The Economics Thread
- Thread starter ManUtd1999
- Start date
I know nothing about economics but with the stock market taking such a hit how could this affect house prices in the UK?
There will be fewer buyers and more sellers, so it won't be good.
I ask because I'm looking to buy this year. Was wondering if prices could drop maybe.
You don't need a lot of buyers to inflate your prices. You only need just a few buyers with a lot of money.
Housing prices will keep increasing because there is people with a shitload of money to spend, and not many interesting options where to spend it. The housing market will always be attractive (Buy to rent).
The crisis won't hit the top 1% wealth. So they will buy everything that can be bought.
It's a nightmare trying to decide, but if your need isn't imminent then the next few months could be informative. Save, wait, and watch, you could be one of the few gainers from the likely chaos to come.
History says that house prices can go down as well as up, just like shares. Not often of course, but this could be one of those times.
A recession was inevitable in any case, but this could easily turn to be a depression. I hold a total world index and it has gone almost 25% down in the last 2 weeks or so, with the worst yet to come. It can easily rival the 2008 one, if not worse.
I was thinking yesterday. A recession is almost inevitable. How unprepared are the Central Banks? I think this period could be reckoning for Europe. They have bled the ECB dry. It has exhausted all its instruments. When the health crisis is over, we would have a serious economic one. Will we ever see a fiscal response?
Everything will depend on how soon the world can get control over the situation (facilities, quarantines, vaccines etc). If this spirals into later in the year then a deep recession is almost sure to happen late this year and into 2021.
I recall reading there were harbingers of a recession before all of this. I don’t remember the specific reports, but I know they instigated enough discussions that it wasn’t entirely a figment of my imagination.
If that indeed was the case this virus outbreak and oil price war would be acting as force multipliers so to speak. Which could be...well, not good.
If that indeed was the case this virus outbreak and oil price war would be acting as force multipliers so to speak. Which could be...well, not good.
Where is that coming from?
My girlfriend and I are looking to buy a house in 12-18 months time. Is a major recession likely to help us with that or hinder us?
I would argue help you, unless bank liquidity dries up or your jobs come under threat. Not impossible in prolonged recessions, but unlikely at the moment.
Oil and Gas firms are double fecked. The Saudi-Russian price war has dropped the price of crude from $52 to $35 barrel. A 33% drop.
That's compounding the impeding financial crisis due to Covid. So naturally funds are dumping oil & gas bonds like crazy.
Save and watch trends closely, learn what sort of thing is available in your likely price range, and form a good idea of what and where you might want. Then you will be in a position to be quick and decisive when necessary.
As for the wider economy, my gut feeling is that Trump will cut taxes, increase spending, and borrow whatever is necessary to get the US economy roaring in the short term to help him at the polls. What effect this will have on inflation, interest rates, and the economy in the longer term god only knows, but Trump won't care about that, he'll be interested in his own time only.
Cheers for replies, can only sit and wait I guess.
I'm not sure how many tools Trump has left in his armoury to mitigate a recession, they've already done their huge tax cuts which has already added trillions to national debt. It's the house which holds the purse strings after all and the Democrats in the house are not going to spend his way out of trouble.
Can he do that? Not sure how the US budget process works but we're in the middle of the 2020 budget, can major changes be enacted at this time?
I have to admit I don't know, but surely the president has some power or there isn't much point to having a president?
What I mean, Europe has depended on the ECB to bring itself out of recession with almost no fiscal policy contribution.
No, he can only promise to.
The POTUS has broad authority but mostly on national security, in theory Congress still holds the purse strings.
So further tax reform is a non-starter within the timeframe alluded to.
Okay, but that's an entirely different thing. There's no central (as in federal) fiscal policy, apart from the existence of the EFSF, it's all decentralised to the national governments.
As for the ECB, apart from the fact that it can print Euros to provide liquidity for commercial banks, it has been building up its assets decade by decade. Check out its gold and foreign reserve assets:
- 2000 reserves
- 2010 reserves
- 2020 reserves
Sure, it has no room for lowering interest rates (same as the BoE) but that's about it. It's far from broke, it's in rude health. The problem with financial crises in Europe is that they become political more than anywhere else, because nationalism often kicks in, and turns a small, solvable problem into a massive one. Greek debt crisis a prime example.
Of course the ECB isn't broke. But imo, it doesn't have much room to manoeuvre. Apart from the stability fund, some countries need to spend some money. I am not talking about the likes of France. But countries like Germany have some leeway.
Thanks OP. Weird country really, or misrepresented perhaps, from the outside all we hear is president, president, president, like it's only him/her that counts.
Hinder. Bad times mean lending guidelines get tightened. If you can save more to ensure you have a bigger downpayment that will help.
Don't expect property values to crash in line with the stockmarket, though.
Conventional monetary policy tools are limited by the ZLB. Central banks usually cut interest rates somewhere between 2,5-5% during a recession and that's just not possible in Europe in the current framework.
Unconventional responses (which aren't really unconventional anymore) are not limited in the same way, but their effectiveness and secondary effects are less understood. When push comes to shove, central banks will find ways to react and expand their tool-kit, but its not particularly prudent to rely on the ECB to solve any problem.
Its less an issue of nationalism and more one of politics.
Nationalism manifests strongly in politics, as anyone keeping tabs on world politics would attest.
Trump's effort to calm markets has backfired spectacularly. Dow dropping 10%. I was looking at the futures this morning so knew it would be bad but nothing like this. Nearly 3 years of growth wiped off in two weeks.
Is it true that they spent 1.5tn in trying to revive the markets? And from where (govt revenue/direct printing) did that money come? I saw it on twitter and find it hard to believe, that number is bigger than the Obama stimulus itself.
The Fed is offering $1.5 trillion combined through 3 $500 billion repo operations today and tomorrow. That's when the Fed will lend member banks the money and take US govt securities as a guarantee. Repo operations is how banks cover cash needs or park excess cash with the fed, usually just for 1 day (called overnight because the final balances are traded around the end of the day when the banks figure out what their cash balances or needs will look like). The difference here is that the operations are being offered for 1 & 3 months periods, so whatever a bank takes now it knows it won't be recalled until then.
The banks will also pay interest rate on these, albeit a low one. To be determined by the demand for the operations. There's currently a pull on banks because businesses all over are drawing on their existing credit lines, and the banks might not be receiving some payments from borrowers that are in near-term trouble. That all demands cash, so the Fed with this intends to backstop it.
It's a large amount, but it's not the same kind of thing as TARP. None of the banks in particular is yet assessed as having bad assets (loans) that will fail at a higher rate than anyone else's (although they could and we just don't know yet), the Fed is making sure they just have enough cash to keep the system running.
EDIT: Also it is because the demand for cash I mentioned started to force banks and institutions to sell long-dated Treasury notes/bills which was causing rates to go up for those expirations. The Fed is also hoping to stem off this need to sell the long-dated treasuries for cash, and get those rates back down a bit. I don't know, I'm just an equity analyst. Treasuries/rates/bonds/the Fed aren't really my expertise.
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From Boeing to Wynn Resorts, companies are maxing out credit lines as they race to stockpile cash amid coronavirus slowdown
"Boeing plans to draw down a $13.8 billion loan as early as Friday"
That's a proper credit line.
"Boeing plans to draw down a $13.8 billion loan as early as Friday"
That's a proper credit line.
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Quick question which probably doesn't warrant a new thread.
I have a decent amount of money which would sit best in a savings account. There is an online easy access account online marcus goldman sachs which they are offering 1.3% variable.
Does the 0.5% drop by the bank of england mean that they will drop to 0.8%? I read an article explaining that savers should secure fixed rates savings but I need access to this money provided things change I don't want it locked up.
I have a decent amount of money which would sit best in a savings account. There is an online easy access account online marcus goldman sachs which they are offering 1.3% variable.
Does the 0.5% drop by the bank of england mean that they will drop to 0.8%? I read an article explaining that savers should secure fixed rates savings but I need access to this money provided things change I don't want it locked up.
Banks don't necessarily have to follow the base rate, but it is entirely possible.
Anyway, either rate is pathetically low and below the current interest rate.
At the moment, saving is a mugs game.
You might as well stick it under your mattress.
Have a difficult decision to make with my stocks, its been in absolute freefall and i dont know whether to pull out now, and hold in cash to reinvest in the upturn later down the line, or stick. any market savy people have any insight?
You don't know when the upturn will be. And if you pull out now (phrasing) then you lock in your losses
Leave it in (phrasing)
problem i have is i cant see this being the bottom, and it has already dropped over 10%, with the auto pullout point being 20% in the portolio which seems inevitable at the moment.
Auto pullout?
The portfolio has a loss level that triggers a cash out of funds.
It probably isn't the bottom... Depends on what you trying to do... If you retiring 5 months from now then yeah probably cut your losses. If you in the market for the long haul then you shouldn't be looking at your portfolio of stocks now