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The Anti-Austerity Crowd

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Comments

  • #272
    Iwasfrozen
    Registered Users, Registered Users 2 Posts: 16,250 ✭✭✭✭Iwasfrozen


    KyussBishop wrote: »
    Whoa hold up here: You have no problem with banks offering excessively cheap credit - even when you know this leads to house prices being bid up? :confused:

    Allowing that, and then being surprised at house prices being bid up, is like giving the population easy access to guns, and being surprised that the murder/gun-injury/successful-suicide rate goes up - then ignoring the massive societal problem that creates, and then just blaming it on the population, not on the easy access to guns.
    Houses are being bid up to levels that people are willing to pay.

    It's like blaming knife manufacturers for a rise in local stabbings.


  • #273
    Frank Lee Midere
    Closed Accounts Posts: 3,780 ✭✭✭Frank Lee Midere


    KyussBishop wrote: »
    The only people with the power to actually do anything to stop a property bubble developing, are the banks/central-bank and government - and they do this by restricting loans.

    On a purely practical level, the primary moral responsibility has to lie with the group who actually are practically capable of acting to prevent a problem from developing.

    The wider population does not have this capability (what exactly is going to be done, to prevent bidding up house prices? :confused:), so that leaves responsibility with the banks/central-bank and government.

    Ok. Let's say. 70-30. Whatever. I am mostly on your side but let's not exempt the buyer. Not all buyers are poor. Some are rich. Most are middle class.


  • #274
    Frank Lee Midere
    Closed Accounts Posts: 3,780 ✭✭✭Frank Lee Midere


    Iwasfrozen wrote: »
    Houses are being bid up to levels that people are willing to pay.

    It's like blaming knife manufacturers for a rise in local stabbings.

    Or like blaming gun manufacturers and retailers for a rise in shootings ( you chose knives because they have mostly non violent uses).

    And you can do that.


  • #275
    Iwasfrozen
    Registered Users, Registered Users 2 Posts: 16,250 ✭✭✭✭Iwasfrozen


    Frank Lee Midere wrote: »
    Or like blaming gun manufacturers and retailers for a rise in shootings ( you chose knives because they have mostly non violent uses).

    And you can do that.
    I choose knives because they are not always used to kill people

    Just like credit is not always used to buy houses.


  • #276
    Convexity
    Banned (with Prison Access) Posts: 8 ✭Convexity


    Frank Lee Midere wrote: »
    I don't think anybody could understand that.

    I'll explain it to you. Person A buys a strawberry off person B for 1 euro. Person B then uses that same euro to to buy a grape off person A. Then person A uses the euro to buy a strawberry etc etc until the value of total transactions is thousands of euro. This is economically healthy. Thats why in a country with 100 billion GDP there could only be 5 billion in the economy.


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  • #277
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Iwasfrozen wrote: »
    What's overpriced? Surely every commodity is worth what it's purchaser is willing to pay for it? If people are willing to buy a house at price X then how do you determine if X is an "unsustainable" (what does that even mean anyway?) price?
    So if a commodity/asset becomes inflated, because massive amounts of borrowed money is pumped into it, that's ok? :confused:

    I mean come on, just think about it: You can hyperinflate that bubble by making loans insanely easy to get - that's massively socially destructive, that's why you put restrictions on credit.
    Iwasfrozen wrote: »
    That's the way business works. I provide a service or commodity, I raise my price, now the ball is in your court. You can either accept the price I have set, in which case the price I have set is at least equal to or less than your valuation of the property, or you can say no thank you and be on your way.
    So I assume you agree then, that excessive credit is a bad thing, and that it should be stopped to prevent this kind of bidding up of house prices, based on credit?

    Or do you support property bubbles? (seems to be one or the other, as far as I can see)
    Iwasfrozen wrote: »
    It's daft to blame the banks for providing buyers with the means to inflate prices... for inflating prices.
    Why? :confused: If any idiot could borrow €4-5 million tomorrow, you think this wouldn't be destructive to society in any way?

    I find a lot of these responses really puzzling, because it's very easy to see how they miss the point at how destructive these policies have been.


  • #278
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Convexity wrote: »
    Banks should be allowed to give cheap credit, but if they go bust they should suffer the consequences and not be saved by the tax payer.
    This is the worst of all worlds, because we get:
    1: Property/asset bubbles because of these banks, and
    2: Peoples deposits getting wiped out.

    Excessively cheap credit is harmful thing.


  • #279
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Iwasfrozen wrote: »
    Houses are being bid up to levels that people are willing to pay.

    It's like blaming knife manufacturers for a rise in local stabbings.
    So in other words, no, you have no problem with house prices being bid up.

    Well what do you propose, for stopping property bubbles then? You're happy to just let them happen?


  • #280
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Frank Lee Midere wrote: »
    Ok. Let's say. 70-30. Whatever. I am mostly on your side but let's not exempt the buyer. Not all buyers are poor. Some are rich. Most are middle class.
    That's true, there is certainly fault on the side of buyers too - the main place where I see any practical ability to do anything about the problem though, is through controlling credit issuance, not with the wider population.


  • #281
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Iwasfrozen wrote: »
    I choose knives because they are not always used to kill people

    Just like credit is not always used to buy houses.
    Just like guns aren't always used to shoot people, right?

    Yet I presented an empirical study earlier, showing you that cheap credit does lead to a rise in house prices. Much like the same way easy access to guns, leads to rising murder/gun-injury/successful-suicide rates.


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  • #282
    Permabear
    Closed Accounts Posts: 38,989 ✭✭✭✭Permabear


    This post has been deleted.


  • #283
    steamengine
    Closed Accounts Posts: 2,372 ✭✭✭steamengine


    Piliger wrote: »
    I am very happy with austerity. We are sill spending money that we don't have and I abhor the attitude of entitlement that some people have, where they believe that we are entitled to spend more than we have. After going independent last time I am voting FG this time. They are doing an excellent job in general and the coalition is working very well imho.

    If austerity had come about due to natural causes then it would be tolerable. Having to dig deep to pay for the mistakes of others over the next few decades is just fuel for deep resentment. There is nothing excellent about such a situation.


  • #284
    Iwasfrozen
    Registered Users, Registered Users 2 Posts: 16,250 ✭✭✭✭Iwasfrozen


    KyussBishop wrote: »
    So if a commodity/asset becomes inflated, because massive amounts of borrowed money is pumped into it, that's ok? :confused:

    I mean come on, just think about it: You can hyperinflate that bubble by making loans insanely easy to get - that's massively socially destructive, that's why you put restrictions on credit.
    It's inflated to a price that the buyer is willing to pay for it, obviously you can see that if a commodity is priced at less than what a buyer will pay for it then it is clearly undervalued. The bank is providing the buyer with the means to pay a price closer to their own valuation of the property.
    So I assume you agree then, that excessive credit is a bad thing, and that it should be stopped to prevent this kind of bidding up of house prices, based on credit?

    Or do you support property bubbles? (seems to be one or the other, as far as I can see)
    You're using words like excessive that can't be quantified, excessive to what?

    As for building up of house prices as I've said if the house is priced at a value less than what the buyer is willing to pay for it then from the point of view of everyone involved in the transaction the house is essentially undervalued as the lack of availability of credit is stopping a buyer paying what they think the house to be worth.

    What you're essentially arguing for is to frustrate everyone involved through lack of nominal money.
    Why? :confused: If any idiot could borrow €4-5 million tomorrow, you think this wouldn't be destructive to society in any way?
    It would be destructive, they need to show an ability to pay it back.


  • #285
    Permabear
    Closed Accounts Posts: 38,989 ✭✭✭✭Permabear


    This post has been deleted.


  • #286
    Piliger
    Registered Users, Registered Users 2 Posts: 6,741 ✭✭✭Piliger


    Frank Lee Midere wrote: »
    That entire train of though assumes that people have a right to borrow to buy what they want at whatever absurd price they want at a future cost to society and future taxpayers at whatever it costs. They don't.

    Exactly. What matters is where the activity intersects with the good of the economy and of society as a whole imho. And this certainly does.

    When buyers are facilitated to borrow an unlimited amount to buy a house, then a percentage of them, those that are not the brightest or the most educated or prudent, will do so. That will inevitably increase bidding prices and drive House Prices up.

    When a small group of buyers (1st time buyers) are given a back hander of, say 10k, to help them buy ... all that does is also drive the prices up by ... yes 10k.

    The result is a relentless increase in house prices that will only end in tears.

    We as a country need to look at how to slow the whole process down to a level where the buyers have a sensible continuing ability to pay off the debt that they incur in buying their house. if we don't we only end up with mortgage default, economic damage to the country and homelessness.

    If buyers cannot be relied on to exert self control, and they have proved over and over that they can't, then the Gov needs to regulate lending to a level that achieved the control.


  • #287
    Merrion
    Registered Users, Registered Users 2 Posts: 1,436 ✭✭✭Merrion


    1) Raise inflation to 3%, our national debts get inflated away and the "pain" is bourn by savers - many of whom are those that cashed in during the property boom.

    2) Allow non-institutional investors to buy government bonds retail at the same rate as the market is asking - this would get that locked up money that is doing nothing in savings accounts back into the economy.

    3) Only allow the central bank to issue mortgages - other banks can get an "introduction" and "management" fee but cannot use mortgages as an asset which artificially creates non-government money supply. (i.e. not M-1)


  • #288
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Permabear wrote: »
    This post had been deleted.
    Your study didn't show anything other than a lack of evidence, it didn't even attempt to disprove the claims about cheap credit. The study I presented found positive evidence.


  • #289
    Convexity
    Banned (with Prison Access) Posts: 8 ✭Convexity


    KyussBishop wrote: »
    This is the worst of all worlds, because we get:
    1: Property/asset bubbles because of these banks, and
    2: Peoples deposits getting wiped out.

    Excessively cheap credit is harmful thing.

    people will be weary of where they make deposits, therefore banks would have to be more cautious lending in order to attract depositors. Plus, they wouldn't be wiped out, in a liquidation depositors would receive compensation.


  • #290
    Permabear
    Closed Accounts Posts: 38,989 ✭✭✭✭Permabear


    This post has been deleted.


  • #291
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Iwasfrozen wrote: »
    It's inflated to a price that the buyer is willing to pay for it, obviously you can see that if a commodity is priced at less than what a buyer will pay for it then it is clearly undervalued. The bank is providing the buyer with the means to pay a price closer to their own valuation of the property.
    Houses are not commodities, they are of uniquely limited supply in whatever location they are in, because land is a finite resource - that is why allowing excessively cheap access to credit, bids up their value.

    House prices are inflated to the values that some buyers are willing to pay, leading to appraisers raising the price of houses in the surrounding area - overvaluing them, raising the price floor for houses - affecting all buyers (hence why you need to restrict credit).

    Banks are not there to prop up house prices, and banks privilege to create money - granted by government - should be coupled with proper regulations, so this privilege is not misused to create bubbles.
    Iwasfrozen wrote: »
    You're using words like excessive that can't be quantified, excessive to what?

    It would be destructive, they need to show an ability to pay it back.
    Excessive compared to the persons salary, excessive issuance of loans without a sizeable deposit, excessive issuance of loans without checking a person can pay them back (all of these previous things requiring proper regulations to monitor), excessive issuance of loans while being aware that a property bubble will blow that undermines the sustainability of a good portion of loans.

    I agree on the latter part in any case - most of what I desire, for curtailing cheap credit, is restrictions on the above.


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  • #292
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Piliger wrote: »
    Exactly. What matters is where the activity intersects with the good of the economy and of society as a whole imho. And this certainly does.

    When buyers are facilitated to borrow an unlimited amount to buy a house, then a percentage of them, those that are not the brightest or the most educated or prudent, will do so. That will inevitably increase bidding prices and drive House Prices up.

    When a small group of buyers (1st time buyers) are given a back hander of, say 10k, to help them buy ... all that does is also drive the prices up by ... yes 10k.

    The result is a relentless increase in house prices that will only end in tears.

    We as a country need to look at how to slow the whole process down to a level where the buyers have a sensible continuing ability to pay off the debt that they incur in buying their house. if we don't we only end up with mortgage default, economic damage to the country and homelessness.

    If buyers cannot be relied on to exert self control, and they have proved over and over that they can't, then the Gov needs to regulate lending to a level that achieved the control.
    This is rare, so worth noting/highlighting: I agree with you 100% here, absolutely.

    I also say, that (while buyers share responsibility) this puts the lions share of responsibility in the hands of government and the banks/central-bank, for keeping that lending under control.

    People debate that latter point quite heatedly, but tbh, it seems really uncontroversial when the issue is framed like it is in your post.


  • #293
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Permabear wrote: »
    This post had been deleted.
    I've got evidence, you've got opinion - you can't reduce evidence to opinion, as much as many Libertarian posters try to :)


  • #294
    Piliger
    Registered Users, Registered Users 2 Posts: 6,741 ✭✭✭Piliger


    Permabear wrote: »
    This post had been deleted.

    I prefer to say a blight on all of their houses. We can find an economist for every and any argument under the sun and a 'study' to match. Economists are no better than historians when planning the future.


  • #295
    Permabear
    Closed Accounts Posts: 38,989 ✭✭✭✭Permabear


    This post has been deleted.


  • #296
    Iwasfrozen
    Registered Users, Registered Users 2 Posts: 16,250 ✭✭✭✭Iwasfrozen


    KyussBishop wrote: »
    Houses are not commodities, they are of uniquely limited supply in whatever location they are in, because land is a finite resource - that is why allowing excessively cheap access to credit, bids up their value.
    Land in Ireland for all intents and purposes is unlimited to house 6 million people, what you mean is land in a particular area is limited in the short run until that area is inevitably re-developed.

    All commodities are limited in the short run until production is increased to satisfy demand. But this is getting overly theoretical.
    House prices are inflated to the values that some buyers are willing to pay, leading to appraisers raising the price of houses in the surrounding area - overvaluing them, raising the price floor for houses - affecting all buyers (hence why you need to restrict credit).
    That's the way any business is run, if I own a business I set a price I want to sell my commodity at, then the ball is in your court. you may either accept the price I have offered or you can walk away, your hand is not being forced to make either decision.

    I really don't see why it is relevant that only a limited number of people will pay the inflated price when only a limited number of people will pay any price.
    Banks are not there to prop up house prices, and banks privilege to create money - granted by government - should be coupled with proper regulations, so this privilege is not misused to create bubbles.
    The banks are there to provide people with a ability to pay the price they believe is fair for a house.

    By proventing the banks from doing this you are essentially frustrating both sellers (who cannot get the buyers valuation of the house) and buyers (who can't outbid a rival buyer because all parties seeking to buy are having their access to credit artificially curtailed).
    Excessive compared to the persons salary, excessive issuance of loans without a sizeable deposit, excessive issuance of loans without checking a person can pay them back (all of these previous things requiring proper regulations to monitor), excessive issuance of loans while being aware that a property bubble will blow that undermines the sustainability of a good portion of loans.
    All those things are subjective, your excessive may be my safe. That's why the term is not really useful in discussions like this.

    (the fact it is emotive doesn't help)
    I agree on the latter part in any case - most of what I desire, for curtailing cheap credit, is restrictions on the above.
    At least we can agree on something.


  • #297
    Permabear
    Closed Accounts Posts: 38,989 ✭✭✭✭Permabear


    This post has been deleted.


  • #298
    Permabear
    Closed Accounts Posts: 38,989 ✭✭✭✭Permabear


    This post has been deleted.


  • #299
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Permabear wrote: »
    This post had been deleted.
    And hence the typical attempt to reduce evidence down to opinion - this is actually what typifies economics in a lot of ways, trying to play down the idea of applying empirical research to policies, so that doubt can be poured on any claim counter to someones preferred ideological position.


  • #300
    Permabear
    Closed Accounts Posts: 38,989 ✭✭✭✭Permabear


    This post has been deleted.


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  • #301
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Iwasfrozen wrote: »
    ...
    The banks are there to provide people with a ability to pay the price they believe is fair for a house.
    ...
    I'm not going to go through each nitpicking point here (I've tried, and it results in a huge post), so I'm going to distill it this to the bolded bit.

    If banks exist to fulfill whatever the borrowers idea of a fair price is, then that means they exist to fulfill property bubbles - if that's what a small subset of the borrowers wish (those who bid up the house prices for everybody else) - even if this destroys a significant portion of the economy, as well as takes down the banks themselves (n.b. by your definition, such property bubble house price are a 'fair price' - right...).

    Fúck that, that is stupid, that's not what banks are for. The only way to avoid economic destruction from that, is to make the banks/central-bank/government, responsible for properly restricting credit, from the idiot borrowers (EDIT: the idiot borrowers, being the subset of borrowers bidding up prices on everyone else).

    This is required to protect the economy from the destruction property bubbles cause.


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