WHEN HOUSE PRICES COLLAPSE WHO WILL WIN, WHO WILL LOSE ?

The economy goes into a nose-dive, 10 years of no growth like Japan - we all lose.

It could be argued that the Japanese lengthened the deflationary period by preventing it doing its job of liquidating the bad loans. Instead of a short sharp and hard deflation they turned it into a slow grinding 15 years.

FoFP

Sounds about right for the Japs - good enough for a country that never apologised for Burma, Changi and a million other atrocities. Sorry, but I remember the '80s when Thatcher and Co were telling us all how we had to be polite to the Japanese in order to get their business - adopt their custom of a precise way of bowing when greeting, a precise way of handing over business cards, etc, etc. I don't think they worried much about our customs but... someone once said that the Japanese could do nothing as individuals so they went mad en masse... although that doesn't explain the Burma railroad.

Rant over...

I think the fact that Brown is now talking down a housing crash is an indicator in itself of how close we are to one.

John.

i dont recall the yanks ever apologising to anyone for Vietnam but that is irrelevant.

agreed. as Holmes has said before it probably wont take place til after the next election. heaven help Gordon if he is still chancellor.

I recall all that. I remember someone saying that soon Tokyo property in aggregate would be worth more than all property in the US and, after looking at it, I concluded that there was a credit bubble in shares and property there. It's of a par with "DOW 36,000" and the theory that Britain will bifurcate into renters who can't afford property and landlords who could.

Credit bubbles everywhere are people going mad en masse. The point is that few can see the madness until afterwards. It seemed perfectly sensible, and even astute, at the time to exchange a house for a tulip bulb.

Heh, I had precisely the same thought. At the end of the South Seas Bubble, they brought out the head of the Bank and even some of the Cabinet to deny there was a problem.

I also noticed that Fannie Mae have withheld some financial statements. I'm beginning to sense that the game is afoot.

FoFP

Not me. I've steadfastly refused to predict when the peak will be.

Mostly in credit bubble busts, any government in power has it taken out on them. I suspect that people will blame the BoE for not doubling interest rates and bursting it, and Brown will get the blame for "privatising" the Bank. Brown is certainly in the firing line and it's highly likely to prevent him ever becoming PM. Saying that he sees nothing amiss is giving a huge hostage to fortune.

FoFP

i obviously misread a post of yours. still.. cant be far off now. wee anecdote : my sisters friend bought a 100k house in cornwall several years ago and its value has since soared to 180k. what does she do ? remortgages and borrows the extra 80k at very low interest. i asked my sister if she would be able to pay this off if rates rose. not a chance. these people cannot blame anybody but themselves.

Is this leverage :

"Fannie and Freddie acquire home mortgages from lenders that initially make those loans. That provides funds for lenders to make more home loans. The two companies keep many of the mortgages as investments and package others into securities sold to other investors. The two companies own or guarantee roughly half of the $7.3 trillion of U.S. home mortgages outstanding."

Indeed. It's basically why I believe that Fannie and Freddie will be Ground Zero for the collapse of the credit bubble. You forgot to mention that they do all this on equity worth 3% of the guaranteed mortgage-backs.

They go and it's no credit and no more bubble.

FoFP

I just pasted it from a web site but it sounded an awful lot like leverage and the type of "innovative" financial vehicle galbraith writes about.

############### that they do all this on equity worth 3% of the guaranteed mortgage-backs. They go and it's no credit and no more bubble. ###############

could you expand on this ?

Perhaps we should apologize for what did to India. Mind you, they sent over a load of toys stuffed with used hospital bandages - so maybe we'll just call it quits.

Reminds me of a joke I saw on the gogglebox once: I'm quite a shy person, and I always get embarassed asking for things back. So when I go to the person's house, I try to break something of equal value.

I'll get me coat.

It's all very well covered at Doug Noland's Prudentbear website:

FoFP

I can't see how the lenders will benefit if they no longer have security to cover their loans.

The people who benefit are those who get out of the market before the crash happens.

Ah, but the Japs paid a very heavy price for their atrocities and their rule of 'no surrender' - the A-bombs on Hiroshima and Nagasaki. After that I reckon it was quits.

Cheers, RB

Isn't it about time the Welsh, Scots and Irish, who all claim to be Celts but in reality are probably no more Celtic than the average Brummie, apologise for the Celts' invasion of these Islands, sweeping away the Britonic (Ancient Briton) culture? And shouldn't we Cro-Magnons all be apologising for the disappearance of the Neanderthals? !!!!!

Cheers, RB (part Welsh, part Irish)

If there is a property crash on the horizon, one contributing factor could be the endowment shortfall scandal. Millions of people stand to owe money when their endowments end. A proportion of these people are likely to be sufficiently stretched to need to sell their houses to raise the cash they owe.

cheers, RB

"John Smith" wrote

Sorry, but I

When exactly did she do that?

Hear, hear!