newbie
undisambiguated
what dataset does illustrate the fragility you're talking about?
Global financial system implosion begins
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ska invita
back on the other side
My guess would be that figure is so high because its been increased by the insanely high valuations on peoples houses.
?
mauvais
on reddit or something
This is just it, there isn't one.
You could do set pieces on risk factors. Like you could plot the number of interest only mortgages vs the chance of a housing value crash, which would fuck a lot of people.
Or you could try and get stats on things like credit card debt and consumer loans (unsecured debt?) to get a better idea of dangerous exposure.
But it's very difficult to get an accurate picture because it's so multi faceted and that's before you get into all the external drivers that would make it meaningful (e.g. the causes of the crash)
Assets are difficult too because a lot of it is market value, and again e.g. if you're young to middle age, your pension fund could half in a serious crash, whereas if you're old it's probably safer in cash & bonds etc
newbie
undisambiguated
without rerunning any of the umpteen housing threads, the valuation is what people have been prepared to pay- yes globalised economy, foreigners etc and btls but also ordinary Brits influenced by cheap low interest rates and comparison with other forms of spending.
ska invita
back on the other side
Not denying that, just saying that bubble has likely been the cause that inflated the FTs asset figure to a record high
newbie
undisambiguated
That makes all economic data 'trivial', even meaningless, because it doesn't fully describe all aspects of fragility or risk, even though looking at the historic series provides clues as to how interactions between factors play out.
That's probably a good thing, your interpretation and mine of the same data may lead us to different understandings of current risk and thus economic decisions, to sell, to spend, to save, to take on debt and so on. I suspect instability increases if we all behave the same.
mauvais
on reddit or something
Well, yes & no, because there's usually a dominant risk or most valuable factor, even if we don't know it or what it is, and so you don't need total detail.
I suppose what I'm saying in the household debt context is that the dominant risk is probably of a crash or arrival of major pressure fairly soon, and when you apply that, the data you've been talking about will morph in a particular, non-linear way. It's possible to predict elements of that, but you would need more detail. Not all of it, but some valuable stuff.
And historical data's a funny one. In theory it's great but we haven't ever done much of this before. A lot of the elements of the system, be it banking structures or individual consumer behaviours, are novel.
newbie
undisambiguated
ok, but you posted headlines about record household non-mortgage debt, amounting to 10 grand per household. In isolation that's clearly a matter for concern, and implies a hike in the fragility also under discussion. Come a rise in interest rates and a recession and we're all sunk.
Except that after that (& mortgage) debt we have a huge asset cushion between us. Obviously that isn't evenly shared (just as debt isn't), which provides part of the reason why recessions harm some people really really badly and leave vast numbers more or less unscathed.
mauvais
on reddit or something
On the same theme I've been doing a Yale-run Coursera course (free) on the Global Financial Crisis and it makes a parallel point about banks & their equity cushion. All that cash from other people's savings is a great counterbalance to liabilities, until the day that it isn't because there's a run on the banks and everyone withdraws their freely moveable value immediately*. So again it's all a case of thinking a couple of steps further about what can go wrong & what such an event will do to your metric.
*of course there are measures and metrics that influence the exposure to this too
*of course there are measures and metrics that influence the exposure to this too
ska invita
back on the other side
There won't be an asset cushion if there's a house price crash... Negative equity and spiralling debt, yes. I've said elsewhere, my impression is this government is happy to inflate the housing bubble precisely because of this asset cushion effect. Going to sound like a whoopee cushion when there's another crash
newbie
undisambiguated
seems to me the biggest risk factor is the internet and the impulsive mass behaviour it encourages. And that's born out in your subsequent post about bank risk- there have been runs on banks in the past but now our response to news can be instant and effortless there will be a tendency to all behave in ways that are individually beneficial but very bad for the herd.
ska invita
back on the other side
Bank runs are nothing new and I doubt the internet increases the scale of them... It would suggest a time when banks failed and people just didn't hear about it
newbie
undisambiguated
Of course there will.
On past experience the vast, vast majority are almost unaffected by recession, whether their home goes into negative equity or not is more or less irrelevant. They may have fewer treats, but so long as they keep their job and continue to pay the mortgage, they're almost unscathed. Negative equity only matters if they have to sell.
Homeowners who are hurt by recession tend to be very badly hurt- at worst lose job, lose home, collapsed relationship and bankrupt. But the folk next door, still in work, may be miserable about their NE but it doesn't actually make much practical difference. Renters, without the asset backup, can fare much worse because they're prey to their landlords economic circumstances .
Also, of course, NE historically tends to affect fairly recent purchasers. The nomional value of homes of people who've been in place for a while has increased, so while they may lose their anticipated gain their home is not actually worth less than they paid for it.
mauvais
on reddit or something
This is quite right, except that interest-only mortgages are effectively new (90s and 00s) and don't fit the pattern. Hence history only being so much use. The FCA reckons half of borrowers are going to have a shortfall, and that's before anything even happens. Now this is a different problem model, because you don't go bust during the crash, you go bust at the end of the term, but there's no escaping how screwed you are a long time in advance.
mauvais
on reddit or something
Didn't need the internet for The Great Depression though, or for the various historical bubbles. It certainly changes the mechanics and scale of it, but I'm sceptical that it's a root cause of much. I also don't think consumer (mis)behaviour, consumer confidence excluded, is that powerful, because much of it should/could be regulated by lenders and other institutions.
newbie
undisambiguated
As demonstrated by your point about interest only mortgages, lenders aren't always acting in the interests of consumers, and regulators are often far too slow.
There's no need for any form of electronics for feedback to happen, but it makes it a lot more noticeable and sustainable. I don't think the internet is/will be a cause of anything specific except algorithm trading, but, as with a microphone in front of a speaker, it will amplify something minor very quickly and with deafening intensity. Unlike in that example, the effect won't necessarily go away when the cause (the mic) is removed.
J Ed
Follow Back Pro Expropriation
hipipol
Peckham Wry
asset and liability management
In essentially looks at assets, revenues/losses from same and liabilities, ie debt repayment but also running costs - fuel, rates, ground rent for leaseholds, all other attendant expenses and should include amortization for all assets
The point I was making is that all assets and debt are relative - both vary with market conditions, so a ratio is a better measure of the relative resilience to economic shock that any absolute monetary value - being a fixed snapshot at a specific moment - would give
For example, if your personal wealth was based on the ownership of a small oil field, 2 years ago you were laffin yer nuts off - not quite the same today.....
A ratio/correlation model enables you to the vary the values, mark to market, to give a more accurate result as times change
frogwoman
No amount of cajolery...
Why are we looking on helplessly as markets crash all over the world?
Will Hutton Sunday 17 January 2016
Will Hutton Sunday 17 January 2016
"sit alongside the travails of the new middle-class poor." One for the squeezed middle watch thread.
mauvais
on reddit or something
It's just a bit weird, it's all over the place with no coherent theme. It ends with a respectable shopping list of wants but they don't have much to do with a forthcoming crash. The oft-mentioned oil price is just one of many factors and predominantly the result of a few political initiatives. And China's imaginary growth has been talked about for ages but even if you did know, why get off the emperor's comfortable new bus until you think it's about to imminently crash?
Corrective laws & regulation since the last serious events have been a joke. More tangible change came out of the single event of Enron, I think. Thus it's true that we haven't learnt any lessons but not least because we/they basically got away with it. So a call for any more is a bit silly because it'd be a sticking plaster at most, and there won't be anything more than that until the entirety of society embraces it, which in turn will probably only be after much greater pain.
Corrective laws & regulation since the last serious events have been a joke. More tangible change came out of the single event of Enron, I think. Thus it's true that we haven't learnt any lessons but not least because we/they basically got away with it. So a call for any more is a bit silly because it'd be a sticking plaster at most, and there won't be anything more than that until the entirety of society embraces it, which in turn will probably only be after much greater pain.
mauvais
on reddit or something
gosub
~#
Zombie ships send maritime freight into worst crisis in living memory
similar problem with 'zombie' aircraft.
similar problem with 'zombie' aircraft.
goldenecitrone
post tenebras lux
You could be forgiven for thinking that the West was punishing Saudi Arabia for something or other.
NoXion
Craicy the Squirrel
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