“If it’s inevitable then why aren’t all capitalist economies showing US/UK private debt ratios?”

Indeed. This not only applies to Germany but to the UK and US in the post war years. Both countries had policies in place which prevented such a state of affairs. Accordingly, finance capitalists fought back and were successful in capturing the political system in both the UK and US with their parodies of democracy and weak unions.

Germany on the other hand has a robust and effective democratic system which has prevented the ascendancy of advocates of Neo-liberalism. The Free democrats, who are the ideological equivalents of the the Tories and the US Republican Party, have never been more than junior coalition partners and are currently utterly irrelevant.

It is certainly the case that Merkel has attempted to move the Christian Democrats to the right but she has only managed limited success. Another factor in the German situation is the fact that German banks are too busy munching away like hungry caterpillars at the economies of Greece, Spain, Italy, Ukraine etc and don’t have the same need to rob their own population.

So the answer to your question is that some countries have fought back against the depredations of the finance sector and have achieved varying levels of success – for the time being.

“Or could it be that there is in fact little that is “inevitable” about capitalism since it exists in an institutional and social context that modifies the behaviour of economic players?”

Well yes. But the neo-liberal project is to reverse that statement so that the powerful economic players modify the institutional and social context in their favour. Look up James Buchanan.

There are capitalist economies that are not debt-driven, and have shown no rise in private debt to GDP ratios during the period of so-called neo-liberal economics.

Ergo, your first statement looks like dogma, unsupported empirically. If it’s inevitable then why aren’t all capitalist economies showing US/UK private debt ratios? How long do we need to wait? Or could it be that there is in fact little that is “inevitable” about capitalism since it exists in an institutional and social context that modifies the behaviour of economic players?

Nope. They are sitting on assets which are making money for them. That is not the same thing. The wealth is created by people, not property. It is then transferred to property owners by the processes described in this article.

Do you have some evidence for this startling claim?

I have no idea what this has to do with my comment or with that of the comment I was replying to. I suspect that you don’t either.

“Tell me again what is “inevitable” about capitalism”

OK. But you could just read it again from above:

“As a minority accumulates the surplus value created by others it generates demand for “investment opportunities”. When this is combined with squeezing the purchasing power of the real creators of wealth the only avenue for profit is the kind of usurious lending you describe: effectively renting the surplus back at ruinous rates to the very people who created it and creating temporary demand which is structurally unsustainable.”

“…other than tired Marxist dogma that it still seems to attract.”

To be “dogma” it would have to be a belief without foundation. Perhaps you could tell me which part of my description of this process is without foundation. Describing Marxist economic theory as “dogma” just as it has been completely vindicated by the events of the last decade is something of a dogma in its right.

The author has misunderstood the concept that the underlying reason for property values to rise is not due to land values as being the source, but on economic activity around the land. If for example google decided to locate its head office in a small town (a totally unrealistic scenario but polarises the point) then property values would increase – the increase is not due to the land increasing in value magically as the author has indicated, but due to the economic fundamentals of the location (hence why you hear the phrase location location location for property)

The second major reason for property increasing is due to global (and domestic) investors viewing property as an alternative investment – it is safe and can offer a high return.

In London, the above are the two major factors why property has bubbled so high – this is ofcourse the major concern of brexit. If there is a hard brexit and lots of financial services are forced to leave (an unlikely scenario in my opinion, or well, not as dramatic), then the fundamentals of the economy would be at threat and so there will be a forecast of lower demand for the future which would cause prices to fall. Additionally, investors may no longer view property in london as a safe haven and will also depart. The impact would be the bubble bursting. However, it would reopen the doors to property to people who could not afford it before. The economy would eventually find a new equilibrium.

The author has taken the perspective of blaming capitalism for the problem of house prices. But I find it absurd to ignore all the real economic reasons as to why this has occurred. It is ofcourse true that investors are sitting on assets that are creating wealth for them, but these investors took a risk by investing in property and they are entitled to a return for their risk. The concept is no different to opening a new shop which later becomes successful and the owner can just reap the return. This is the fundamental of capitalism.

Ofcourse capitalism does go too far where it does not really draw a line for the accumulation of wealth. If you think about it, countries around the world are mainly measured by GDP growth; so investors that are able to continually benefit out of this continuous growth will reap rewards until there is no more gdp growth (from a macroeconomic point of view). Ofcourse, it is rare to hear of a country experiencing negative GDP growth and wealth globally just keeps on rising.

In terms of property, Government policies like inheritance tax help to spread the wealth but there are always loopholes. Capitalism is the worst economic system, except for all the others.

You could not devise a more evil and dysfunctional system of housing if you tried. Thatcher’s sobriquet of “witch” is well-deserved.

Nope. The main issue is that the housing crisis has transferred wealth upwards and is exacerbating the very inequality which it results from.

I’m not sure however we’d be in this state, drowning in debt from cradle to grave, if we’d held on to our manufacturing base – after all, the mass production of the consumer goods we used to make has served the Chinese frighteningly well for the last 20 years.

But HEY apparently – we’re a ‘post-industrial’ economy now – it’s all financial services, real estate, coffee shops and hairdressers.

We don’t need nerdy scientists and engineers making stuff (‘touch labour’ as I laughingly heard one management consultant refer to the process of actually making product), do we..?

The magic money fairy and her everlasting credit tree will continue to provide! And if she doesn’t – well my parents will just have to stump up, innit.

You’re quite right but this is an inevitable consequence of capitalism. As a minority accumulates the surplus value created by others it generates demand for “investment opportunities”. When this is combined with squeezing the purchasing power of the real creators of wealth the only avenue for profit is the kind of usurious lending you describe: effectively renting the surplus back at ruinous rates to the very people who created it and creating temporary demand which is structurally unsustainable.

“…but suffice to say history shows it generally doesn’t end well. ”

Right again. The neo-liberal dogma maintains that any economic activity which generates a profit is wealth creation so the squeezing of real wealth creation is not a problem. In fact, many of them would agree with the basic premise of this article – but would not think it a bad thing. For them , the wealth transfer the author describes is just “how it all works”: Irresponsible borrowers paying the morally correct penalty for living beyond their means.

* Yes the residual element is now the majority element in Britain.

http://markwadsworth.blogspot.co.uk/2015/12/we-dont-have-housing-crisis.html