The Coming Collapse of the Middle Class

Belfast · 29-04-2008 12:43pm #1

The Coming Collapse of the Middle Class 57 mins
Distinguished law scholar Elizabeth Warren teaches contract law, bankruptcy, and commercial law at Harvard Law School. She is an outspoken critic of America's credit economy, which she has linked to the continuing rise in bankruptcy among the middle-class. Series: "UC Berkeley Graduate Council Lectures" [6/2007]
http://www.youtube.com/watch?v=akVL7QY0S8A

The question that was not asked is why the cost of housing has gone up.
Part of the reason is 2 income household.
The real reason is planning permission. Planning permission restricts the amount of housing built , what height and where they are built resulted in a restricted market.
If there are 1,000 housing units in an area and there is a plan to build another 500 housing units there is an incentive for those who own the 1,000 housing units to object to create a shortage to increase the market price of their housing unit.
Planning permission was introduced 1962.
The effect of planning permission was to give more power to Politicians more power and corrupt politics.
We now pay more money for the same houses and the planning has been done so badly it could not be worse if there had been none.
Why are all the economic commentators saying the cost of housing going up is a good for the economy, the price of energy, food or other basics is going up is bad ?

Cheap credit.
Where does the cheap credit come from ?
If most people are not saving, where are the banks getting the cash to lend?
The answer is Money is no longer backed by Gold and silver as it was in the from 1946 to 1972 under the Bretton Woods system (http://en.wikipedia.org/wiki/Bretton_Woods_system).
We now use a Fiat currency (http://en.wikipedia.org/wiki/Fiat_currency) instead of a gold standard.
This means the central bank (ECB) can print money whenever it wants. The Banks get the money by the European Central Bank printing the money. This debases the money and leeds to infaltion.
An extreme example of the is Zimbabee where inflation is over 100,000 and the Weimar republic in the 1930s. (http://en.wikipedia.org/wiki/Hyperinflation)

Inflation destroys the value of saving of the middle class and encourages people to live in debt

What happens when interest are lowered by European Central Bank more money is borrowed and thus more printed.
Housing is used to secure the loans for the banks so the higher the price of housing the more money can be printed to be loaned by the banks.

When the banks run out of money to lend (Banks have to keep a percentage of their cash in reserve that they cannot lend). They take the loans they have made and package it as an asset and use to to secure a loan. This money is now loaned to customers of the Banks. So Banks have done this many times over. In affect loans the same money many time over. Thsi is called Securitization. (http://en.wikipedia.org/wiki/Securitization) and is legal.

The same happened with taxi licences.
When taxi licences were limited the price went up to £125,000 in Dublin, after they dropped to £5,000.

Frontline - Secret History of the Credit Card (2004) - 56 min - Aug 8, 2007 PBS
The average American family today carries 10 credit cards. Credit card debt and personal bankruptcies are now at an all time high. With no legal limit on the amount of interest or fees that can be charged, credit cards have become the most profitable sector of the American banking industry: more than $30 billion in profits last year alone. FRONTLINE examines how the credit card industry became so pervasive, so lucrative, and so powerful.

http://video.google.com/videoplay?docid=-9048007397539880204&hl=en

oscarBravo · 29-04-2008 2:07pm

Posting links to videos isn't an acceptable way to start a discussion. If you have a point to make, make it.

I am pie · 29-04-2008 2:11pm

She must be some sort of genius with an incredible ability to see that cheap, readliy available credit might cause problems in the US.

If only someone could come up with a catchy name for this credit....crunch ?

FFS. :rolleyes:

Belfast · 29-04-2008 2:44pm

oscarBravo wrote: »

Posting links to videos isn't an acceptable way to start a discussion. If you have a point to make, make it.

I have done that

Belfast · 29-04-2008 3:43pm

When grew in the 1960s in Ireland one income could buy a house now to takes 2.
Women were forced to resign for many Jobs when they got married.
This was unjust.
Because of the rigged housing market through planning permission married Women are now forced to work.
It costs between €60,000 to €100,000 to build a house, but the average prince of a house in Dublin is over €350,000.

oscarBravo · 29-04-2008 4:36pm

Not a Theory thread. I'm not even convinced it's a Politics thread, but I'll give it the benefit of the doubt for the moment.

mike65 · 29-04-2008 4:55pm

Feel like an indymedia thread.

Mike.

oscarBravo · 29-04-2008 4:59pm

Jaysus Mike, you trying to goad me into locking it?

jmayo · 29-04-2008 5:47pm

Belfast wrote: »

Cheap credit.
Where does the cheap credit come from ?
If most people are not saving, where are the banks getting the cash to lend?
The answer is Money is no longer backed by Gold and silver as it was in the from 1946 to 1972 under the Bretton Woods system (http://en.wikipedia.org/wiki/Bretton_Woods_system).
We now use a Fiat currency (http://en.wikipedia.org/wiki/Fiat_currency) instead of a gold standard.
....

Jaysus no wonder the ar** has fallen out of things, it is based on Fiat (Fix It Again Tomorrow)

mike65 · 29-04-2008 5:59pm

Jaysus Mike, you trying to goad me into locking it?

Ah go on.

This means the central bank (ECB) can print money whenever it wants. The Banks get the money by the European Central Bank printing the money. This debases the money and leeds to infaltion.

If there is one thing said insitution has not done its print money. The only time its pumped money is recently to stave off banking collapse which was appropriate and not routine.

The US Fed has been creating cash like it was going out of fashion. Its why its worth so little. They are gambling cheap cash/credit can create such liquidity in the market that consumers and foreign buyers can drag the numbers out of the red. It might work or it might be Japan 1991.

When taxi licences were limited the price went up to £125,000 in Dublin, after they dropped to £5,000.

And? The taxi plate "market" was a closed shop which denied the market the number of taxis actually required to satisfy demand. I do not see any (sensible) correlation. Also the action to relax the market was if anything anti-inflationary.

Mike.

brianthebard · 29-04-2008 8:21pm

mike65 wrote: »

Feel like an indymedia thread.

Mike.

It would be great if mods could drop threads on other forums.

Thomas_S_Hunterson · 29-04-2008 8:24pm

Middle class is here to stay to be honest, along with the lower and upper classes.

If you think a bit of economic turmoil is going to throw society on its head then you're mistaken.

partholon · 29-04-2008 8:38pm

depends sean. alot of people who think theyre middleclass are actually anything but and come the recession will find out all about it.

i find myself in the ridiculous situation that the disposable income i have as a partimer is equivilant to somone earing in excess of the average industrial wage, purely because of when i bought my house.

alot of people look like theyre doing great on paper but most of their money is going on a mortgage or rent and theyre jobs are anything but secure. plus theres no guarentte they'll get another job in that field, in fact its much more likey they'll have to settle for a much lower paid job ala the people just let go from DELL

look at it this way, if the upper class are the best paid and the lower classes are the worst paid then by that definetion to qualify for middleclass you'd have to be raking in at least over half a million a year as thats the figure that lies between the two extremes. if your not on that then your really just working class with pretensions

Sand · 29-04-2008 10:01pm

When grew in the 1960s in Ireland one income could buy a house now to takes 2.
Women were forced to resign for many Jobs when they got married.
This was unjust.
Because of the rigged housing market through planning permission married Women are now forced to work.

Actually, as more women work longer careers - which has been the case over the past 30 years or more - the market on houses will bear a higher cost. Back in the day, only the man usually would be earning a significant income so the market would only bear a cost relevant to a single income.

So its chicken and the egg time. Did house prices rise because builders realised they could charge 2 income families more? Or did families start having 2 incomes because house prices rose?

Belfast · 30-04-2008 1:42am

Why should the cost of housing not reflect the cost of make them? instead of the maximum cost people can afford irrespective of what it costs.
most other products bear some relation to the costs of producing them not what people can afford.

Do you think charging 3 to 4 times the cost of building the housing is a good idea because people can afford it?

SkepticOne · 30-04-2008 9:56am

Belfast wrote: »

Why should the cost of housing not reflect the cost of make them? instead of the maximum cost people can afford irrespective of what it costs.

How much should land be charged at?

30-04-2008 10:11am

I'm sacking the cleaner, selling the 4x4 and cancelling cello lessons...

mike65 · 30-04-2008 10:13am

I'm sacking the cleaner, selling the 4x4 and cancelling cello lessons...

and Aoifes horse?

Mike.

djpbarry · 30-04-2008 5:39pm

Belfast wrote: »

Why should the cost of housing not reflect the cost of make them? instead of the maximum cost people can afford irrespective of what it costs.
most other products bear some relation to the costs of producing them not what people can afford.

Just about everything is priced according to what people are prepared to pay; if people aren't prepared to pay the asking price, the retailer will bring the price down in order to make themselves a profit. One of the main reasons the price of houses soared in Ireland is because people were prepared to pay crazy money for them. Had house-buyers exercised a little more restraint, then the prices would not have risen to the same degree.

bonkey · 30-04-2008 6:26pm

Belfast wrote: »

Why should the cost of housing not reflect the cost of make them? instead of the maximum cost people can afford irrespective of what it costs.

Its not the maximum people can afford, its the maximum people are willing and able to pay.

Do you think charging 3 to 4 times the cost of building the housing is a good idea because people can afford it?

I find it interesting that on one hand you complain about the market being "fixed", and on the other hand, propose that it would be a good idea to "fix" the market. It would appear that your argument isn't that its wrong to put artificial limits on the market, but rather that its wrong to put artificial limits on the market that aren't to your advantage.

Have you considered the cost of reregulating planning permission? Dublin's infrastructure, for example, is already stressed to breaking point. Some would say thats an optimistic view! With deregulation, not only would there be more houses, there'd be even less control on where they went.....and we'd probably see you here complaining that its ****ing useless to have a government that will let houses be built anywhere at all, in any sort of numbers, when they know they can't provide the infrastructure for same.

silverharp · 30-04-2008 6:52pm

from a political angle the gov in the 90's until now have ran policies that increased prices for land & property. Mortgage relief, first time buyer grants & making policy choices between renters v buyers also all the tax relief schemes which increased the building bubble and raised construction costs. Given that Ireland was going to join the Euro, all these incentives should have been abolished on the basis that everyone was going to benefit from lower interest rates.

Belfast · 30-04-2008 9:43pm

SkepticOne wrote: »

How much should land be charged at?

That should be decided by the market.
The market price for building land is controlled by planning permission by limiting the amount of land that can be built on.

Belfast · 30-04-2008 9:51pm

bonkey wrote: »

I find it interesting that on one hand you complain about the market being "fixed", and on the other hand, propose that it would be a good idea to "fix" the market. It would appear that your argument isn't that its wrong to put artificial limits on the market, but rather that its wrong to put artificial limits on the market that aren't to your advantage.

I never said anything about it being a good idea to fix the market in anyway. I said without planning permission the cost of housing would be closer to the cost of construction.
I am not sure what advantage you think I would gain form this.

Belfast · 30-04-2008 10:02pm

bonkey wrote: »

Have you considered the cost of reregulating planning permission? Dublin's infrastructure, for example, is already stressed to breaking point. Some would say thats an optimistic view! With deregulation, not only would there be more houses, there'd be even less control on where they went.....and we'd probably see you here complaining that its ****ing useless to have a government that will let houses be built anywhere at all, in any sort of numbers, when they know they can't provide the infrastructure for same.

I say let people build houses where ever they want. I want less control by the state as to where people live. if people buy house where there is poor infrastructure that is their choice. Caveat emptor
Dublin's infrastructure is messed up of because of planning permission not of the lack of it.

rockbeer · 01-05-2008 12:27am

Belfast wrote:

The libertian Party

Er... what's a libertian? Did you mean libertarian?

Belfast wrote:

I say let people build houses where ever they want.

Are you for real? Are you happy to live in a country dotted with tasteless monstrosities wherever people feel like putting them? Have you no concern for environmental considerations? Have you thought this through at all??

People living where there's no or inadequate infrastructure doesn't just effect them, it effects everybody and everything around them. And we aren't just talking about individuals building one-off houses for themselves, we're talking about commercial developments, estates, with all the implications they carry.

What you call libertarianism sounds like rank selfishness to me.

House prices, despite a certain degree of market distortion imposed by factors such as planning, are primarily determined by supply and demand. I recommend economics 101 for you.

leninbenjamin · 01-05-2008 12:50am

all i can say is lol.

it's funny how you give about restraints on the price of houses, then give out about the removal of restraints in the taxi market. talk about contradictions.

:pac:

silverharp · 01-05-2008 8:36am

rockbeer wrote: »

Are you for real? Are you happy to live in a country dotted with tasteless monstrosities wherever people feel like putting them? Have you no concern for environmental considerations? Have you thought this through at all??

one point is that there is not a free market in services, there is an incentive in building everywhere as people don't pay realistic connection charges, if someone wants to build a house halfway up a mountain, that's fine but they should pay the 5K connection charge to the grid, they should build the road to the house not the council, the post office should charge a delivery fee etc...

leninbenjamin · 01-05-2008 11:22am

the reason planning permission is needed is because of the 'prisoners dilemma' scenario. if lack of services were a disincentive why do we see massive estates going up in the back and beyond of nowhere, then have residents who buy whinge to no end about their lack of services.... we need planning permission, but more importantly we need it to be radically improved in this country, i.e. add a bit of planning to the giving of persmission.

djpbarry · 01-05-2008 11:57am

Belfast wrote: »

The market price for building land is controlled by planning permission by limiting the amount of land that can be built on.

And that's a bad thing because? You think you should be allowed build a house in the Phoenix Park?

Belfast wrote: »

I say let people build houses where ever they want.

So you DO think you should be allowed build a house in the Phoenix Park?

rockbeer wrote: »

Er... what's a libertian? Did you mean libertarian?

First people tell us where we can and can't build our houses, now they're telling us how to build our words!!! :mad:

seamus · 01-05-2008 1:02pm

Belfast wrote: »

I say let people build houses where ever they want.

What about the developer who gets his hands on a small park in the middle of Dublin and builds a 20-storey, 500 unit block? Whatever your feelings about high-rise, the sheer volume of people will be a problem.

Allowing people to build anywhere is an infrastructural nightmare. Not for the country, but for cities. If you allow people to build anything, anywhere, then it's next to impossible to develop an infrastructure plan that can handle it. You could plan to put an capacity for an extra 5,000 people on one route, but you have no idea if 5,000 or 50,000 extra people will be on that route in 5 years.

In fact, the house builds of the late 90's/early 00's show us exactly what happens when you allow people to just build with no restriction - the developments had to get planning permission, but it was met with little resistance and in many cases they could buy themselves out of their infrastructural requirements to leave the existing infrastructure to grind to a halt under the pressure. Lucan/Quarryvale is the perfect example of this.

jmayo · 01-05-2008 4:00pm

rockbeer wrote: »

Er... what's a libertian? Did you mean libertarian?

Are you for real? Are you happy to live in a country dotted with tasteless monstrosities wherever people feel like putting them? Have you no concern for environmental considerations? Have you thought this through at all??

Rockbeer sorry to bring you the bad news but we already live in a country like that where there are countless tasteless monstrosities dotted around our countryside and even worse housing estates build in small villages with absolutely no infrastructure.

Hell they are problems in Sandyford with sewage and waste even though hardly any of the apartments are occupied.
BTW I work beside Dunnes and have suffered the smell before they clean the drains with tankers. :rolleyes:

Some people get away with building huge houses where as others almost next door can't get permission for anything.
Supposedly it is determined by who you know who can work the system.
Our planning system is a joke.

The Coming Collapse of the Middle Class

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