Unfortunately for British buyers, the 'invasion' has made property expensive, especially in London.
If I were a Spaniard, I would probably consider moving to Britain, too:
Source: The Commentator
Unfortunately for British buyers, the 'invasion' has made property expensive, especially in London.
However, it's still much better to complain about high prices of British property than suffering from a prolonged period of asset price deflation like this:
I have nothing against Spaniards who move to Britain. They just want to have jobs, families, lives like anybody else. I blame the Spanish government: not the current cabinet, but the Spanish political establishment as a whole for having pursued inept economic policies in the long run.
Everybody knows that Ireland has experienced a boom after having adopted the euro, and a subsequent bust. It has been accompanied by wild swings in property prices:
Somebody may argue that Northern Ireland—which, of course, uses the pound—hasn't been better off when speaking of property prices. The boom in Belfast was no less breathtaking and the bust was similarly gut-wrenching as in Dublin:
Well. Is it thus indifferent if we have the pound or the euro? Not nearly so. This is what really matters: the unemployment rate in Britain compared to Ireland. Note that the unemployment rate in Northern Ireland peaked in 2013 at 8.5 per cent. The Republic of Ireland has been much worse off.
This is the real advantage of having an independent currency. Forget the property market.
Permabears are silly creatures. They keep foreseeing the end of the financial world as we have known it, the Apocalypse that would destroy the value of stocks and bonds worlwide. The tout the catastrophe which never happens.
Of course, there may be deep and prolonged bear markets. However, central banks keep producing new money that would eventually push the price of stocks and bonds up. Yes, you may lament about moral hazard, but if you invest in the stock market, you win in the end. You keep winning.
Naive investors will see the value of their investments growing over time, even though bear markets may hamper the growth from time to time (see the green line below). A permabear, however, will end up embittered and losing money, even if he may have been be considered as a hero during the crisis. See the blue area below—the growth (and decline) of the $10,000 invested into Hussman Strategic Growth 10 years ago:
Pretty unimpressive, isn't it. As I told you, being a permabear is the silliest thing in finance whether in the long run (above) or in the short run (below).
There are very few markets where permabears keep winning. Japan comes to mind. However, America is not Japan. Neither is Britain. Some Continental economies suffering from a prolonged banking crisis, however, may bear some resemblance to Japan, whose stock market collapsed under the weight of bad loans in the early 1990's. It has never fully recovered. Perhaps a better idea for Hussman than incessantly shorting the US stock market with little success.
What we are likely to pay:
This is the value we're supposed to get. Note that expenditures exceed revenues by £84 billion.
In plain words:
If this is not scary then what?
From 1980 to the present day, average gross government debt in three major developed countries (USA, UK, France) has risen from 33.2 per cent GDP to 92.4 per cent GDP. No major wars occured during that time span, and there was a substantial 'peace dividend' which was made possible by the victory in the Cold War.
If there was an emergency, which would require the Western world to engage in a major conflict—such as with the Islamic State—what would we do? Would we just say 'Sorry, world, we have no money, because we've squandered everything on food stamps and bailouts, let's try to reach a settlement with ISIS?' Or would we just give in?
That said, everybody knows that ISIS is no direct threat to the Western civilisation for the time being. The most vicious and hateful state since the Third Reich (yes, it is already a state, albeit not recognised) is still weak and could be easily wiped out if the West only wished so. However, what may happen in five, ten, or twenty years?
One day we might bitterly remember the rosy times of the not so distant past when our debt was only 92 per cent GDP and the Islamic State had no air force and no nuclear weapons yet. Will we seek appeasement then?
This captured my attention recently: Is economic growth permanently lower? Why does the long run GDP growth rate in the advanced economies keep falling? Why, oh, why?!
Source: Is economic growth permanently lower?
Of course it is. The reason why is quite straightforward:
A high level of redistribution introduces inefficiencies into the market mechanism. That makes productivity falling and the GDP growth rate decreasing. Elementary, dear Watson.
From 1995 to 2014, monetary inflation in Britain amounted to 9.6 per cent on annual average (measured by the M1 money supply aggregate). That has had a sweeping impact on asset prices. The chart below shows the relative growth of three Land Registry House Price Indices for England & Wales, Greater London, and Westminster, respectively.
Source: Bank of England, Land Registry
The House Price Index for England & Wales grew by 5.4 per cent per annum during the period observed. This has been a considerably slower pace compared to the M1 money supply growth. The house price growth has been mitigated by new construction and by privatisation of council flats.
In the area of Greater London, new construction is strictly limited. This is why the growth of money in circulation pumps up London property prices by a faster rate than prices in the rest of the country.
In Westminster, this mechanism is even more pronounced. Noone will ever build more flats in Westbourne Terrace, for instance. Most residential buildings are listed, no land for new development is available. That's why Westminster House Price Index has relatively closely mirrored the M1 money supply aggregate.
Sure, foreign buyers have also had an impact on the house price level in Central London. However, money supply in most other countries keeps growing at a similar rate as the British M1 over time. Thus not much difference.
Over an extended period of time, property prices are more likely to grow faster in metropolitan areas than in suburbs or villages. (Depending on location, of course.) As wealthy people tend to reside in attractive city locations (or own rental properties there), their wealth keeps rising accordingly.
A cause for a Piketty tax? Not really. A steeply progressive property tax solves nothing. The government will always squander the proceeds. Rather, I would encourage other cities to thrive and prosper. Central London is too busy, anyway.
While correlation is not causation, the growth of the regulatory burden...
... may very well explain this:
Unfortunately, the regulatory burden data go back only to the year 1997.
This is an utterly misguided statement:
From the article:
Although many Europeans, especially the Germans, have been brought up to fear inflation, deflation can be still more savage (see article). If people and firms expect prices to fall, they stop spending, and as demand sinks, loan defaults rise. That was what happened in the Great Depression, with especially dire consequences in Germany in the early 1930s.
Wrong, The Economist, wrong. With all the due respect to one of the most renowned and oldest economic journals, it does not understand what deflation really is. Nowhere in the world, never in the human history, people have stopped spending in the anticipation of prices to fall. It's an economic urban legend that has never been proven true.
In fact, there are two basic kinds of deflation. First, the well-known and much-debated price deflation, which doesn't really matter. Secondly, there is monetary deflation, which is much more important. Monetary deflation is the dangerous variety, which The Economists, and most of mainstream economists, fail to understand.
This is how both kinds of deflation looked like during the infamous Great Depression:
Source: Federal Reserve
From 1929 to 1933, there was a severe monetary deflation. The amount of money in circulation and credit sharply fell as banking crisis unfolded. That was why retail and commodity prices fell, too. The price deflation was just a consequence of the crisis, not vice versa as The Economist seems to believe!
Since 1933, banking crisis has been resolved, credit volume growth resumed and so did the money supply. The price inflation remained very low until the WWII for a variety of reasons, including productivity growth.
Money supply growth (or money supply decrease) determines whether the economy would growth or fall. The inflation (or deflation) of consumer prices is relatively unimportant.
That said, there indeed was a credit deflation in Germany starting in 2009:
Now this is the really scary thing.
Canadian contribution to the Allied victory in the WWII has long been underappreciated:
"... Britain had to address the parlous state of her own finances, having effectively been bankrupted by the costs of the war. She had been able to continue fighting since 1941 only as a credit client of the United States under Lend-Lease, and, which is much less well known, of Canada, receiving from her both soft loans (which would not be repaid until 2006) and outright gift aid.
That Canada's contribution to Britain's wartime finances should have gone for so long unacknowledged is both unfair and ungracious. Canadian loans totalled $1.2 billion and outright gifts $3.5 billion. To put this in context, the first phase of Lend-Lease was only $1 billion, and even this proved controversial in the US. Writing shortly before his death, Keynes made it clear that in his view Britain would not have been able to continue the war but for Canada's generosity."
The mess we're in: Why politicians can't fix financial crises. Guy Fraser-Sampson
This may have been paid for by Canada, too:
Picture taken by The Devil in front of the RAF Museum in Hendon. (Highly recommended.)
A white male with some professional experience in finance and investing.