Where are we on the Limits to Growth model?

[johnhemming2]

total supply (my addition) 6121250 (GBP Million)

The larger M numbers generally include the smaller ones. Hence for the broadest measure of money you take the largest M number. I personally think that is flawed as it ignores credit and credit limits which give rise to purchasing power which is what it is supposed to be about.

Ie you shouldn't add them together to get a total "money".

It remains, however, that basic liquidity is either M0 or M1 figures. Really M0

[johnhemming2]

gross property price inflation of recent decades

Not hyper inflation. It does happen (hyperinflation that is).
https://en.wikipedia.org/wiki/Hyperinflation

Property prices are being driven up by demand against a limited supply (which is why they have been going down a bit in the last 3 quarters - slight reduction in demand).

[Little John]

total supply (my addition) 6121250 (GBP Million)

The larger M numbers generally include the smaller ones. Hence for the broadest measure of money you take the largest M number. I personally think that is flawed as it ignores credit and credit limits which give rise to purchasing power which is what it is supposed to be about.

Ie you shouldn't add them together to get a total "money".

It remains, however, that basic liquidity is either M0 or M1 figures. Really M0

Even by the definitions you have indicated above, notes and coins still come to a mere 3% of the total money supply.

Credit/debit card transactions (in other words, debt based money) now make up the majority of basic transactions in the UK. So basic liquidity is not now served by a majority of notes and coins. Furthermore, this transition occurred in 2015.

http://www.bbc.co.uk/news/business-32778196

Not that this is even relevant anyway since the vast majority of transactions over and above simple, small transactions has been on the back of debt-based "money" for many years.

[Little John]

gross property price inflation of recent decades

Not hyper inflation. It does happen (hyperinflation that is).
https://en.wikipedia.org/wiki/Hyperinflation

Property prices are being driven up by demand against a limited supply (which is why they have been going down a bit in the last 3 quarters - slight reduction in demand).

Demand has not gone down. What has reduced is the capacity to act on the basis of that demand due to a lack of "money" available to borrowers relative to the asking price of properties. In order for market volume to increase, wages must rise or prices must fall.

Furthermore, "demand" has been largely driven, "hitherto", by near ZIRP. In other words, for the majority of buyers, the only thing they can afford to worry about, given they have no choice but to enter the market if they are able, is how much will be the monthly cost of servicing the debt. Outside of the polluted hothouse of dirty foreign money swirling around London, in the absence of near ZIRP property prices would have fallen long ago in the rest of the country

[vtsnowedin]

Little Jhon.
I don't understand why you are so angry.
The sum total of money for you the individual is what you have in your pocket plus what you might have under the mattress or it's equivalent plus what you have as credits in the bank as either checking accounts or savings accounts. Would you really want to have to carry around and protect the whole sum in your pockets?
And yes a thirty year mortgage on a house is a terrible deal except that you get to house yourself and your family in that house for those thirty years while the cost of the house goes up along with inflation and at the end of the thirty years you own the house whereas if you had just rented for the same time the same house the owner would kick you out next month if you couldn't come up with the rent.

[johnhemming2]

Furthermore, "demand" has been largely driven, "hitherto", by near ZIRP.

Some days you worry about interest being too high. Some days you worry about it being too low.

The demand from Eastern European purchasers for UK property has dropped because of Brexit. Some have dropped out of buying property or offered a lower price simply because of the referendum vote. Nothing to do with interest rates.

I am not saying interest rates are irrelevant, but demand can be affected by things other than the availability of finance.

[Little John]

Furthermore, "demand" has been largely driven, "hitherto", by near ZIRP.

Some days you worry about interest being too high. Some days you worry about it being too low.

I do not vacillate on interest rates, as you appear to be trying to suggest.

The demand from Eastern European purchasers for UK property has dropped because of Brexit. Some have dropped out of buying property or offered a lower price simply because of the referendum vote. Nothing to do with interest rates.

Jesus wept, this is not just about London

I am not saying interest rates are irrelevant, but demand can be affected by things other than the availability of finance.

Interest rates are not the fundamental problem. They are a symptom of it. The problem is money issued as debt with interest attached on a finite planet

[johnhemming2]

The demand from Eastern European purchasers for UK property has dropped because of Brexit. Some have dropped out of buying property or offered a lower price simply because of the referendum vote. Nothing to do with interest rates.

Jesus wept, this is not just about London

I am not saying interest rates are irrelevant, but demand can be affected by things other than the availability of finance.

Interest rates are not the fundamental problem. They are a symptom of it. The problem is money issued as debt with interest attached

I know of a case where Eastern Europeans pulled out of a purchase because of the Brexit vote outside London. It is not just about london.

Secondly, as we have discussed elsewhere the notes and coins on your pocket don't pay any interest.

Thirdly as some central banks now have had negative interest on their central bank accounts (Sweden did for a while) that cannot be the issue.

The issue of supply and demand relates to a mixture of net immigration, more households because of couples splitting up and restrictions on building houses.

There are areas in the country where it is difficult to sell houses because the demand is so low. Those areas of the country, however, have exactly the same monetary policy so the issue cannot be monetary policy.

[Little John]

The demand from Eastern European purchasers for UK property has dropped because of Brexit. Some have dropped out of buying property or offered a lower price simply because of the referendum vote. Nothing to do with interest rates.

Jesus wept, this is not just about London

I am not saying interest rates are irrelevant, but demand can be affected by things other than the availability of finance.

Interest rates are not the fundamental problem. They are a symptom of it. The problem is money issued as debt with interest attached

I know of a case where Eastern Europeans pulled out of a purchase because of the Brexit vote outside London. It is not just about london.

Secondly, as we have discussed elsewhere the notes and coins on your pocket don't pay any interest.

And as I have pointed out, on the back of your own quoted numbers, note and coins account for around 3%, at most, of the money supply in this country

Secondly, contrary to what you appear to be implying, that house prices falling is a bad thing, it is not. It is a good thing.

Thirdly, monetary policy is what has driven prices to unsustainable levels. And, despite that monetary policy being driven to new extremes (ZIRP and near ZIRP), a lack of well enough paid work is what is causing prices to finally falter.

Market size is driven by underlying material demand

However, if the prices in that market can only be met with debt, market vigour/volume is driven by capacity to service the debt

Demand is as big as ever. It is market volume that has collapsed. Market volume will only cause prices to rise within the constraints of what money is available. For prices to rise above that ceiling, extra money must be available. The insane prices rises in real estate over the last three decades is a consequence of demand in the context of an unregulated system of money-as-debt creation and near ZIRP has merely been a last-gasp attempt to try to keep that party going. Demand alone would have hit a price ceiling long ago

One of three things will cause that volume to return; cheaper debt, greater capacity to service the debt or cheaper prices

[kenneal - lagger]

What has driven house prices so much higher than they used to be as a proportion of income is the entry of banks into the mortgage market and their willingness, no, enthusiasm, to drive up house prices by allowing the lending of an ever larger proportion of salary on mortgage payments.
When Building Societies were the only lender on house purchases there was a maximum lend of three times salary plus one half of the second salary and 80 or 90% maximum lend. That had a dampening effect on house price increases because if prices went up over the rate of wage inflation most people left the housing market until wages caught up. When banks began lending ever higher proportions of wages, concluding with five times salary and 110% of valuation just before the 2008 crash, house prices rocketed.
This was good for the banks because they got to charge ever higher amounts of interest on any one transaction and also their asset values went up along with the property prices. Not good for the general public or the economy though!
The only way that the economy can improve is to increase the spending power of the British public and the best way of doing that is to reduce the too high proportion of wages that are spent on where we live. That means reducing house prices and the cost of renting. Unfortunately this can't be done quickly as it would precipitate a bank crisis and would put many recent buyers into negative equity. We need a house price freeze and rental cap for a couple of decades and this would have to be engineered through an increase in social housing provision. This provision should be paid for by the government printing the money rather than borrowing from banks and allowing them to print the money and profit from doing nothing.
If this was an announced policy aim it would cause a huge outcry from the *anking sector and the press, whose owners have a large interest in the financial sector, but it should eventually take the steam out of any opposition when the benefits start showing through. The young especially would see the benefit to them in the future and it would be a very good vote getter for which ever party proposed it. Even "Mum and Dad" bankers would see the ultimate benefit.

[emordnilap]

When Building Societies were the only lender on house purchases there was a maximum lend of three times salary plus one half of the second salary and 80 or 90% maximum lend. That had a dampening effect on house price increases because if prices went up over the rate of wage inflation most people left the housing market until wages caught up.

This.

[RenewableCandy]

Thank you Ken.

Btw we have a friendly Tory in the house, mate of fils. His parents have emigrated to Spain but his new flat isn't available for another couple of weeks, so he's staying here at Chateau Renewable.

In September he'll start an Economics degree course. Dinner convos are interesting...

[Lord Beria3]

https://medium.com/insurge-intelligence ... f81f85686b

Back on topic...

A new scientific research paper authored by a team of European government scientists, published on Cornell University’s Arxiv website in October 2016, warns that the global economy has entered a new era of slow and declining growth. This is because the value of energy that can be produced from the world’s fossil fuel resource base is declining inexorably.

New scientific research suggests that the world faces an imminent oil crunch, which will trigger another financial crisis.

A report by HSBC shows that contrary to the commonplace narrative in the industry, even amidst the glut of unconventional oil and gas, the vast bulk of the world’s oil production has already peaked and is now in decline; while European government scientists show that the value of energy produced by oil has declined by half within just the first 15 years of the 21st century.
The upshot? Welcome to a new age of permanent economic recession driven by ongoing dependence on dirty, expensive, difficult oil...

"HSBC believes that after 2018, this is going to manifest in not simply a global supply shock, but a world in which cheap, high quality fossil fuels is increasingly hard to find.

This goes along with my own reading which indicates a major energy/economic crisis by the end of this decade.

[Lord Beria3]

https://medium.com/insurge-intelligence ... 96dec3f13b

An excellent article on EROI and the broader oil picture.

Because the health of the global economy depends not just on the quantity of reserves — but the quality of supply.

And the quality of supply, as measured by EROI, is haemorrhaging. And that inexorable decline in global net energy is increasingly acting as a key biophysical constraint on global economic growth.

Axiom 4: Global net energy has declined over the last century. This decline correlates with a long-term decline in the rate of global economic growth. These two phenomena are not accidentally related, but causally entwined: economic growth consists of an increase in production and consumption, which is based on the extraction of energy and its conversion into goods and services.

[vtsnowedin]

Thank you Ken.

Btw we have a friendly Tory in the house, mate of fils. His parents have emigrated to Spain but his new flat isn't available for another couple of weeks, so he's staying here at Chateau Renewable.

In September he'll start an Economics degree course. Dinner convos are interesting...

Visions of a Archie Bunker household with fils as Gloria and the new tenant as the Meathead but that leaves you as Edith but trying to stuff you into that role gives me a brain cramp.