The true wealth of the people!

It's always a failure...Socialism is inevitable

Define failure.

As Keynes once said, capitalism is like a staircase.

It has failed to bring all human beings to a certain standard of living.

You may point out that capitalism doesn't aim to that which is not a defense. It is a simple admission of the inadequacy of capitalism.

Capitalists think it is normal that half the world is in poverty. Their goal is not to bring a better standard of living to everyone. It's about letting those with capital make the most of their capital. It's successful in that respect only but I do not dabble in such decontextualized nonsense.

I'd like to point out the irony of capitalists hating socialism but they live by it. It you were to narrow the range of analysis to only those who own the means of production, they have socialism.

I didn't say interest rates. I said mortgage payments. If a landlord has mortgage payments of £1000 a month. They will charge £1000 a month for rent or possibly a bit more. I can't find statistics on the amount of homes that are privately rented by landlords that have a mortgage on the home. I think it's the majority. This means those landlords that have finished paying the mortgage on the homes they own can charge the same or a bit less than what the landlords with outstanding mortgage payments charge. This pushes up rent costs. This is why private landlords are reluctant to carry out vital repairs, take cash in hand and pack houses with more persons than there should be. They do not make profit per say. They just pay the mortgage off with your rent. This is obviously a ****ty deal for the tenant so why not get a mortgage. Makes sense in this dysfunctional system. That is why I despise mortgages.

People's wages do not deter landlords from charging what they need to break even. Normally, people's rent costs are not adjustable so they will probably skimp on other costs like food, electricity, travel, clothes, extra curricular activities etc.



Since rent is linked to mortgage payments, this system equates mortgages to renting. Please refer to my explanation above. Also, as I said before, house prices must go up in order for buying a home to make sense. Therefore mortgage payments increase and therefore cause rent costs to increase.



Everyone buys a house based on the capital return. It's a savings vehicle as well as a home. Are you telling me that you would pay in total £450k for a house that will be worth £200k in the future? I don't think so. If you would then you're a zombie.

Na. What I meant with my Thatcher comment is when the right to buy scheme was implemented people bought cheap homes and made unrealized capital gains fairly quickly. Now there are less discounted homes to buy + speculation. This causes prices to be high and therefore mortgage payments to be high. This makes it difficult to benefit financial from purchasing a home since house prices cannot go higher unless more demand is creating which was the case in the subprime mortgage schemes in America. Poorer people were able to buy homes and keep the ponzi scheme going but they could not keep up with the payments and failed. Banks sold on the toxic assets and then loads of assets turned to **** but that is going into some other issues.

So in conclusion, the house buying system is based on speculation that effects everyone directly or indirectly. I would rather the government controlled all housing and charged rent based on total debt repayment, building insurance and a urban proximity multiplier. (This is what I have come up with).

Negative equity is inevitable, unfortunately. Home ownership in a capitalist system is a fantasy. It's created to benefit the banks that give you the mortgage at the detriment of you and I.

Its still going the right way.

Capitalism delivers a better standard of living for the masses, regulated capitalism even more so. Over time, absolute poverty declines as people experience real wage growth.

Historically it has been normal, the west has proven that if you make good policy decisions you'll get wealthier. A better standard of living is the side effect, a good business environment creates business, creates jobs, creates consumption, creating more jobs.. If my wage rises 5% while inflation is 1% then I don't care that somebody else made 10 million in capital or wage appreciation.

Yes. That's largely due to globalism allowing for oligopolies due to it being harder to regulate the resources that big business can foster to abuse their position in the market. Outside the financial sector the UK is actually better than most though.

50% of the world earns $1 a day. 80% of the world earns $10 a day.

How long will it take to bring these figures down? Do you really think capitalism aims to improve everyone's standard of living?

What masses? To whom are you referring to?

50% of the world earns $1 a day. 80% of the world earns $10 a day.

Especially when someone makes 10 million which they will probably reinvest into the economy and increase a cost that you incur.

The typical decontextualized scenarios

Mortgage payments is entirely dependent on the mortgage length.

So if mortgage rates double in two years - which is quite possible, you're saying rents would double?

They are adjustable, they can move to somewhere cheaper, or negotiate rent down. Landlords don't like dead periods.

I'd pay £450k knowing it was going to be worth £200k in the future if I thought I'd be paying £300k in rent in the interim.

I don't really understand how right to buy effected the rest of the market. Its not like my parents were able to buy a discounted home in the 80s Then again my parents bought their present home in 1994 with cash - complete speculators and it worked, 250% paper return since then.

Its not really speculation though, everyone needs somewhere to live, either rented or owned, its hardly like high house prices make anyone richer unless they downsize.

Could you demonstrate the mortgage/rent link? ie when mortgage rates fall, how rents fall too? And/or how when mortgage rates rise, rents rise in line?

http://www.bbc.co.uk/news/magazine-17312819

Suggests dollar a day poverty has come down, and is much better than 50%...

Although I doubt its much to do with capitalism - apart from in China.

You're defending the system by referring to the cheapest mortgages ever or some bs.

I don't know what to call someone who advocates for a system which ultimately ****s you up.

AHHHH I got it....You're a ****ing dumb capitalist ZOMBIE!!!!!!!!!

What masses? To whom are you referring to?

50% of the world earns $1 a day. 80% of the world earns $10 a day.

How long will it take to bring these figures down? Do you really think capitalism aims to improve everyone's standard of living?

You sound like a capitalist zombie. If your wages increase by a larger proportion than general prices, you don't care. In reality this doesn't happen often, does it. Especially when someone makes 10 million which they will probably reinvest into the economy and increase a cost that you incur.

The typical decontextualized scenarios won't cut it I'm afraid. I adhere to a holistic approach. As you are a capitalist, you will endeavour to provide examples that are detached from reality and have many underlying assumptions which are appropriately unrealistic.

I don't understand what part of my reply this statement addresses.

Why do you keep referring to mortgage rates. I'm talking in terms of mortgage payments. If the interest rate doubles, the mortgage payments do not increase by double. They do increase.

Anywho, if this happens, rent will increase on homes that are owned by a landlord that has a mortgage out on the loan. If the tenant cannot pay, they leave for somewhere else or, if there is not a cheaper option, they will probably lend from Wonga, sell their valuables, lend from friend or refuse to pay. There are many scenarios that will play out. I think what will happen is the landlord will have to use their own money to pay the difference between what the tenant will pay and what the mortgage payment is, assuming the landlord works.

Overall, it will cause those with mortgages to struggle to meet their payments and most probably default, especially if they have taken out a mortgage on a scheme like help to buy for example. If some people start defaulting this will cause confidence in the housing market to decrease then the price of houses to decrease which in turn results in the reduction in demand which triggers a cycle. Securities tied to income from houses will be devalued since they cannot sell the homes which will cause panic in banks that have these types of assets. Access to credit for mortgages stops. Banks own houses noone can buy. They will have to revalue their balance sheet items which affects their profit forecast since a loss will be posted in their profit and loss account. Shareholders moan. Stock prices go down. Deposit are scared that banks will collapse and a run on the banks commences. This is one of the many scenarios that could occur.

In regards to rent increasing or decreasing, it depends on how many homes are available to rent. Those landlords that own the properties outright can rent for whatever so they won't necessarily effected. Unless, they have taken out a partial loan on the house or they rely on the income from the house to pay for their living expenses.

Depending on the whole economic outlook, rent could go any which way. If there was an economic collapse then I presume people will be made homeless as they cannot afford the rent being charged. Economic collapse is likely because houses are a vital cornerstone of the financial system. Basically, 07/08 collapse will occur. If their is a bail in or bail out then everything will be fine I guess. Bail in's will restrict money supply and therefore cause deflation etc. Economics is all guesswork. Loads of outcomes are possible. Make a guess based on previous collapses and an analysis of the current and immediately prior situation.

Ultimately, it comes down to what the tenant can pay. If the majority of renters cannot pay whatever the market rate is, it will have to drop otherwise the landlord will make losses, unless they are restricted by the mortgage payments they have to make.

It is also important to remember that the financial sector demands a certain rate of return on investments which can also effect the rent costs. In most cases landlords are investment banks. In America, they have started to create rent back securities. People that had previously defaulted on their mortgages are offered rental contracts that have payments equivalent or in some cases higher than the mortgage payments they used to pay. They cannot go elsewhere since all the housing companies are doing it so they are doomed. They struggle to pay these rental costs. The go to pay day lenders to make rent.

So who knows the outcome eh...I have described some scenarios to you which are based on reasonable factors.



You geezers give me a headache. Just answer the question. Then add your additional conditions. This is a more appropriate way to proceed. lol Why would rent be that much? What reasonable assumption is this based on?

Is it based on the objective of opposing my views? I think so.



I would need more information about the home but I can give a generalized answer.

In regards to the right to buy scheme, it brings people into the market. Makes them become speculators. Some people sell their house to move abroad. Some sell it to upscale. Some lend against it and start a business which could be successful or fail. If it is successful, it is likely that they will want to upscale and take out a huge mortgage to buy a mansion for example. They could also delve into the real estate business. Buying homes then renting at a high price while holding onto an appreciating asset. Some lend against it to send their kids to private school and repay the mortgage with their job. Some lend against it and buy another home which they rent out. This one is the most common way. Lend 150k on your home. get 5 mortgages with 25k deposits and make the tenant cover the mortgage payment and get a little profit on the side for yourself. In 50 years you have 5 extra homes all worth 200k each. A quick million. You can't do that know. The essence of a ponzi scheme.

It's like the asset of all assets. Receive monthly cash flows while the market value increases. This fuels big capital to swoop in and start pushing for bigger margins which leads to bigger rental costs and house prices and so and so on. As it is a ponzi scheme, it is self perpetuating.

People buy their home and sell it at a higher price for whatever reason. People with large amounts of capital can come in and purchase homes for cash, avoiding mortgages, and hold onto it until they can sell it for a good return or they need to free up some capital.

That would require a mini research project. Also, I haven't been talking in terms of mortgage rates. I've already explained the basics of it. People speculate on housing i.e. they think the price will increase. People buy homes using a deposit. Rent it out and cover the mortgage cost with the rent received. The more people doing this the higher the price of houses go. Then new buyers buy homes because they think the price of houses will increase. They pay a larger mortgage based on the inflated house price. The cost of rent increases to match. Meanwhile, capital flows into houses in the particular geographic area where the prices are increasing and push the prices higher. etc etc...until the bubble can no longer continue, i.e there aren't enough people to take out mortgages or a large enough capitalist sucker to put their capital into obviously inflated houses. Then house prices decrease, defaults, repossessions, illiquidity in financial sector, revalue assets, huge losses on books, companies panic fire people, stock prices tumble, people savings lose value etc etc...this is assuming the government doesn't bail out the government like in 07/08.

Apply this cycle to real life and I am sure you will see a correlation. In regards to decreases in mortgage rates/payments, if the owners mortgage payments decrease they might charge less rent depending on the overall market. Mortgage payments will only decrease if interest rates decrease. If interest rates decrease credit is cheaper and therefore the bubble ensues pushing up house prices and mortgages and payments then rents etc etc...Obviously, you must account for the willingness of banks to lend to individuals who want to buy homes. This is probably why the help to buy scheme came into practice. They are scared that the money supply will dry up so they want to stimulate demand in houses by making it more desirable.

I could go on but my bed awaits me.

Meh. I need to scrutinize these figures.

Is the UK responsible for that? Are we responsible for the dictators, for corruption, for violence, in many parts of the world?

That makes no sense. How does their investment increase prices? In many cases, it might decrease prices; say you have a market for widgets at $10 a widget. A man invests $10 million in creating a company that sets up a factory selling these items at $8 a widget so he can grab some market share.

He takes a part of the widget market, and prices are pushed down. Therefore the investment has pushed down prices. This happens in many industries, the computer industry is probably the best example; prices for computers and computational devices have gone down year-on-year since the 1970s

By "decontextualised", you mean "failing to take into account extraneous considerations that I misguidedly believe are relevant", no?

Angry are we?
Not yet picked up that first pay cheque?

The masses are the people in this world. Real wage growth is occurring in most parts of the world.

The figure for $1.25 a day is actually closer to 1 billion people.

Absolute poverty falls each year, the side effect of capitalism.

Well that depends on your spending pattern. The poorer you are, the more your wage is dependent on food and energy however as you become wealthier you may buy more white goods which tend to decrease in price substantially over time. That being said my parents are on welfare and once energy companies cut prices they will have seen price falls in their food, energy and fuel over the past year.

That's really a nonsense statement.

You were talking about corporate welfare, I was agreeing with you.

This is why I dislike statistics. It makes it sound like everything is ok. It's not. At least half the population in the world have a substandard living standard.

If you earn a lot it is highly likely that you will spend a lot, maybe even spend more than you have. You always hear people say the middle class drives the economy. Why? because they buy ****. They buy things all the time not because they need them because they want them.

lol falls in prices causes increases in consumption by the poor and rich.

According to you...which is quite appropriate

Oh.

I was sitting in my kitchen this afternoon, reading the papers and munching on a succulent clementine satsuma and it occurred to me how privileged I am, and indeed wealthy, compared to someone sitting in their kitchen in 1949.

In 1949, for the average working family, eating a satsuma was a wondrous treat, perhaps only done once a year; working class families often gave their children as their Christmas present a piece of fruit. For your average working man, a satsuma was an expensive indulgence, it would cost as much perhaps as much as a few packets of cigarettes (for comparison, imagine it cost 15 pounds in today's money)

On the other hand, today I can pick up a whole bag of clementines for a couple of pounds. Indeed, I can easily purchase more clementines than I care to eat, and it a very low price. That my fellow TSRians is true wealth; or rather, it's a true increase in wealth.

Another example is when my Mum first moved from Australia to the UK as an adult in her early 20s (she was born here, then the family moved to Australia), she could usually afford to make one international long-distance call home a month. It was astoundingly expensive, the lines were often fuzzy (they were passed over communications satellites) and they had to be short and sweet. Now, I can call home to my Mum, or anyone, on Skype, with full view of one another, for nothing. I call that a true increase in wealth / living standard.

If an average working man of the 1940s were to peer into my life today, he would think in some ways I live the life of a millionaire of his day. In fact, I can do and enjoy many things a millionaire of his day could not (my access to general open-source information, for example, exceeds that of any man in 1949 in terms of speed of provision and volume). The average person today is healthier, freer, longer lived, better clothed, better housed, better educated and safer.

When you look at many aspects of our lives today, our society and political structure (social democratic capitalism; a free market consensually saddled by a safety net and regulatory oversight) has delivered astounding increases in the wealth. The material comforts of the average person today would suggest that the aims of the politicians of decades ago were, on the whole, successful; they created a remarkable society, much more comfortable, tolerant, peaceful and free than 'ere it was. I do believe that inequality and wealth gaps are important, but it does bear thinking about the absolute increases in the material wealth and comfort of the ordinary person.

I say this to attempt to give some perspective to the people who moan that all politicians are completely corrupt and incompetent, that everything is awful and everyone is part of a conspiracy. In actual fact, the society the politicians of the 50s, 60s and 70s promised us (as far as the conditions of the average man, or average family) has been fulfilled. The important thing now is to recognise what a remarkable and precious society we have created, and ensure we can both conserve what we have now and continue to evolve in the way that has brought us such prosperity, safety, comfort and freedom.

Fair enough, but even so is there any evidence for rents rising as mortgage rates rise?
As rates went from 8%-->14% in the early 90s there would have been a 55% rise in the cost of a 25 year mortgage. So did rents rise dramatically? If not, which period illustrates your point?

Yes, it comes down to what tenants can pay, thats why I say rents rise with wages, not mortgage payments. Its also why rental yield has fell during the 2000s.

Its not an additional condition. If I lose £250k on the property, and would have spent £3.82 on rent over that 50 year period (you specified 50 years remember). Then buying would be mad. If rent was likely to be £300k over the 50 years in absolute terms (£6k a year) then buying would still be a smart thing to do to the tune of £50k. I think you'd agree, rent on a £250k property is likely to average more than £500/month over the next 50 years. Its not a condition, its just a major factor you've not considered.

Did people buy out their right to buy homes with cash, rather than a mortgage? If not, your model doesn't work.

In Newcastle, the average price is around 210k and the rent is around 550 per month.

But why would rent be 300k? why would you predict that amount in this scenario? If you adhere to the principle that the rent cost is determined by the price of the house, the rent cost would have decreased to the same extent the price of the house did.