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My world turned upside down

Sunday, 25th May 2008

I am in a state of utter bewildered incomprehension. I don't understand how I can have read what I have just read. It is beyond my ken. It throws into chaos everything I thought I knew about the world.

It is this:

The boom/bust in oil and house prices is, quite simply, good news, whatever the tangential pain. It shows that the good ship Gaia, planet Earth, is traumatising its passengers into husbanding its scarce resources. Above all they must ration living space, for which the West has been appallingly greedy, and carbon fuel, of which the same is true.
The fall in house prices follows a classic inflationary bubble induced by cheap borrowing. Prices soared not (as the government claimed) because of an excess of “need”. Need is not an economic concept, only demand. Prices soared because the lowest interest rates in a generation made houses, however expensive on paper, cheap to buy. Millions who could not realistically afford to borrow did so and prices soared in consequence of their unsustainable debts. The bubble duly burst. House sales in Britain are down on a year ago by some 35%, prices by almost 4%.
The market has delivered in a matter of months what the Treasury and its pundit, Kate Barker, claimed that only flooding the market with “new land” could achieve, a surplus of housing supply for both sale and rent, signified by a fall in price. With no loss of green belt and no “eco-towns”, house-buying has been brought within the range of millions of new buyers, albeit under a more disciplined mortgage regime. Only builders and estate agents get hurt.
...The same laws of economics apply to the price of oil – and, for that matter, wheat. These are scarce resources. The fact that more people want them is why they are more expensive. When a Labour MP last week cried that petrol should be made cheaper by the government “because it is a necessity”, he might as well have said two plus two equals five. When will these fools be sent for compulsory re-education before they do more damage?

That's from a piece by Sir Simon Jenkins, and is not just entirely right but hugely, critically and importantly right, and right where so many idiots are wrong.

How on earth did this happen? Sir Simon has long been one of my surest guides to knowing what is right and wrong in this world. Whatever he writes, I can bet I'll think the absolute opposite.

And now this. My world has been turned upside down.

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Commondog

May 26th, 2008 8:19am

I'd like to have read this article one year ago, then I would not have had all those doubts about my sanity when the idiot spiral was still apace and the BBC kept smiling when each month's house price rise was announced.

Just wish he'd ease up on the old, "...the West has been appallingly greedy...", tune.

What's greedy are people, and it ain't the West that are making those in any great number.

Snorri Godhi

May 26th, 2008 11:33am

It is true that house prices were driven by cheap borrowing, but they'd still be much lower without rationing of living space (to use Sir Simon's terminology).

Meanwhile, even if new buyers can now afford some sort of housing, the quality of British housing remains well below even East European standards.