Posts tagged as economics

18 Sep 2007

Falling house prices mark the end of the Great Stability

Governments’ boast that they had succeeded in taming both inflation and the business cycle was always a hollow one. The lie was given by rampant house prices and commodities, massive speculation in investment structures that barely existed a decade ago and record levels of debt on both governments’ and households’ balance sheets. Monetary authorities succeeded in cheating recession after 9/11, which coincided with an incipient downturn, but economic activity continued to expand only at the cost of unsustainable strains in financial balances between the key sectors making up the economy. Thanks to a feeding frenzy in the housing market, none was more extreme (in terms of flows as well as balances) than the US household sector.

read more Commentary by Stuart Fowler
15 Aug 2007

No nonsense economics: what’s gone wrong in credit markets, why it was predictable and what lessons investors should learn

Economics matter to wealth managers like No Monkey Business. To plan household finances and manage portfolios, we model financial market behaviour. How we model it requires some implicit views of how economies behave. At the heart of our views are some old-fashioned, let’s say orthodox, ideas about banking practice and its impact on the business cycle and asset price cycles.

read more Commentary by Stuart Fowler
24 Jul 2007

The housing green paper: more shoddy work on the foundations

‘No nonsense thinking’ is exciting because it leads to practical ideas about living your life which bring tangible rewards. The UK’s conventional wisdom that owning your own home will bring greater rewards than renting or leasing is a good example of how slavery to an idea can lead on to slavery to a bank or a job and damage life goals requiring money that may have even greater value, such as learning new skills, family-raising and retirement saving.

read more Commentary by Stuart Fowler
13 May 2007

The housing ladder: what exactly pushes it out of reach?

Surely a silly question! Rising prices relative to income make house prices unaffordable. I’m not a property economist but if I apply my expertise in both financial asset pricing and personal financial planning, I think I gain further insights. I hope some property experts will take these further.

read more Commentary by Stuart Fowler
09 Apr 2007

Drowning in debt: the American way

America’s insecurity after 9/11 showed in a desperate attempt to prevent recession by cheap and easy credit. Now the chickens are coming home to roost. An unprecedented house price boom was in large measure fuelled by this monetary expansion but it was also aided by lax lending standards from mortgage bankers and by new sources of liquidity from hedge fund investors – now as big as banks. In recent weeks we have seen the first signs of this foolhardy liquidity drying up, with several lenders to the dodgiest borrowers going bust and others shutting up shop.

read more Commentary by Stuart Fowler
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