When poor and normal people get too much money, this is what happens

[danlightbulb]

Im not rich. Decent job, but don't own my own house and drive an older car.

But this, what we're seeing now, is a result of giving 'the bulk of people' too much money. Increasing benefits, increasing minimum wages, and most of all, cheap and abundant credit and mortgages.

When a very small number of very rich people get even richer, it doesn't really matter too much for the rest of us. They don't buy up cheap houses, they don't buy up low end cars. They amass their wealth in the things that they want, yachts, houses in Monaco etc, that most other people would never have gotten anyway.

But when you give poor and normal people too much money, they can then buy up all the cheaper houses, they can then live more lavish lifestyles with holidays abroad, luxury appliances, bigger TVs or whatever. And because there are so so many poor and normal people, this has massive effects, and has resulted in what we're seeing now. Huge inflation because EVERYTHING normal is in demand. No houses because a whole load of low to middle earners have all of a sudden been able to buy to let and get their mortgages paid for nothing, and banks have handed out money to let these people leverage even more out of their rising asset values.

And the solution to this rampant inflation that's pushed by everyone - increase benefits, decrease tax burden, put even more money in all of our pockets to cover these increasing costs. Except it won't work, its a circular self perpetuating problem.

The very very very poor cannot win. The new middle class 'property class' win in all scenarios, and can accumulate, and accumulate, and accumulate. The very rich can lose or win but it doesn't matter either way, because it won't effect them anyway.

 

[danlightbulb]

Which "poor" people on benefits or minimum wage are buying up all the houses exactly?

The poor people who should have been council tenants for life, unfortunate as it sounds.

Society needs a pecking order, and the dissolving of it, has left us in this mess.

 

[danlightbulb]

Wealthy people or people who can access credit on terms normal people can’t (e.g. BTL landlords) are.

They aren't the super rich though. They were 'normal' people who have become wealthy through the property gains. That's my point.

 

[danlightbulb]

Think about the figures.

Two full time salaries earning minimum wage is now about £38k a year, which will get you nearly a £200k house.

That's why there are barely any houses below £180-200k anymore.

The combination of minimum wage increases, banks willingness to give credit, and working class people with a bit saved up who invest it into low end property, is why we're in this mess now.

We are seeing the effect of after Covid housing demand, massive disruption in the supply chain and a war in Europe.

Those events have triggered this all of a sudden, but they aren't the root cause. The root cause is buried in the last 20 years of economic policy.

 

[danlightbulb]

Nonsense!

Many countries have both richer 'poor' people and poorer 'rich' people and get on just fine. We do not need the inequality associated with your 'pecking order'.

Then we'll get this rampant inflation.

When money and credit pours into the system, inflation is the result. Its baked in completely now, because a lot of people have a lot more money than they other wise would have in an equivalent position 50 years ago.

 

[danlightbulb]

blaming the poor... WOW just WOW how can you not understand how economies work?

Im not blaming the poor, its not their fault.

But objectively, what is happening is a result of too much money/credit in the system, and most of the spending that causes inflation is spent by the majority of people, i.e normal people.

 

[danlightbulb]

So if those two minimum wage people only earned £28,000 instead of £38,000, you're saying there would be a lot more houses under £180,000?

Well if that were true... they wouldn't need as large of a mortgage and could still afford a house because they would be "cheaper".

Except, adjusted for income, they wouldn't be cheaper, it would be the same.

Exactly my point!

But what has happened is the increased input money, has fed house prices, allowed people who already own to leverage up, and has fed more house prices.

If money stopped coming in at the bottom, we would have had stable prices.

 

[danlightbulb]

It is how the market works, lots of demand equals high prices and vice versa.

The demand wouldn't be there, if money into the bottom end hadn't been accelerated in the way that it has over the last 20 years.

The 'old money' very rich don't really have much impact here at all. The new property rich do.


My landlord is a fitter for British Gas. That's it. That type of job should never have been sufficient to own three houses. Too much money flowing in.

 

[danlightbulb]

Except it's not your point.

If low earners making more money is the driving force behind increased housing costs then reducing their income would reduce housing prices in tandem. Meaning that their decreased income would have the exact same buying power and they would still be able to buy the properties.

Do you see how this is contradictory?

No sorry, you're not getting it.

All else being equal, buying power would decrease yes. But the damage is already done because houses have risen in price, allowing people to leverage equity from those houses and buy more of them.

So now, you cant just cut low earner wages because of the lag in the system, and people would really suffer.

What Im saying is, the causes have already happened, and are because of decisions made three decades ago that allowed the working class to reap these massive gains. As bad as it sounds, the working class should never have been able to reap these gains, and we're all now suffering for it.

Now the problem will be perpetuated because the only way to help people survive against this inflation is to bolster wages, cut tax and provide more benefits. This enables them to pay bills, meet their rents etc, and so prevents the system from collapsing when it naturally otherwise would. But to do otherwise would be seen as immoral.

 

[danlightbulb]

Yep toally the poors fault sorry my eyes won't stop rolling

nothing to do with the tory party easting obscene amounts of money for the last 2 years....., it's all the poor peoples fault and those on benefits...... Boris Johnson told me or something

I haven't said its the poor's fault. This inflation bubble has been building for 20+ years, its just been pushed over the edge by recent events. And yes, Gov QE amplifies it I agree.

 

[danlightbulb]

you don't get how inflation works at all, go watch some videos of QE and what it does

how much of this QE monies do you think went to average everyday working people?

Inflation is a circular problem.

Goods get more expensive --> people need payrises --> payrises enable more demand --> demand increases prices ---> and back round to the start.

And add to this cheap credit, and you get what we have now.


Im not blaming the poor. Im blaming the policies over decades that allowed so much new money to input into the system, that's fueled a new level of demand, that's bolstered the profits of companies, that's increased prices, that's led to more money being needed etc etc.

I have seldom read something so wrong and inaccurate.

Please do elaborate.

 

[danlightbulb]

So the poor should know their place.

I don't doubt that it was done for the right reasons 20+ years ago, and I don't doubt many many working class people have benefited personally from the last 20 years of asset growth, credit availability, raises in pay etc.

What I am saying is that this current problem is as a result of those decisions, as well as other factors.

Whose policies? What are you referring to?

There's more poverty in the UK now than in 2005. I don't remember food banks 20 years ago.

I think mainly the council house sell off in the 90's followed by the deregulation of banks in the Blair/Brown era. Its been perpetuated since.


If Im wrong on this I'll accept it. Do you all think that policies enabling working class people to leverage assets to gain, over time, far more money than their actual job would ever have provided them with, has not been a significant contributor to this current problem?