tag:blogger.com,1999:blog-2277215496195926573.post258555793097902837..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Borrowing to BUILD houses is no more productive than borrowing to buy EXISTING ones.Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2277215496195926573.post-29303296366974059162016-11-08T08:13:36.727-08:002016-11-08T08:13:36.727-08:00Strikes me there is a flaw in the idea that lendin...Strikes me there is a flaw in the idea that lending for production should take preference over lending for consumption (e.g. mortgages), which is that purpose of production is consumption!!<br /><br />Re council housing, it certainly looks like the decline in council house building has contributed to the rise in house prices. But this is a complicated area, which I don't claim to be an expert on, so I'll keep my trap shut.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-79993011269402189972016-11-08T06:25:30.453-08:002016-11-08T06:25:30.453-08:00Another Werner fan here. However, I thought I had ...Another Werner fan here. However, I thought I had read his writing somewhere that he regarded credit creation for all real estate as "non-productive" (not adding to GDP).<br /><br />However, that cryptic Tweet of his seems to say he's ok with lending for building, which on the face of it, is producing something, and also providing employment (for a while).<br /><br />Now I think back, I seem to remember his definition of productive credit creation is that where the result of spending the credit produces the means of repaying it (and some), e.g. building a new factory, etc, assuming the factory is profitable and provides an income stream.<br /><br />That doesn't normally happen with housing, unless we are talking about buy (or build) to let, which I would not normally regard as productive, at least not in the way it has been done in the UK in recent decades.<br /><br />My ideal pattern for housing development would be to allow (and finance, from fiscal deficit) councils once more to build again massively, properly planned and with plenty of amenities (perhaps with strategically placed "new towns").<br /><br />However, an update to the traditional council housing model would be to include a generous proportion of something like shared ownership, that would allow tenants to gradually become owners (if they wish) in their own time and at a pace which is economically viable for them.<br /><br />The difference between this and existing "right-to-buy" would be (in my ideal picture) would be that councils would carry on building, so that when rented houses are bought, that doesn't leave a shortage of available rentable houses. And hopefully by providing sufficient high quality supply, the average house price would come down (in relative terms) to a lot closer to average income than it is now.<br /><br />However, this is probably a bit too socialistic for you, and for most people in this conservative old country of ours. :-)montmorencyhttps://www.blogger.com/profile/12879422255762834319noreply@blogger.com