Economics 101

[FoxesAreBlue]

I bought a flat last June in a 4 year fixed rate mortgage.....

Am I going to be fvcked in just under 3 1/2 years?

I'm fvcked aren't I

[Merging Cultures]

I bought a flat last June in a 4 year fixed rate mortgage.....

Am I going to be fvcked in just under 3 1/2 years?

I'm fvcked aren't I

I'm not a financial advisor, but I'd take a guess and say yes

[Merging Cultures]

I have loads of questions about the economy but I won't ask them here for fear of being ridiculed for lacking even basic economics knowledge.

Here's a question - are stamps really legal tender?

Ask away. I think I've put myself out there at risk of ridicule. There are a lot of smart people on here who can probably answer better than I can.

No, stamps are not legal tender. Sorry. http://blog.royalmint.com/are-stamps-legal-tender/

[Zingari]

  

Don't worry. Thanks to this thread I've got it Sussed. It's all about supply and demand and the weather, I reckon I know as much as Osborne now.

Have you  got a little red box though  ?

 

Has no one ever wondered how ever big the economy grows , it still all fits in that little red box 

[Strokes]

I bought a flat last June in a 4 year fixed rate mortgage.....

Am I going to be fvcked in just under 3 1/2 years?

I'm fvcked aren't I

Just to cheer you up, you're also being fuçked now

[Vlad the Fox]

Have you got a little red box though ?

Has no one ever wondered how ever big the economy grows , it still all fits in that little red box

That's because there is only ever one sheet of paper in there that either says 'we're ****ed' or 'whoo hoo spend mother****ers.'

[FoxesAreBlue]

Just to cheer you up, you're also being fuçked now

How so?

That's not an aggressive question, I'm genuinely interested, I never really liked the idea of renting and always wanted to own my own place. This was cheap, I can afford it on my own (just, at the minute) without having to go in with somebody else.

It's a shoebox of a flat, but when I get home I enjoy locking every mother fvcked in the outside world out and having my own peace.

I also only have to was up twice a week when I run out of pans or spoons, whichever comes first, thanks to the slow cooker, it's usually spoons.

[Merging Cultures]

Just to cheer you up, you're also being fuçked now

How so?

That's not an aggressive question, I'm genuinely interested, I never really liked the idea of renting and always wanted to own my own place. This was cheap, I can afford it on my own (just, at the minute) without having to go in with somebody else.

It's a shoebox of a flat, but when I get home I enjoy locking every mother fvcked in the outside world out and having my own peace.

I also only have to was up twice a week when I run out of pans or spoons, whichever comes first, thanks to the slow cooker, it's usually spoons.

There is an argument that renting and investing the difference can earn you more money than buying and house prices rising only slowly.

Khan academy did a good video of the maths.

I sold my house in the US under water, but fortunately we didn't get stung because of some laws whereby they right off the losses. Crazy. Because of that experience I'm personally nervous of buying again. We were lucky to not be lot affected. Others haven't been.

Most investments have positive trends, so it's hard to choose which is good because you should always diversify.

[Strokes]

How so?

That's not an aggressive question, I'm genuinely interested, I never really liked the idea of renting and always wanted to own my own place. This was cheap, I can afford it on my own (just, at the minute) without having to go in with somebody else.

It's a shoebox of a flat, but when I get home I enjoy locking every mother fvcked in the outside world out and having my own peace.

I also only have to was up twice a week when I run out of pans or spoons, whichever comes first, thanks to the slow cooker, it's usually spoons.

I just meant by being fixed at a time whilst interst rates are so low, as you go on to a tracker they could well be above what you are fixed on.

I come off being fixed this time next year , so I hope to get a year lower but in not sure it will happen.

[FoxesAreBlue]

I just meant by being fixed at a time whilst interst rates are so low, as you go on to a tracker they could well be above what you are fixed on.

I come off being fixed this time next year , so I hope to get a year lower but in not sure it will happen.

Ah right, I'm sure I have the option to go onto another fix at the end of my 4 years (I think that's a remortgage?) from what little I know it is likely to be higher rate of interest then, but by that time I should hopefully be earning a lot more than I do currently.

[Captain...]

Does it really need to be so complicated?

 

We invented money to serve us, so why does it sometimes feel like it is the other way round?

[Monk]

I have my own views on this, but what do you think of Scotland's prospects as an independent country especially with regard to monetary policy remaining with the BoE and the prospect of not being in the EU.

[ozleicester]

Do you think thaty with the slow (oh so slow) death of the baby boomer generation we will see the value of houses/real estate fall as we find we have more housing than need (back to the a fore mentioned supply and demand)?

 

 

Australia has just been told that our 3 remaining car manufacturers will all be closed by 2017 leading to job losses for around 50,000 people. Would governments be better off subsidizing manufacturing in order to reduce the cost of welfare for the tens of thousands of semi skilled workers who will be unemployed, keeping in mind the general progression of the children of the chronically unemployed seems to very often lead to generational unemployment.

 

Does a more "socialist" style of government actually make more sense long term?

 

Can and should governments buy back essential services like water, power etc?

[Merging Cultures]

I have my own views on this, but what do you think of Scotland's prospects as an independent country especially with regard to monetary policy remaining with the BoE and the prospect of not being in the EU.

If they vote for independence and keep sterling then the BoE will have to tightly regulate them. They are a relatively large influence on sterling and are reliant on two quite temperamental sectors, oil&gas and finance. So, we'd have to put some tight reigns in place. In which case, they'd be fine but independence would be rather fake.

If they went with their own currency they'd lose a lot of investors.

[Merging Cultures]

Do you think thaty with the slow (oh so slow) death of the baby boomer generation we will see the value of houses/real estate fall as we find we have more housing than need (back to the a fore mentioned supply and demand)?

 

Australia has just been told that our 3 remaining car manufacturers will all be closed by 2017 leading to job losses for around 50,000 people. Would governments be better off subsidizing manufacturing in order to reduce the cost of welfare for the tens of thousands of semi skilled workers who will be unemployed, keeping in mind the general progression of the children of the chronically unemployed seems to very often lead to generational unemployment.

 

Does a more "socialist" style of government actually make more sense long term?

 

Can and should governments buy back essential services like water, power etc?

 

There could be an increase in housing supply as boomers die and relatives sell their estates, but then again it isn't like they are all dying in the same year. It will be spread over  the same 18 year period that they were born in. It therefore probably wont be too dramatic. Also, the boomers were fortunate enough to be the wealthiest generation of their time, and probably have been able to purchase larger houses. Larger houses tend to have greater price fluctuations, so they will fall in price more quickly, but the change in price of large expensive houses wont help younger less wealthy people.

 

Most governments do subsidise manufacturing, they provide tax breaks and grants for building factories in certain areas. I am just guessing but the car manufacturers have probably met all the agreements set out in their contracts and so are able close up and move on to the next country that will subsidise them. Unless the government can incentivise them to stay.

 

I don't think a more socialist style of government is necessarily what is needed. However, I think a prudent use of regulation, support for the vulnerable and ensuring that health, education and safety is accessible is important. I think it is generally accepted that we need to have a healthy and educated workforce to be able to compete economically. Unfortunately, I think the push under Labour was to have everyone go to university regardless of capability or interest, just to make sure that everyone was equal. Across society we need to be better at recognising capacity and vulnerability and being able to apply strategies to support those people. A one-size-fits-all strategy doesn't work and I don't think a more socialist style government would recognise this. 

 

This is a brilliant question. Conservative views are that private companies can run these services better, but clearly without the opportunity to compete there is a market failure. Other private companies can't just go and lay pipes or train tracks to compete with the existing system. Although that is essentially how the rail road started, but now it is just too costly. I read an article on the BBC where a guy said we should allow proper competition, but didn't explain how. He also moaned that journeys fell from 1923 - 1948 and blamed nationalisation. That's hardly fair given what was going on at the time!! Train journeys have definitely decreased since then too, but that is because cars and fuel have been cheap and easy. Rail needs to compete on price and convenience, but they haven't been. I think the regulators are pathetic, they can't control the companies and prices keep rising. Hopefully, the new franchise model the Conservatives have developed will mean that there is more competition to buy the rights to a franchise. I don't see the renationalisation happening any time soon.

 

Energy, as I mentioned above, I think we will eventually move towards localised or individual power generation [fuel cells, wind, solar] to take away some of the 'power' away from the power generators. The barriers to entry are so huge, massive investment in power stations plus the network. 

 

Water, same as rail. 

[Rincewind]

There are a couple of links to articles about wages and house prices on the DNO site if anyone is interested. The heading has changed so much easier to browse. Link in my sig. I am in the first picture at the top of the page.

Not sure if this is the right thread.

[Smudge]

Have you  got a little red box though  ?

 

Has no one ever wondered how ever big the economy grows , it still all fits in that little red box 

When I read that I thought, that's a bit personal.

[Merging Cultures]

The free market is somewhat of an ideal scenario that does not exist. Free market economics is predicated on full information known to all market actors at all times and that we make rational decisions based on the full information.

 

Right now, we know that Chelsea are at the top of the premier league, rationally we should be supporting that team as they are, according to their league position, the best club in the country. However, we have bias. We support Leicester, therefore we are not acting rationally and the market is not free because of the internal bias that affects our judgements.

 

Companies are for-profit entities, increasing their share price and thereby their shareholders wealth is why they exist. As such they seek to protect their market share through patents and non-disclosure of information.

 

We used to think that smoking was cool, the companies spent untold amounts on protecting that by denying that there was a health risk. We now have better understanding about the health risks, but people still choose to smoke, even when they are being taxed so heavily. It's a much freer market now than it was, but because of the addictive nature of nicotine, it isn't totally free, people cannot pick and choose when they will not smoke.

 

Apple is famous for being a patent troll and has been criticised with stifling innovation. If their technology was freely available to all then they would not make the massive profits they do, and we probably would have even better technology available. The patent regulations need changing btw.

 

I believe in free markets, if they are truly free. But they are not. As such, there is a definite role for government to regulate companies and protect consumers. In my opinion, it's role should be about making information more available, by using incentives to encourage disclosure, and by ensuring that firms can compete on level playing fields.

[Libertine Dream]

Did you study econ Baltimore, if so where?

[Merging Cultures]

Did you study econ Baltimore, if so where?

I did:

BSc Economics at Brunel

MSc Financial Economics at the School of African and Oriental Studies, Uni of London

[ozleicester]

There could be an increase in housing supply as boomers die and relatives sell their estates, but then again it isn't like they are all dying in the same year. It will be spread over  the same 18 year period that they were born in. It therefore probably wont be too dramatic. Also, the boomers were fortunate enough to be the wealthiest generation of their time, and probably have been able to purchase larger houses. Larger houses tend to have greater price fluctuations, so they will fall in price more quickly, but the change in price of large expensive houses wont help younger less wealthy people.

 

Most governments do subsidise manufacturing, they provide tax breaks and grants for building factories in certain areas. I am just guessing but the car manufacturers have probably met all the agreements set out in their contracts and so are able close up and move on to the next country that will subsidise them. Unless the government can incentivise them to stay.

 

I don't think a more socialist style of government is necessarily what is needed. However, I think a prudent use of regulation, support for the vulnerable and ensuring that health, education and safety is accessible is important. I think it is generally accepted that we need to have a healthy and educated workforce to be able to compete economically. Unfortunately, I think the push under Labour was to have everyone go to university regardless of capability or interest, just to make sure that everyone was equal. Across society we need to be better at recognising capacity and vulnerability and being able to apply strategies to support those people. A one-size-fits-all strategy doesn't work and I don't think a more socialist style government would recognise this. 

 

This is a brilliant question. Conservative views are that private companies can run these services better, but clearly without the opportunity to compete there is a market failure. Other private companies can't just go and lay pipes or train tracks to compete with the existing system. Although that is essentially how the rail road started, but now it is just too costly. I read an article on the BBC where a guy said we should allow proper competition, but didn't explain how. He also moaned that journeys fell from 1923 - 1948 and blamed nationalisation. That's hardly fair given what was going on at the time!! Train journeys have definitely decreased since then too, but that is because cars and fuel have been cheap and easy. Rail needs to compete on price and convenience, but they haven't been. I think the regulators are pathetic, they can't control the companies and prices keep rising. Hopefully, the new franchise model the Conservatives have developed will mean that there is more competition to buy the rights to a franchise. I don't see the renationalisation happening any time soon.

 

Energy, as I mentioned above, I think we will eventually move towards localised or individual power generation [fuel cells, wind, solar] to take away some of the 'power' away from the power generators. The barriers to entry are so huge, massive investment in power stations plus the network. 

 

Water, same as rail. 

 

interesting, thanks.

 

Should there be a cap on remuneration?

 

Also i noted in the buying vs renting video, that USA give tax breaks for buying...does anywhere else do this?

[Guest Col city fan]

I bought a flat last June in a 4 year fixed rate mortgage.....

Am I going to be fvcked in just under 3 1/2 years?

I'm fvcked aren't I

[Merging Cultures]

interesting, thanks.

 

Should there be a cap on remuneration?

 

Also i noted in the buying vs renting video, that USA give tax breaks for buying...does anywhere else do this?

 

Re. remuneration, I assume this is a general question, so I might get a bit long winded.

 

I don't think there should be a cap on remuneration. Boards set remuneration rates for senior managers and approve remuneration policy. The shareholders appoint the board. The problem we have at the moment is with 'board capture', whereby boards often do not properly govern the senior managers and blindly approve increases 'to keep talent'.

 

However, some CEOs do not get much money, but they get share options to try and align them with shareholders desires, i.e. increasing shareholder wealth by increasing share price. This benefits the shareholders, indeed it benefits us all as pension and insurance funds are the largest investors, and therefore increasing share prices means we have more pensions. The obvious problem with that model is it is fine until there is a crash, at which point those who are about to retire (and haven't adjusted their mix to be less risky) will have less pension. As I've said a few times diversify!!

 

So, you can have massive salaries which makes it clear that there are inequalities in salary across an organization, which leads to employee dissatisfaction etc. Or we can reduce salary and provide share options, which are more opaque and leads to a direct focus on increasing share price at all costs.

 

A focus on share price can lead to protectionist tactics and the sake of competition and innovation.

 

To wrap up, governance at the board level needs to be improved to ensure there isn't board capture. There also needs to be a drive by shareholders to focus less on share price but more on the quality of the investment and the underlying business fundamentals. As Warren Buffett said "Only when the tide goes out do you discover who's been swimming naked." By focusing more on the underlying business fundamentals it is likely that investments will not fluctuate as much which would make pensions much more stable. Through both of these actions remuneration will be appropriate based on the actual performance of the company.

 

I think there are a few places that do tax breaks for first time buyers. Unfortunately, I have only ever bought (and sold) in the US.

[Monk]

The free market is somewhat of an ideal scenario that does not exist. Free market economics is predicated on full information known to all market actors at all times and that we make rational decisions based on the full information.

Right now, we know that Chelsea are at the top of the premier league, rationally we should be supporting that team as they are, according to their league position, the best club in the country. However, we have bias. We support Leicester, therefore we are not acting rationally and the market is not free because of the internal bias that affects our judgements.

You're confusing free markets with efficient markets here, to be pedantic.

[Merging Cultures]

You're confusing free markets with efficient markets here, to be pedantic.

 

Nope. Efficient market hypothesis is about financial markets. It is also based on availability of information.

 

Free markets create market equilibrium through perfect competition and full information. To be fair I didn't explicitly include the concept of perfect competition and low barriers to entry, I merely hinted at it with the Apple analogy. I'll add additional info.

 

I know wikipedia is not best but it is accessible while i am working

 

"This equilibrating behavior of free markets requires certain assumptions about their agents, collectively known as Perfect Competition, which therefore cannot be results of the market that they create. Among these assumptions are several which are impossible to fully achieve in a real market, such as complete information, interchangeable goods and services, and lack of market power. The question then is what approximations of these conditions guarantee approximations of market efficiency, and which failures in competition generate overall market failures. Several Nobel Prizes in Economics have been awarded for analyses of market failures due to asymmetric information."

 

http://en.wikipedia.org/wiki/Free_market