Blog 2023 Malcolm Blair-Robinson

House Prices

These are falling again. This is good news. They need to fall a good deal more. I realise the pain and distress this causes to those who are over borrowed, earn their living in the housing market, or are in the replacement kitchen industry. But we cannot get away from the fact that another housing surge with increased personal debt will lead to another crash. Neither can we get away from the fact that housing costs are too high to allow earnings to operate at levels which will make industry competitive and public services affordable.

For too long we have spun ourselves into a trance of believing that an economy based on debt and shopping was prosperity. We invented new meaning for old words. Debt became credit, spending became investment, borrowing more became equity release. This is why the total of private and public debt in the U.K. is the second highest in the whole world and, as a percentage of GDP, five times greater than that of the U.S., which is the biggest borrower of all.

The scale of all of this and the inherent problems it causes is way beyond anything which nervous politicians, muddled economists or hated bankers have admitted to. Like the cost of the second world war it may take sixty years to finally pay for. To survive at all financially, we will have to take much pain and slowly rebuild our economy on sound asset valuation, sound money, net saving and above all real wealth creation not derived from asset inflation.

We need to learn that cautious bank lending and falling house prices are good signs. We will have to learn on our own because nobody is going to have the political guts to teach us.

This entry was posted on Tuesday, August 10th, 2010 at 12:20 pm and is filed under Malcolm Blair Robinson. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.