WEEKENDER: The Housing Market, by Wiggia

The news that interest rates are going up has spooked the housing market. In truth it never takes much to do that as much of the property wealth accumulated is built on not-so-firm foundations, but has become over the years the base of much that the ordinary working man has accumulated in capital assets, in effect replacing ever poorer pension returns. 

It suits the powers that be and the building industry to keep kicking the can down the road as long as possible as a collapse will end whatever government is in power and in the case of the Conservatives take away their biggest donors all in one hit. 

So almost since I can remember there have been endless boosters and financial support mechanisms invented to keep the train on the rails, and to a degree very successful it has been, but at a cost. 

The days of thrift have been replaced by ever increasing borrowing. How did we arrive at this? If we go back to the time when we purchased our first house, the procedure was quite simple: you approached a building society, told them what you earned, they told you on that basis what you could borrow, and you would open an account with them and prove you could repay the agreed amount by saving with them for two years. You knew where you stood financially as interest rates were pretty static and even if your wife had a decent job that would only give you a better chance of securing a mortgage, it would not increase the amount you could borrow. The borrowing at that time 1967 was two and a half times earnings; we saved for the two year period and purchased our first house. 

How times have changed; and they started to change in the Seventies with larger multiples of earnings partly to boost the mid seventies housing stagnation, but as with all fixes they became the permanent model. This multiple earnings rate continued to increase with every hiccup that the housing market encountered, up to the disaster of ‘89 when we had the only real slump in house prices along with borrowing rates that meant negative equity became a reality. One would have thought that period would have had a return-to-reality effect on the market, but no, by now we were well into the BMW on the drive period when young couples were not satisfied with just getting a house, they wanted the instant nice car and all the rooms fitted out and no real halt to their lifestyle outside of this. Who can blame them, when schemes such as low deposits and fixed low interest rates for a number of years made it all possible?

Meanwhile the multiple years earnings ratio continued to rise, one’s partners earnings added to the total and today six or seven times annual earnings to borrowing ratio is not unusual. Add to that the low interest rates that have become the norm since 2008 and many would think this is housebuying Nirvana with no end. 

The reality is somewhat different. With the rise in rates now happening the warning signs are out for a correction in prices. What is guaranteed is that the Conservative party in particular, who rely for a large portion of their votes on the house owner sector, will do all they can to stop the collapse happening; what is left that they can salvage from the magic money tree has yet to be announced or provided. 

The overlying problem with the housing market is that years of gifting first time buyers schemes to get them to buy houses has simply pushed up prices, in effect creating a Ponzi scheme. Every time easier money is provided prices go up as sellers know more money is available; the same with the lower deposits that free up more buyer'  money and other similar schemes. It has happened every time these schemes or fixed rates or as now ‘lifetime mortgages’ have been introduced. Surely we have run out of incentives that only push up prices, yet while whoever is in power facilitates all these measures prices will continue to rise. 

No one wants a housing crash. We saw the damage in the late eighties / early nineties when as an aside few could sell their houses because so many were tied down to mortgages they could not or barely afford for properties that had lost a fair chunk of their value. 

Having said that there was no help at that time yet already we hear cries of ‘the government must do something’; not really the government but the taxpayer of course. 

With many mortgage offers being withdrawn and interest rates reaching around 6% one could say the market is returning to something like normal, the sort of level that prevailed for years before 2008. Surely that, with a corresponding drop in house prices, can only be a good thing. 

Many will say this is the free market in action, but that would be being economical with the truth as governments have a vested interest in keeping the housing market going along nicely even at the ridiculous current prices. They take a lot of money from transactions for doing absolutely nothing, display faux concern about getting everyone on the housing ladder and at the same time placate the building industry who donate so much to the Party. 

You will also note the government's efforts to get houses built and sold does not include raising the build quality to a standard enjoyed elsewhere in Europe, or the size of the properties built, or the dire architecture. That I have covered in previous articles, yet it is part of the overall poor picture of where the housing market has ended. Perhaps at the very least price stagnation for a prolonged period would be the easiest way to bring back some common sense to the whole sector. 

The last couple of years have been a fantasy land with the housing market seemingly in another world to everything else. The pent up demand created by Covid ran its course long ago or it should have, but the signs are there. Looking locally, houses are no longer selling as fast as they were put up for sale, in fact many are sticking and 'reduced' signs have reappeared. Maybe, just maybe, this is a sign that some sanity is coming back to the market along with the withdrawal of those fixed low rate mortgages. 

Those who say the housing market has only ever gone up have obviously not lived long enough to remember ‘75 and ‘89 ‘90. Yes it did all recover but many got their fingers burnt big-time then. Governments need to stay out of the game and lenders need to stop being so greedy - but will they?

FRIDAY MUSIC: Mavis Staples, by JD

The general consensus is that Aretha Franklin was the 'queen of soul' She was very good but nowhere near as good as Mavis Staples, but that is just my opinion for what it is worth.

Mavis rose to fame as a member of her family's band The Staple Singers (she is the last surviving member of that band). During her time in the group, she recorded the hit singles "I'll Take You There" and "Let's Do It Again". In 1969, Staples released her self-titled debut solo album.

Staples was inducted into the Rock and Roll Hall of Fame in 1999, named one of the '100 Greatest Singers of all Time' by Rolling Stone in 2008; and enrolled in the Gospel Music Hall of Fame in 2018, as a member of The Staple Singers.

https://en.wikipedia.org/wiki/Mavis_Staples

Nordstream, Russia and the US

Why were the Nordstream pipelines sabotaged? Cui bono?

Russia? Maybe, but I think not.

I’ve seen one theory kited that it was part of a grand plan by Russia to weaken Germany severely, thereby destabilising the EU and making its constituent territories vulnerable to conquest. On the other hand, the countries that have previously suffered Soviet rule would be extremely resistant to reliving a similar experience; I should imagine that Poland, for one, would fight almost to the last citizen.

Besides, if we are to believe Hillary Clinton, Putin is a right-wing nationalist, not a Communist. He has a stated interest in defending the rights of ethnic Russians who found themselves stranded in foreign countries following the collapse of the USSR, but even in the Baltic States they are a minority - about a quarter of the population in Estonia and Latvia, only 4.5% in Lithuania.

However, a 2014 survey of Russian citizens (possibly instigated by Putin) expressed concern about discrimination against Russians in these three states, which has worsened recently: there and in Poland, there have been reports of destruction of Russian monuments, and symbolic gestures of this kind can be a precursor to more direct persecution. Topping the list of victimised Russian expat communities was Ukraine.

One wonders whether the US would have waited eight years before military action to defend American citizens abroad who were under sustained attack with shot and shell. Even so, it seems obligatory for everyone in the West to say clearly and repeatedly that Putin’s intervention was foolish, criminal, inexcusable etc; instead of inevitable, however deplorable.

Is Putin a nasty piece of work? Would a sheep last long as the leader of a wolfpack? Even Ivan the Terrible seems to have started out fairly reasonable until the boyars poisoned his beloved wife. But if you think Putin is bad, consider who (or what junta) might replace him if he is overthrown. Let’s try to be realistic, not moralistic.

Russia has less than half the population of the United States and about double the land area. It is reasonable to suppose that she has her work cut out to hold on to what she has, especially facing a hugely populous China in the east, keen for lebensraum and envious of the wood, water and mineral resources of Mother Russia. Tibet has been abandoned by the British to China and its fate; Beijing is also eyeing disputed territory in northern India.

An alternative reading of Putin’s strategic aims as far as his Western borders are concerned, is that they are twofold:

1. Putin needs to be seen by his support base, his voters, to defend Russians, their culture and religion. A leader who fails to act on behalf of the 25 million ethnic Russians living in the 14 non-Russian republics is not much of a leader. Mixed in with that is an element of hurt national pride following the fall of the Soviet Union; if that seems trivial, think how the humiliation of Germany after WWI helped the rise of an emotionally stunted loudmouth who ruined Europe and killed tens of millions of Russians.
2. More practically, the bulk of Russia’s population lives in the western part and the trade routes along the Volga and Don are vital internally and also as a connection with foreign countries to Russia’s south and east. The Volga runs into the Caspian Sea which is bordered by Kazakhstan, Turkmenistan, Iran and Azerbaijan as well as Russia itself.

The Volga is linked to the Don by the Volga-Don Canal, but 15 years ago, the President of Kazakhstan proposed a new Eurasia Canal, which if it is ever built will run directly from the Caspian to the Azov Sea, considerably shortening the waterway route and boosting trade.

The Don flows into the Azov and thence to the Black Sea, whose shores Russia shares with the EU’s Bulgaria and Romania, as well as Georgia, Moldova, Turkey - and Ukraine.

Ukraine’s maritime borders on the Azov and Black Seas are therefore strategically vital. If an enemy occupies these areas he threatens Russian naval and commercial shipping. There is a reason, I think, why the neo-Nazi ‘Azov’ Battalion is so named.

All might have been well if Ukraine had remained non-aligned, or even agreed to regionalisation as per the Minsk proposals; but the application - recently repeated by Zelensky - to join the EU and NATO lit a match between Putin’s toes.

Surely it is reasonable to say that Putin has more to gain from peace and economic development than from the waste and bloodshed of war. Russia built Nordstream 1 to bypass potential interference from Ukraine (where major gas lines transit and two spurs cross in the Donbas, and which charges heavily for allowing their use), Belarus and possibly other third parties.

adapted from e.g. here

Germany has enjoyed economic advantage because the US and NATO have largely provided her military protection, but also from a long-term contract with Russia for cheaply priced gas. These are two factors in why Germany is (or was, until now) such an economic powerhouse and major sponsor of the EU. The second pipeline was to expand capacity. Germany and Russia as trade partners: win-win.

Germany has been persuaded to support Ukraine, but given the foregoing context, reluctantly one imagines. Now whether the story about broken Nordstream 1 pumps is or isn’t true, the sanctions against Russia prevent Siemens fixing them and at the same time certification of Nordstream 2 has been blocked. These are problems, but temporary ones, and could be used by both sides as levers in negotiations, with the prospect that an agreement might be reached and business as usual resume.

Not now, after the explosions; and not for a long time to come, if ever. The blow is devastating: US shipments of liquid natural gas - heavily priced and twice as CO2-producing as piped gas - can only satisfy some 10 per cent of Germany’s needs, and even then only when suitable port and processing facilities have been developed to receive them. The new Baltic pipe, owned by Poland and Norway, is said to be able to provide only another 10 per cent or so.

That’s assuming it all goes to Germany. The competition for gas energy supplies is going to become a sort of game of musical chairs, with the shortages inflating prices internationally. Even the UK could be facing cutouts.

This stands to ruin not only German industry but her agriculture - her imports of fertiliser are already dropping. Stand by for widespread food shortages and supply chain disruption all round.

So, cui bono; who benefits?

In 2019 the Rand Corporation stated baldly, ‘the United States is currently locked in a great-power competition with Russia.’ Turning Ukraine into a Vietnam soaks Russia’s resources and hampers her ambition to create a Eurasian EU using the trade routes along the Volga and Don and between the Caspian, Azov and Black Seas. And if Russia were to fall like Iraq, just imagine the feeding frenzy.

Will crippling Germany work as some allege is the intention, i.e. to cancel the possibility of Germany making a separate peace with Putin? These clever-clever plans have a habit of going wrong. In fact look at the trouble the CIA has sometimes caused for the US as well as its targets: the Gulf of Tonkin, the Bay of Pigs, Iran-Contra, the Gary Powers/U2 ‘just one more overflight’ messup that halted the growing rapprochement with Russia under Khrushchev and drove Moscow into the arms of its hawks.

Is it really so important to be a dog in the manger, to stop other countries and blocs becoming more prosperous? If so, why did the West feed the Chinese dragon and immiserate its own peoples?

To reverse the quotation from Hamlet, ‘Though this be method, yet there is madness in't.’

Tory Party consternation

The new British Prime Minister and Chancellor faced an early setback on Monday, when a planned cut to the top rate of income tax (45%) was reversed.

Levied on incomes above £150,000 p.a., the cut would have cost ‘only’ £2 billion, but didn’t look good at a time when the general populace is hard hit by inflation - especially in energy bills - and the prospect of recession (or worse.)

This is the week of the Conservative Party conference in Birmingham and PoliticsJOE interviewed some members for their reactions:

As it happens, I was pretty much next door then, attending some of the talks arranged by the Bruges Group at the Birmingham & Midland Institute.

The atmosphere at the BMI was interesting - I saw little groups of what looked like politicos on stair landings having discussions; not panic, but definitely an air of concern.

Similarly some of the speakers at the Bruges Group sessions - I am thinking in particular of respected economist Tim Congdon - had barely restrained passion in their voices. The 1 p.m. slot - ‘Getting Brexit Done and Overcoming the Economic Crisis’ - was notable for all the things that should be done as opposed to what is being done. There is a sense that we have been overtaken by events and at a particularly bad time, with an untested new leadership and (symbolically, but it matters) the recent loss of the Queen who so long represented stability and continuity for our country.

Having said that, Sir Bill Cash MP noted that the border-trade troublemaking by the EU in Northern Ireland is in the process of being addressed via the Northern Ireland Protocol Bill, now going through the House of Lords, and said there would be trouble if the Lords try to block it. Tim Congdon reminded us of how much our membership of the EU had been costing us annually; now we have the liberty to rearrange our affairs without expensive and harmful interference from Brussels.

https://researchbriefings.files.parliament.uk/documents/CBP-7886/CBP-7886.pdf

Just in time, seeing how the destruction of Nordstreams 1 and 2 seem set to plunge Germany into a slump and the EU itself into a possibly terminal turmoil.

As for the Chancellor’s U-turn, so far I haven’t heard a proposal to reverse the decision to remove the cap on bankers’ bonuses, something that the financial sector welcomed as according to them it would ‘attract talent.’ This, I take it, would be the sort of ‘talent’ that triggered the Global Financial Crisis, that made a fortune shorting the pound last week and at the same time cost the taxpayer £65 billion in support to pension funds that had played with bond-related derivatives. My term for these vultures and incompetents is The National Lootery.

For me the question is, are we headed back to the 1970s, or the 1930s?

Worse than the present crisis is the one we face if the Blair-style revolutionary Sir Keir Starmer is able to exploit the public’s disillusion with the Tories sufficiently to win a General Election and complete the destruction of the country. Repentant former Trotskyite Peter Hitchens says:

Sir Keir’s unregretted former membership of a weird revolutionary sect (the Pabloites) is known but not understood. If he wins the next Election, we will all discover what a full-on Red-Green government is like. Good luck with that, as the taxes squeeze and the lights go out and both houses of Parliament become neutered chambers of unopposed Leftists, anxious to tax you and tell you what to think.

As for PM Liz Truss, she has previously tried to channel Margaret Thatcher in her photo ops, but Mrs Thatcher was highly intelligent, extremely hard-working and lucky. I’m pinning my hopes on Truss being very lucky; doesn’t look like it, so far.

COLOUR SUPPLEMENT: Back to Mono 3, by JD

…some more B&W pictures, this time with a few stanzas of poetry for each picture.

The world is too much with us; late and soon,

Getting and spending, we lay waste our powers:

Little we see in Nature that is ours;

We have given our hearts away, a sordid boon!

This Sea that bares her bosom to the moon;

The winds that will be howling at all hours,

And are up-gathered now like sleeping flowers;

For this, for everything, we are out of tune,

It moves us not.–Great God! I’d rather be

A Pagan suckled in a creed outworn;

So might I, standing on this pleasant lea,

Have glimpses that would make me less forlorn;

Have sight of Proteus rising from the sea;

Or hear old Triton blow his wreathèd horn.

And lately, by the Tavern Door agape,

Came stealing through the Dusk an Angel Shape

Bearing a Vessel on his Shoulder; and

He bid me taste of it; and ’twas—the Grape!

And much as Wine has play’d the Infidel

And robb’d me of my Robe of Honour—well,

I often wonder what the Vintners buy

One half so precious as the Goods they sell.

Fear no more the heat o’ the sun,

Nor the furious winter’s rages;

Thou thy worldly task hast done,

Home art gone, and ta’en thy wages;

Golden lads and girls all must,

As chimney-sweepers, come to dust.

Fear no more the frown o’ the great;

Thou art past the tyrant’s stroke:

Care no more to clothe and eat;

To thee the reed is as the oak:

The sceptre, learning, physic, must

All follow this, and come to dust.

Fear no more the lightning-flash,

Nor the all-dreaded thunder-stone;

Fear not slander, censure rash;

Thou hast finished joy and moan;

All lovers young, all lovers must

Consign to thee, and come to dust.

No exorciser harm thee!

Nor no witchcraft charm thee!

Ghost unlaid forbear thee!

Nothing ill come near thee!

Quiet consummation have;

And renownèd be thy grave!

Another stick-up from Microsoft !

From my Substack column - why not join for FREE updates?

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For a long time, Bill Gates’s outfit was fixing things that weren’t broke. Then it moved to breaking things that were fixed.

Now it’s doing it again, demanding money that I can’t easily afford since my energy bills have just more than doubled.

We’re all used to frequent compulsory ‘updates’ that interrupt your work, slowing the computer. A few years ago MS announced they ‘would no longer support’ the edition of Windows I was using and I had to go get a new laptop with the latest sparkly version of his software. At least the HP notebook was a pretty teal colour.

Waal, a few days ago I tried opening a Word document. ‘Updating Office’…ooh! … ‘Error.’ Seems it’s something to do with needing Windows 11 and please check your machine to see if it’s powerful enough to download. Oh and there was a reference to my existing Office licence being part of a bulk buy and its replacement is going to cost £80 a year, if I’ve got that right. Until then, no Word, no Excel - not even for access to documents I previously created.

But, haha, I can still open them, because I haven’t yet scrapped/donated the old computer; the one that starts up much faster, opens documents way faster and doesn’t shove black oblongs onto the screen with notifications that I didn’t ask for.

The corporations are making you purchase everything twice and three times. In music, vinyl to CD to a Cloud subscription system that may, who knows, suddenly terminate. In motoring, petrol to diesel then omigod not polluting diesel then madly expensive rare-earth electric. When they’re not ‘upgrading’ they’re keeping profits rising by making the product worse - remember the confectioners’ plan to produce Toblerone bars with fewer ‘teeth’ or replace the raisins in Cadbury’s Fuit and Nut with cheaper sultanas?

I think we reached ‘peak quality’ some while ago. When the market is saturated all that’s left is to heist the customers.

This is why I buy physical books (mostly) and DVDs - so cheap these days, hardly more than the postage. No batteries, no abrupt termination of service; can share, swap, resell, gift. Private property! The foundation of liberal democracy!

Bill, you’ve got all the money a man could ever want; why the hell didn’t you just go fishing, have a beer with your buddies, spend more time with your wife and children?

It’s a madness, this power thing. Include me out. Leave my stuff alone.

FRIDAY MUSIC: Shigeru Umebayashi, by JD

Shigeru Umebayashi (born February 19, 1951 in Kitakyushu, Fukuoka) is a Japanese composer. He is best known for his film scores.

https://en.wikipedia.org/wiki/Shigeru_Umebayashi