Monday 9 January 2017

BS Britain, part 2

to continue on BE's thread of yesterday with a view of a different C@W contributor...

With the UK, it is not the overall level of life, which is great (try travelling to non-first world countries, does the trick for me everytime!), but the BS re politics is related to the fact that the class gaps are much wider now than they were.

By way of example, my retired in laws live in a much nice house than I do, despite me earning in a year what they only ever did in about 5. This grates a little. My father in law, a sensible and numerate man, has saved more into his pension than I will ever manage, plus his went up in value whereas mine would be better in cash than with the rapacious fund managers.

Indeed, 'nice' places to live in the South East and London are now £1 million plus...even on a Prime Minister's salary you are not having it. It is not all about jets, or coke and hookers (desirable though these may be) or even as I saw some nice Arab lady do before Xmas spending £700 in Hotel Chocolat on a whim. It is achieving something for the toil of labour and learning

It is just the 'middle' is dropping away and the achieving group accelerating away. Look at public schools, previously full of sons and daughters on accounts, doctors, lawyers. Now only very senior bankers, foreign billionaires and what are euphemistically known as 'property developers' can attend.

This is why over the past decade we see lots of nonsense about 'Alarm Clock Britain' (remember that!) or March of the Striving Makers etc and other such fatuous dog-whistling. The fact is the both blue collar and white collar classes have had a big downgrade over the past 30 years, in line with the Country. With the collapse in oil revenues this last few years, it is really coming home to roost in our national accounts too.

At the same time the world's leading financial minds have had much success in attracting tax-evaders of all sorts to London and our cultural superpower excellence has acted as a huge magnet for the growing peoples' of the world. Thus the Country appears to be full of both rich foreigners - which it is and a multitude of poor immigrants. No wonder the debate on immigration gets so complicated and tetchy.

We can see that the politicians, perhaps like ourselves, have no answer to these events or even ideas on what to do about it. Hence Labour having no policies at al and May insisting on more fatuous dog-whistling only yesterday.

The biggest point though is the whinge-fest above is just that. A whinge, there is little to stop people trying harder, taking risks, going for new jobs and trying new things. The animal spirit is needed for this and you see it in abundance in the Far East, socialism is killing it in UK and Europe. Perhaps with Brexit it can be re-kindled. Blaming the Government and everyone else for your own predicament gets you nowhere - reaching out yourself is the key.

Of course this problem is getting worse as technology means services will not need human labour either. At least blue collar people can build the robots and maintain them, white collar workers will suffer even more in the future and currently this is 80% of the UK economy. So a need for capitalism to be at the heart of what we do net to make sure it is successful transformation is key for the future.

It will be very interesting to see how it all turns out.


andrew said...

TL;DR version:

Blue collar jobs that can be moved to lower wage economies have been.
Now the same is happening to the white-collar jobs.

People with lots of assets have got relatively richer compared to people with fewer assets.

We are moving towards a 'dumb-bell' style income distribution where the mean has not changed much but the value in the top 10% has grown and the number in the 10% has grown.

Something must be done - more capitalism.


Now, at this point I am not so sure.
Capitalism (in an advanced economy) only exists within the rules defined by the government.
Capitalism does not intentionally solve a societies problems. One of its outcomes is that it often does that as a side-effect.

There is 1000 years of history that has made England what it is.
The UK is not the same as the far east.
You could point to socialism as the cause of a lack of entrepreneurial spirit in the UK but (my main point) there may well be other factors.

The key one for me (if I was 30 years younger) would be the cost of failure: - all my contemporaries bar one went into corporate life with a pension and bought a house. You naturally compare yourself with your contemporaries. At that time the cost of failure was enormous.

Now, when I talk to the younger people I work near, most are on contracts, don't have a house or a pension - and so are more entrepreneurial.

So you could say high house prices are driving an increase in entrepreneurialism.

Steven_L said...

... his went up in value whereas mine would be better in cash than with the rapacious fund managers.

Are these the same 'fund managers' that were loading up on Xcite Energy, EMED Mining and other such 'holes in the ground'?

CityUnslicker said...

SL - If only, they were at least risk taking. The ones I seem to be stuck with in corporate pension plan do nothing more exciting than buy high rated government bonds and somehow BS their way to 3-4% fees a year for this service...

Steven_L said...

I guess there's always a bigger fish.

Anonymous said...

I walked into Homebase [big mistake] today, to purchase a brush and a shovel, the shovel was made in China and about as much use as those things they used to sell children at the seaside, only good for a couple or three sessions of serious work.

I pondered musing, looking at this cheap shoddy effort, now where's the nearest proper hardware store? Some chance and I know the area pretty darned well, then I nipped over to a garden centre and it was not much better there, Chinese made shit again.

You get to wondering about what Trump is actually about, say he does go for broke with battling China, shovels aside for a mo' would it be such a bad thing?
America is, pretty much like here in Britain, just not as far down the road. Evidently, you see from plastic wheelie bins to great big ships, tanning, shovels, horse shoes probably we've lost the skills and that's what Trump instinctively feels I guess and don't tell me that's its a level playing field - it ain't.
Trump thinks why? Why the fuck should we all have to buy cheap Chinese shit? imho he has a point.

Pay a few cents more and get the real deal, an American made shovel, which will last a couple of winters or six.

Finally, when the shit hits the fan, whether it be an Islamic uprising as is surely coming or, grid energy calamity and other such stuff the other likely event - the world's financial system collapses under the weight of the debt overhang, what the fuck are all the paper clip counters and army of minions going to do, because they can't do anything - is it not true?

The skills have gone, funnily enough though in Germany they haven't...... strange innit? Britain laid down and just gave up, just think all these 43 years and the Krauts are still as protectionist as are the French, "single market" my ass! and.........

Donald Trump is only following in their [Krauts/Kermits] footsteps.

MyPropertyName said...

I've been banging on here for a number of years about high house prices.
The usual response was that I was called some variation of a 'communist'.

House prices are high in the UK by design. The best example of this being the green belt bollox spouted by the over 50s.
There are hundreds of thousands of acres of land available to build on but this is restricted by regulation - there is no natural barrier, only govt policy.

The recent immigration and QE clusterfucks have been deliberately engineered to goose house prices since the property and bank markets collapsed in 2008.
(Yes, they both collapsed and will hopefully never recover.)

Every govt action since then has been to hide these facts and pretend the FIRE economy is still functioning. The Govt and BoE are a drag on change and advancement in refusing to allow the market to price money, loans and property.

1. Property values are a function available credit.
2. Credit is a function provided by healthy banks and is based on borrowers incomes.
This is what QE is for - the banks are dead and can only provide funding from BoE.
3. As incomes (GDP per capita) are stagnating in nominal terms (in real terms falling heavily), it stands to reason that loan valuations must be falling, but they are not, they are supposedly rising. How is this possible?
4. Almost everything is predicated on rising property values, which of course cannot rise forever. Pensions, banks, the whole system.
5. The logical conclusion is that there are three available exits
A- Precipitous uncontrolled fall in property prices. Followed up by restrictions on residential ownership - 1 house per resident/ taxpayer for example. No non-natural/ foreign/non-tax paying entities allowed to hold UK resi property.
But Tories and Lab both in pockets of property/bankign cartels. UKIP come closest - if they propose this they'll be elected for a generation.
B- Precipitous uncontrolled fall in Sterling. Huge inflation spike and decimation of sterling holdings. This is the most likely outcome if A is not engineered by govt. Will leave the pensioners in penury, but they deserve it.)
C- Massive infusion of foreign capital and firesale of UK property assets to foreign interests. (This would likely require massive immigration for investors to get a return on their investments. It would also disenfranchise every following generation from owning property in their own country. Homeless on their own land.)

Very, very radical choices need to be made and if we dont make them, something will be imposed on us by markets or the electorate.

Anonymous said...

I'm more inclined to blame good old Britishness over socialism.

Currently awaiting planning permission to change from A1 to A3, in a property that has been empty for 2 years. Taking it's sweet time. The start up loan would be easier if I hustling some fintech vapourware from Shoreditch instead.

Those aren't problems related socialism, its a British love of bureaucracy and powers love of impressive sounding bullshit.

They're the rocky foundations all the other entrepreneurial issues totter on.

Blue Eyes said...

MyName your comment is internally inconsistent. Happy new year nonetheless. If as you say house-prices are a function of money supply then building on the green belt will make no difference.

Theresa BS May says she is going to put out a housing White Paper. Watch this space for a better one.

Dick the Prick said...

How the hell can someone spend £700 in Hotel Chocolat? I had a breakfast there once and they put ground cocoa beans on my scrambled eggs, the weirdos!

Not really a substantive comment, I guess :-)

Electro-Kevin said...

People taking HUGE risks merely to buy the houses that their parents took for granted.

For every success story there are ten failures. (a guess, but you know what I mean)

High house prices are not only down to overcrowding but a reluctance to put houses on the market - stamp duty, moving costs... but also (and above all else) the expectation that they could rise yet higher.

The 'wealth' is self fulfilling as it is the constriction of houses for sale pushing prices up. The analysts take the prices of those few houses for sale and project them over the entire stock to rate creditworthiness... and this is where it will all go tits up.

People have got rich through a stalled market rather than through their efforts or talents. The truly talented and hard working are suffering for it.

Electro-Kevin said...

Dick. It's easy to spend £700 in Hotel Chocolat. Have you seen the prices ???

Worth every penny. An H Box usually gets me a blow job.

Blue Eyes said...

EK spot on. On all points.

Dick the Prick said...

Crikey Bill, whaddya get for £700? No, none of my business!!

L fairfax said...

Any government could make prices in London cheaper overnight by saying that no one gets housing benefit to live in London for more than 6 months and after that they get a flat in Glasgow or Middlesborough etc.
It would save so much money and make working people in London so much richer.

CityUnslicker said...

Re property - a crash is coming. I have just never seen one in my lifetime that has been more than 20% and that is made up after about 4 years generally and we are back to square one.

More building, less immigration. The answer is not hard!

Electro-Kevin said...

Blue - Of course I'm correct. Their coffee and walnut is divine !

gmorris82 said...

£700 in hotel chocalat!! all that money and no taste, Charbonnel et Walker on the other hand.

Steven_L said...

Re property - a crash is coming. I have just never seen one in my lifetime that has been more than 20% and that is made up after about 4 years generally and we are back to square one.

The exchange rate deniers are out in force at C@W I see. Like I said on BE's post. My old mans house was worth at least $800k in 2007. Now it is worth no more than $500k and probably more like $400k.

I reckon that's pretty typical outside of London and best parts of the SE too.

Blue Eyes said...

Looks like the taking stats and obsessing over them truthers are out in force here at C@W. The exchange rate hit $2 to the £ in 2007. So what? Except I happened to be on a cheap weekend in NYC during that period it has very little bearing on anything at all.

Re a proper property crash, some have been waiting for one since at least 1997. I knew someone who sold up and went travelling at that time, presuming that by the time he got back he could pick up a mansion for peanuts.

Anyway, EK has convinved me to divert some savings away from savings and into premium chocolate. Sound advice.

Steven_L said...

It's not just the $ BE, it's all of them, look at the charts.

dearieme said...

Your mistake, CU, was to miss the chance to leave London and settle in Cambridge, in the spell when the need to change trains to get to KX had been abolished, and yet house prices in the town were still set by the modest incomes of herbivorous academics. The private day-schools were not expensive, and the standards of the best were excellent by modern standards, being full of the children of clever academics, or at least of clever academics who had married money, or were extremely frugal, or had had only one child.

Too late now, of course.

My main gripe with Britain is simpler: even in the best of day schools full of clever children, the kids are unlikely to get a schooling as good as the one I got. Bloody disgraceful, and the fault - nay, the boast - of The Left. I have friends from the Continent who cannot understand (or so they say) why it should have been The Left that buggered up the schools.

CityUnslicker said...

dearime your point still stands with Ashford due to HS1, albeit not for much longer.

I am not sure I agree re education at all. I have children, they work harder and are taught more than I ever was. Perhaps when they are older this will stop. But my son's grasp of reality is very strong for an eleven year old.

Just because they did away with Latin doesn't mean....

MySecondNameToday said...

@BE - merely making the point that the current goosing of house prices is entirely artificial and a deliberate act of govt.
If money supply (new credit) were expanding in tandem with available land, prices would remain stable. As planning is restricted and the money is being shitted out by the BoE the outcome is the one we currently have.

Unfortunately this cannot continue as the chimera of 'responsible lending' requires incomes be taken into account. Either that is ditched - as happens with BTL - or the market collapses.
Remember, IIRC house prices can only grow if the rate of credit growth is increasing (not credit, per say).
If the rate of credit growth is slowing (even though credit is still increasing) then house prices begin to fall, if credit contracts, prices collapse.

Without the BoE scuttering funds diarrhea-like into BTL and the blood money from abroad being withdrawn due to sterling falls, the veil of nonsense covering the UK property market will be pulled back.
What will be revealed is that demand (that is, actual income driven ability to purchase residential property) has collapsed due to excessive pricing.
(Please dont confuse economic demand with desire to buy - they are wholly separat. Desire is very high, actual bankable demand is on the floor).

Further, expanding credit figures with largely stagnant incomes should be telling you that the populace in aggregate is having to borrow to stand still.

Without helicopter money or some other radical change, this fucking lunacy will collapse the economy and take the state with it. Just remember to print some of these off to submit to the trials of the politicians, mandrins and journos who created and cheered this fuckwittery.
Because I'd bet my left bollock that'll happen.
And within a decade.

rockbd said...

dearieme said...

Ah, CU, just you wait until your nippers are asked to remember Ohm's Law. In our case, it was taught as three different equations (presumably because the children couldn't be trusted to do the simplest of algebra), and, because equations are difficult, they were taught a mnemonic for each.

I could scarcely believe it! Still, A* in GCSE physics then.

But when I later enquired how Watts and Volts relate to Amps, stunned silence. Obviously physics had nothing to do with choosing a fuse for a plug. Groan!

Steven_L said...

Eh? When I was at school we got taught them in little triangles. V=IR, V at the of the triangle, so IxR. R=V/I etc. They've honestly ditched the triangles for teaching simple 3 variable physics equations?

I mean there always were some folk that couldn't grasp it but so what. Personally I couldn't understand a word of what Shakespeare was on about. But I bet the luvvies still favour teaching that gibberish!

MyTurdName! said...

@Steven_L - nice link but be careful, the nationwide index measures Loan valuation approvals, not the price of houses exactly.
Of course when markets collapse, average loan valuations will increase as only the wealthy can afford to buy.

In simple terms picture a street with 20 houses; 10 selling at £100k and 10 selling at £200k. This street will have an average 'price' (loan valuation) of £150k.

The following year, all the houses are on the market again but volumes have collapsed and credit has dried up. So, only one house sells - 95% fail to sell.
Its a £200k house and falls 10% in value to sell for £180k.

This year the average 'price' is £180k.
Thus with a 10% drop in sold prices and a 95% fall in volumes the average 'price' has increased from £150k to £180k or by +20%!!!!
Get in quick, the markets booming!

This is the situation in the UK currently. Foreign money and unregulated BTL lending has propped things up, but it cant last forever.

dearieme said...

Triangles? For Ohm's blessed Law?

Even the rather pathetic chap who taught me school physics didn't descend to that. You'll be telling me next you did Force, Mass, and Acceleration as a triangle. Christ on a bicycle!!!

Steven_L said...

You'll be telling me next you did Force, Mass, and Acceleration as a triangle.

Yep, they did teach us it like that, this was in the Major years. I did have always have sneaky a feeling they were oversimplifying things / teaching us a load of bollocks to be honest. And this was in a 'good' state school that even beat some private schools in the exam results ratings. Aged 15 I did my work experience in a primary school in a rough part of Northumberland and most 7 year old kids were struggling stuff like "13 - 9 =?" We were on times tables and division at that age.


I think you underestimate how much credit the banking system can / will extend and nhow much the politicians will 'help' people when it comes to property. This is the bear trap, not the crash. The crash will be mid 2020's. I'm planning on staying long UK mortgage lenders and housebuilders for good few years yet. In the next crash insolvent BTL landlords will be hung out to dry to save to the politicians etc. said...