economics: A Manifesto” to appear at Polity Press. We have removed the technical details to make for easier reading [...]

braveneweurope.com

 

[Gareth Barry Conlon]

No sorry you are wrong. The Loanable funds model is not an accurate description of real life.

Steve Keen - Money Matters - Brave New Europe

This is a popular version of the second chapter of Steve Keen’s upcoming book “The New Economics: A Manifesto” to appear at Polity Press. We have removed the technical details to make for easier reading [...]

braveneweurope.com

I read that - i'm not wrong. I work in a Bank. Massive resources are used to ensure that the books are balanced every day and that liquidity is available going forward. At all times the money lent out is covered. Its covered by a mix of deposits, money markets (banks / big corporates lending surplus money via a central market), bond issues, capital. Every single penny can be accounted for back to source. All Banks operate like this - none of them are making up money and lending it. Everything is 100% funded with contingency for deposit run off so in reality Banks have more than £1 for every £1 lent out.

 

[Mr Kobayashi]

I read that - i'm not wrong. I work in a Bank. Massive resources are used to ensure that the books are balanced every day and that liquidity is available going forward. At all times the money lent out is covered. Its covered by a mix of deposits, money markets (banks / big corporates lending surplus money via a central market), bond issues, capital. Every single penny can be accounted for back to source. All Banks operate like this - none of them are making up money and lending it. Everything is 100% funded with contingency for deposit run off so in reality Banks have more than £1 for every £1 lent out.

You firmly believe this, I can tell.

I'm not going to waste energy trying to convince you otherwise but you are.

But If you are interested in learning you can watch some of this.

 

[staffsblue]

Bought my house 4 years ago for £204k

It's now worth at least £300k.

That's in Farsley, Leeds. Which is now a sought after area.

My mum and dad tried to buy in the village, but couldn't afford it and were gazumped numerous times

I bought my first house (a 2 bedroom terrace) in Guiseley in 1992 for £41k. Sold it 11 years later for £115k. God knows what it would be worth now!

 

[Brightwell’s left peg]

My ideal goal is to move to Aus in around 3 years time. The house prices over there though do seem to have gone insane which will make it that much more difficult getting started out there. From what I’ve read renting isn’t much easier.
Hopefully the higher salaries will make it a bit less painful.

Pretty much everything in Aus is expensive. I hope you don’t like to drink too much beer when out socialising. Bought a round of pints for 6 people in Sydney 2 weeks ago. Just shy of £65.

 

[doots]

Helps getter a better remortgage deal all these mad price rises if you're staying put as your LTV is better.
I think.
No idea really.

 

[mancityvstoke]

Pretty much everything in Aus is expensive. I hope you don’t like to drink too much beer when out socialising. Bought a round of pints for 6 people in Sydney 2 weeks ago. Just shy of £65.

£11 a pint?

 

[Brightwell’s left peg]

£11 a pint?

Thereabouts.

 

[mancityvstoke]

Thereabouts.

Fuck that....I'd be in the offy or tesco if they have one

 

[idahoblues]

Fuck that....I'd be in the offy or tesco if they have one

You’d probably be earning a high wage to compensate

 

[paulchapo]

House rises are all well and good but unless you are downsizing or moving to a cheaper area/country, everything you make just goes on your next house. You could sell and rent I guess but that profit would soon be gone too.

 

[Bill Walker]

£11 a pint?

I pay $8 a pint (4 quid) Anglers Rest Southport, even cheaper in the local RSL.

Dont know where Misty was, he probably dreamt it. In fact just him saying "I bought a round" rings a lot of bells :)

 

[jaseirai]

I read that - i'm not wrong. I work in a Bank. Massive resources are used to ensure that the books are balanced every day and that liquidity is available going forward. At all times the money lent out is covered. Its covered by a mix of deposits, money markets (banks / big corporates lending surplus money via a central market), bond issues, capital. Every single penny can be accounted for back to source. All Banks operate like this - none of them are making up money and lending it. Everything is 100% funded with contingency for deposit run off so in reality Banks have more than £1 for every £1 lent out.

It’s a bit long so I’ve copied the conclusion

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

"This article has discussed how money is created in the modern
economy. Most of the money in circulation is created, not by
the printing presses of the Bank of England, but by the
commercial banks themselves: banks create money whenever
they lend to someone in the economy or buy an asset from
consumers. And in contrast to descriptions found in some
textbooks, the Bank of England does not directly control the
quantity of either base or broad money. The Bank of England
is nevertheless still able to influence the amount of money in
the economy. It does so in normal times by setting monetary
policy — through the interest rate that it pays on reserves held
by commercial banks with the Bank of England. More
recently, though, with Bank Rate constrained by the effective
lower bound, the Bank of England’s asset purchase programme
has sought to raise the quantity of broad money in circulation.
This in turn affects the prices and quantities of a range of
assets in the economy, including money"

 

[Gareth Barry Conlon]

It’s a bit long so I’ve copied the conclusion

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

"This article has discussed how money is created in the modern
economy. Most of the money in circulation is created, not by
the printing presses of the Bank of England, but by the
commercial banks themselves: banks create money whenever
they lend to someone in the economy or buy an asset from
consumers. And in contrast to descriptions found in some
textbooks, the Bank of England does not directly control the
quantity of either base or broad money. The Bank of England
is nevertheless still able to influence the amount of money in
the economy. It does so in normal times by setting monetary
policy — through the interest rate that it pays on reserves held
by commercial banks with the Bank of England. More
recently, though, with Bank Rate constrained by the effective
lower bound, the Bank of England’s asset purchase programme
has sought to raise the quantity of broad money in circulation.
This in turn affects the prices and quantities of a range of
assets in the economy, including money"

It's bollox mate. Its fantasy theory pushed by lefty academics. Banks do not create money.

 

[Corky]

It's bollox mate. Its fantasy theory pushed by lefty academics. Banks do not create money.

It doesn't make sense. The theory says they actually create it by getting more highly geared, therefore getting in debt, which then suggests it isn't actually created. So my shallow understanding is they would owe it to institutional investors and the like, investing pensions etc, to other bond holders and each other in effect. I wasn't convinced with the thin air concept.

 

[Mr Kobayashi]

It's bollox mate. Its fantasy theory pushed by lefty academics. Banks do not create money.

Delusional.