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Remember, remember the Fifth of November

…. The Gunpowder Treason and Plot, I know of no reason, Why the Gunpowder Treason, Should ever be forgot.

Now I wasn’t around back in 1605 when Guy Fawkes attempted to destroy the Houses of Parliament so I can’t comment on what happened that evening. But ever since that evening festivities have centred on the use of fireworks as we celebrate the downfall of the Gunpowder Plot.

I happen to live in a 7th floor flat so normally I have great views of the almost constant fireworks in the week leading up to and after the 5th November. But this year there were very few fireworks, clearly a sign of the harder times.

So maybe it’s time we forgot all the current economic measures such as inflation, unemployment, GDP, balance of payments etc and used the number of fireworks launched on the 5th November as a true measure of the state of the economy. After all, what better measure than the amount of money people are willing to set fire to!

For sale: one bridge, a bookmaker and some student loans

What do you do when nobody will lend you anymore money to pay the bills? Well there is only one thing left to do before you declare yourself bankrupt and that is to sell off whatever you can. Which is exactly what thousands of people have been doing recently with eBay reporting that the number of listings on its auction site is up 17% this year.

Now it’s Gordon Brown’s turn, knowing that he is rapidly reaching the limit of what people will lend the country and with expenses still significantly bigger than income he needs to sell off whatever he can to remain solvent. But having already sold off the UK gold reserves well below the current market value he is now looking to sell off the Tote, Student Loan Book & Dartford crossing.

Surely the irony of repackaging student debt and selling it on is not lost on him!

It’s this practice of trading loans that got us into this mess, well that and the borrow to spend mentality that Brown has been pushing as the answer to our economic woes for the last year.

To make matters even worse there isn’t a lot of demand for loan books right now as most of the banks that were keen buyers of the stuff went under during the ‘banking crisis’ so that basically just leaves the state owned banks as a potential buyers. Which is effectively just moving money from left pocket to right pocket, also known as another election gimmick that might just win a few votes.

The Poverty Trap – why it’s not worth working!

“A couple with two children paying a typical private rent of £120 per week would gain only £23 if their earnings rose from £100 to £400 per week (as a result of reduced benefits and tax credits and higher tax and national insurance).”

John Hills – ‘Ends and means: the future roles of social housing in England’ (February 2007)

England v Ukraine – Pay per view?

In less than an hour’s time England will kick off against Ukraine in a match which means little to England fans but despite this England fans are being asked to pay £11.99 (or less than half this amount if you paid before Wednesday. I have written on here before about my addiction to football, but even I wont pay money to watch what is essentially a friendly game for England.

But I will be watching tonight thanks to a well known betting site that is allowing its customers to watch for free if they have a funded account and as far as I can see there is nothing in it’s terms and conditions to prevent you from depositing money before the match then withdrawing it straight after the game, although obviously they hope you will place a bet on the match.

So I haven’t really saved myself any money as I wouldn’t have paid anyway, but I will at least get to watch the match!

Come on England!

The Dubai bubble

I was fortunate enough to be sent to Dubai this week with work, a rare trip out of the office for me as I don’t frequently get to travel with work. Not only did it present an opportunity to absorb some last minute sunshine before the inevitable grey winter days set in, but also my first chance to visit Dubai.

My first impressions upon arriving in Dubai were ‘yikes this is hot’ and that was merely just exiting the airport late at night.

Anyone that has been to Dubai will not have missed the large number of building sites scattered all across the city, with cranes as common a feature of the skyline as the skyscrapers that the city is famous for. Everywhere you look there are massive projects taking place, from the impressive Burj Dubai which is now the tallest building in the world to the recently opened Metro which they proudly declare as the longest driverless train route anywhere on earth.

But after a few days it became clear all was not well in this city as the majority of building sites remained dormant. In fact the only ones showing signs of activity were the government funded projects, clearly another symptom of the current lack of credit available in the markets. Talking with locals I discovered that even the Burj Dubai, the latest icon in the skyline, remained an empty shell of a building as they were not currently fitting out the inside of the building.

Dubai grew very rapidly, in fact you only have to go back 20-30 years before they discovered oil in the UAE and it was a little known town. Like so many booms it became a victim of speculators rushing in with a flood of outside capital being pumped in to the economy. The oil wealth largely remained in the hands of a few powerful and now very wealthy families, who constantly try to out do each other with bigger, better and more expensive developments.

Property prices exploded so quickly that it was impossible not to make huge profits when developing, to such an extent that nobody actually had to occupy the property once it was built. These empty skyscrapers could be used as security to borrow more capital to develop something even bigger and the cycle went on and on for years. This illusion could continue for as long as the money kept pouring in driving property prices ever higher. But the global ‘credit crunch’ burst this bubble and stopped development almost over night, leaving half finished skyscrapers as a constant reminder that the good times are on hold.

I am sure demand for commercial and residential property will continue to grow in Dubai, especially as the government presses ahead with vital infrastructure projects and its appeal to companies as a tax haven remains. But it will be years before more property is actually needed, and thus demand can catch up with supply. So those unfinished buildings may remain in that state for some time yet.

I’m writing this on the plane having just left Dubai and it is clear looking out from the plane window that there is no shortage of land ready to develop in the future; in fact there are huge sections of roads surrounding empty plots ready for future expansion. These sandy wastelands today will no doubt be Dubai’s suburbs in 20 years time. But with so much available space, supply will probably outstrip demand for at least the next generation and any future boom in property prices will inevitably be just another bubble.

My intention is not to criticise Dubai, nor kick the city whilst it is down. I actually think what they have achieved in such a short space of time is highly impressive and that in the long-term the city will be a great success. But it’s another reminder that prices that rise dramatically because of demand exceeding supply in the short-term are unsustainable where supply is not constrained by some limiting factor.