1/9
Interesting article. An economy's "real" wealth is the total value of goods and services it produces. While there are problems with the way GDP measures this, GDP growth is a rough but mostly unbiased proxy for the growth in England's real wealth.
ft.com/content/68b06c…
Interesting article. An economy's "real" wealth is the total value of goods and services it produces. While there are problems with the way GDP measures this, GDP growth is a rough but mostly unbiased proxy for the growth in England's real wealth.
ft.com/content/68b06c…
2/9
According to World Bank data, English GDP rose in real terms by 1.2% a year between 2000 and 2020. According to this article, however, the value of English real estate rose in real terms by 3.0% a year during the period, or two and a half times faster than GDP.
According to World Bank data, English GDP rose in real terms by 1.2% a year between 2000 and 2020. According to this article, however, the value of English real estate rose in real terms by 3.0% a year during the period, or two and a half times faster than GDP.
3/9
Unless there has been a substantial increase in the production of goods and services associated with real estate – and one that has not shown up at all in the GDP data – then clearly there has been a transfer of wealth In England.
Unless there has been a substantial increase in the production of goods and services associated with real estate – and one that has not shown up at all in the GDP data – then clearly there has been a transfer of wealth In England.
4/9
As this article shows, this transfer has hugely benefitted the rich, who save most of their income, at the expense of the rest, who consume most of their income. One result of this has been a surge in household debt.
scholar.harvard.edu/files/straub/f…
As this article shows, this transfer has hugely benefitted the rich, who save most of their income, at the expense of the rest, who consume most of their income. One result of this has been a surge in household debt.
scholar.harvard.edu/files/straub/f…
5/9
This transfer must be reversed at some point because, in the end, asset prices can temporarily diverge from their real values, but never permanently. The way in which it is reversed however can be politically and economically very painful.
This transfer must be reversed at some point because, in the end, asset prices can temporarily diverge from their real values, but never permanently. The way in which it is reversed however can be politically and economically very painful.
6/9
If this were just happening in England, it would be worrying enough, but it is also happening in the US and many other large economies, and to an even greater extent in places like China and Australia, where housing prices have soared at rates rarely before seen.
If this were just happening in England, it would be worrying enough, but it is also happening in the US and many other large economies, and to an even greater extent in places like China and Australia, where housing prices have soared at rates rarely before seen.
7/9
Previous cases in history of an unbalanced surge in real-estate prices make it clear that this can go on a long time before it reverses, but these cases also suggest that the longer it goes on, the more painful the ultimate reversal.
Previous cases in history of an unbalanced surge in real-estate prices make it clear that this can go on a long time before it reverses, but these cases also suggest that the longer it goes on, the more painful the ultimate reversal.
8/9
It seems to me that governments can both speed up the adjustment process and reverse the income distribution effect by aggressively implementing land taxes, but in the end if the cause...
It seems to me that governments can both speed up the adjustment process and reverse the income distribution effect by aggressively implementing land taxes, but in the end if the cause...
9/9
of soaring housing prices is excess liquidity in the financial system, reversing this liquidity is likely to be the only sustainable solution.
of soaring housing prices is excess liquidity in the financial system, reversing this liquidity is likely to be the only sustainable solution.
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