November 3, 2012 at 9:58 am #57127
Britain’s twenty year long housing boom must ultimately come to an end. The boom started in 1996 following the long and deep recession of the early 1990’s that followed the Lawson boom of the 1980’s. Usually booms last about five to seven years followed by a recession lasting the same amount of time as the duration of the boom. Seven years of feast followed by seven years of famine. Seven good years followed by seven bad years; seven years of plenty followed by seven years of lean.
The Lawson boom of the 1980’s lasted five years that was followed by the five years of recession in the early 1990’s. The reason why the current boom will last twenty years rather than the usual five to seven year duration is because the last recession of the early 1990’s was so savage and severe that it could only end up sowing the seeds of a boom that will be much bigger that the last boom. A severe recession results in a boom that is much bigger than the preceding boom.
The recession that Britain experienced in the early 1990’s was a depression rather than a recession in that the economic slump was so severe and savage and it was compariable to the depressions that are currently being experienced in Spain and America at present.
The current UK boom started in 1996 and will last twenty years with the boom going bust in the year 2015. It will be in the year 2015 when the Bank of England finally runs out of ammunition to stimulate the economy and when bubbles cannot be fed they burst and the entire UK economic and housing Ponzi scheme that took twenty years to build up will come crashing down resulting in a savage twenty year long depression. The current boom is unprecedented in its duration and its size in that it will have lasted twenty years which is four times longer than the Lawson boom and house prices at the peak are around four times higher than they were at the peak of the Lawson boom. This means that the recession that will take place in 2015 will last four times longer and will be four times more severe than the recession of the early 1990’s that followed the Lawson boom.
A typical three bedroom house in Walthamstow in east london reached £300,000 at the peak. The same house could have been bought in the depths of the last recession in 1992 for about £60,000 and at the peak of the Lawson boom in 1989 the same property reached a value of £120,000. A property crash tends to cause house prices to reduce by 50% from the peak which means that when the current boom ends in a slump in 2015 the £300,000 house in Walthamstow will end up being worth £150,000, which is still quite alot of money.
Some people are hoping that the crash will cause house prices to return to levels last seen in the slump of the early 1990’s but they are very mistaken. During the twenty year long boom there has been a rise in inflation which has reduced the purchasing power of money such that money has lost half its purchasing power since 1997 when the Bank of England was given the job of setting interest rates. This inflation means that house prices can never return to the levels last seen prior to the boom having started in 1996. The cheapest that a three bedroom house in Walthamstow will ever become will be £150,000 and that is even if a nuclear war was to break out.
2015 will be an interesting year because not only will Britain’s economy go into a nosedive but the economy of Spain and America will go bankrupt and they will experience the real crash as opposed to the 2008 sub-prime credit crunch crash which was just the warm-up act and the crash of 2015 will be the main event.
When the British government finally brings the boom to an end in 2015 and flattens the economy you know that they are doing it just to prepare the economy so that another boom can then take place in the year 2035.
Some interesting phrases concerning money and the economy:
- you need to speculate to accummulate, buy low sell high;
pride comes before a fall;
when it’s too good to be true it usually is;
the bigger the boom the bigger the bust;
The bigger the party the greater the hangover;
What goes around comes around;
What goes up must come down;
every generation has to learn the lessons of greed;
if its not hurting its not working;
be greedy when people are fearful and be fearful when people are greedy;
by the time you know about something it is already too late;
act in haste and repent at leisure;
Live now, pay later;
There is always Hell to pay for a boom;
You have enjoyed the party, now is the time to pay the bill;
Only when the tide goes out do you discover who’s been swimming naked;
Risk comes from not knowing what you’re doing;
A definition of a good long term investment is a short term investment that has gone bad;
Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.
In the business world, the rearview mirror is always clearer than the windshield;
The investor of today does not profit from yesterday’s growth;
If a recession hasn’t occurred for a long time then one is imminent;
A fool and his money are easily parted;
a boom sows the seeds of a recession and a recession sows the seeds of a boom;
boom and bust are capitalism’s summer and winter;
No one can earn a million dollars honestly;
Never ask a multi-millionaire how they made their first million;
Death is the great leveller;
The love of money is the root of all evil;
Economics is the dismal science;
Ask five economists a question and you’ll get 6 different answers;
November 3, 2012 at 11:40 am #113226
The recession that Britain experienced in the early 1990’s was a depression rather than a recession
No it wasn’t.
November 3, 2012 at 1:26 pm #113228
And the boom started at the end of 1993, which was the absolute bottom in house prices in the SE. From early 1994 house prices were already rising and in 1996 my house was valued at 50% higher than in 93 when I bought it.
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