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Boom Bust - House Prices, Banking and the Depression of 2010 (Paperback, 2 Rev Ed)
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Boom Bust - House Prices, Banking and the Depression of 2010 (Paperback, 2 Rev Ed)
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When the first edition appeared in 2005, the consensus among
forecasters was that the boom in house prices would cool to an
annual 2 or 3% rise over the following years. As predicted by the
author, however, prices continued to rise by more than 10% well
into 2007. Basing his argument on a study of property markets over
the last 200 years, Harrison warns of the danger to banks, business
and jobs of ignoring a remarkably regular 18-year cycle. Recent
events have proved the accuracy of his prediction. He accuses
Gordon Brown of giving people a false sense of security by his oft
repeated claim, last made in his 2007 Budget speech, that 'we will
never return to the old boom and bust'. Alan Greenspan in the US
encouraged a similar belief which led to the risky sub-prime
mortgage spree. The reason for the instability, Harrison explains,
is not the housing market itself but the land market on which all
buildings stand. Land is in fixed supply - as Mark Twain noted:
'They're not making any more of it'. Therefore, as the demand for
land for new homes and offices rises with population growth and
economic expansion, market forces, which normally increase supply
to reduce prices, have the reverse effect: prices rise. This
encourages speculation, with banks lending more against escalating
asset values and reinforcing the upward spiral. Under existing
government policies, the only way land prices can be brought back
to affordable levels is a slump, undermining the banking system and
causing widespread unemployment and repossessions. This is what
happened with the collapse of US sub-prime mortgages. The author
argues that monetary policy and bank regulation only have a
marginal impact on land speculation. The only way of neutralising
the boom bust cycle and creating conditions of economic stability
is a fundamental reform of the tax system.
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