Wednesday, November 30, 2005

OECD, housing, and intelligent cultures

OECD: Global growth is "exceptionally vigourous" (if at risk from oil prices, US assets, global trade, yadda yadda), but house prices in UK, Ireland and Spain are “significantly overvalued”. Keeping things stable seems to be the future, although...

"[The OECD] warned of the danger of a protracted period of large house price falls with implications for a slowdown in consumer spending."

Are there parallels here with the dot com boom? The amount of money naive hope going into the Internet pre-2001 sustained it for a while, but things turned around pretty quickly*. Over-valuing in the house prices could perhaps be compared to this, as it represents a sense of hope in the economy. Fortunately, there seems to be a bit more sense surrounding the issue, at least from an economic point of view.

If that's somewhat the case, is there something underlying this short, sharp "series" of "ready investment"? In other words, are we becoming more willing to invest in something, without really thinking through how it's *really* going to pan out? Related questions:

1. Are there other instances of such investment?

2. Where does this leave us in terms of "completeness of information" regarding any particular market? There's some level of assumption that markets operate on an emergent "intelligence", but can other factors change the level of this intelligence, or at least partially occlude it?

Maybe we just need to wait and see how the housing market here turns out. My predictions of a bust over the last few years are looking like jelly...

* Here's a chart of UCAS applicants, broken down by ethnicity, to Maths and Computing...

Chart showing UCAS applicants to maths and CS, 1996 to 2004

(Source: UCAS data run through a Perl script.)

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