Inflation

[SkipdiverJohn]

Unfortunately it follows the old same pattern, boom and bust. Something the U.K. doesn’t seem to be able to shake off.

That's because politicians keep meddling in economics.
What needs to happen is a return to real net positive interest rates - so borrowers pay back more in real terms than the amount they borrowed. What is currently happening is borrowers on low rates are having the true value of their debt eroded by inflation, so tthey are effectively getting subsidised by their lenders.
Historically, borrowing rates were a good couple of percent above the current RPI, so the lender could make a profit and the retail saver could at least maintain the value of their cash and their spending power.
The BOE Bank Rate ought to be about 13-14% with the current RPI around 11%. The MPC are chicken though, because they know a realistic interest rate would trigger mass defaults and repossessions.
It needs to happen though, because the personal and corporate debt bubble in the West has grown to a really dangerous level. Meddling politicians who don't want the economy and money supply to take a big hit, are the ones ultimately fuelling the inflation and the debt problem. The bubble needs to burst, and all the over-indebted individuals and companies need to be taken down for being financially reckless.

 

[welsh dragon]

The problem is people mortgage themselves up to the hilt when Interest rates are low and are quite happy that others are earning bugger all on any money they have been able to save, but as soon as interest rates then start to creep up they cry foul. You should always leave yourself some leeway for when not if things change.

I remember 15% interest rates now that did make your eyes water a bit.

We always have these swings and roundabouts and people just don't seem to prepare for them.

The UK isn't the only country suffering at the moment. It's happening all over.

Of course there are some who will exploit the situation but on the whole, we have to live with it.

 

[jowwy]

The problem is people mortgage themselves up to the hilt when Interest rates are low and are quite happy that others are earning bugger all on any money they have been able to save, but as soon as interest rates then start to creep up they cry foul. You should always leave yourself some leeway for when not if things change.

I remember 15% interest rates now that did make your eyes water a bit.

We always have these swings and roundabouts and people just don't seem to prepare for them.

The UK isn't the only country suffering at the moment. It's happening all over.

Of course there are some who will exploit the situation but on the whole, we have to live with it.

when did you buy your 1st property??

 

[Deleted member 26715]

I bought my first in 1982 for £16.500 they are now selling for £180,000, I bought my second in 1984 for £23,300 it's now worth £230,000, but I still can't afford the property that I actually want, in 1984 I was £15,000 short, now I'm £250,000 short. The first was sold to fund the second in case it's relevant

 

[welsh dragon]

when did you buy your 1st property??

Why? 1974.

 

[wafter]

It's certainly fuelling massive anxiety for me - seeing the money I've saved throughout my entire life being eroded away to nothing, thanks largely to the government's decision in 2008 to kick the can down the road and instead of allowing the enormously unsustainable economy they created to crash and reset as it should, keeping the plates spinning by slashing interest rates and printing money.

Now we're reached the natural end-game of enormous asset inflation followed by currency devaluation, which completes the circle of screwing those who've been cautious, pragmatic and saved to placate those who've been reckless and bought into the model of now debt-led perpetual "growth".

While we've seen many cycles of economic boom and bust, it seems very much like we're reaching the end of an epoch and are going to see some massive changes; which as usual will probably be mercilessly exploited by those who already have too much to the detriment of those who have the least.

We've shamefully, frivilously burnt through an enormous amount of the world's resouces to chase this entirely false construct of capitalist economic growth and excess and at some point that has to end - it seems increasingly like we've reached that point and for most I think the future looks extremely bleak

 

[PaulSB]

The problem is people mortgage themselves up to the hilt when Interest rates are low and are quite happy that others are earning bugger all on any money they have been able to save, but as soon as interest rates then start to creep up they cry foul. You should always leave yourself some leeway for when not if things change.

I remember 15% interest rates now that did make your eyes water a bit.

We always have these swings and roundabouts and people just don't seem to prepare for them.

The UK isn't the only country suffering at the moment. It's happening all over.

Of course there are some who will exploit the situation but on the whole, we have to live with it.

Yes, I well remember those 15/16% interest rates. Throughout the time we had a mortgage our policy was to only borrow what could be funded by my wife's salary. As an NHS employee her position was always more secure than mine.

 

[SkipdiverJohn]

It's certainly fuelling massive anxiety for me - seeing the money I've saved throughout my entire life being eroded away to nothing, thanks largely to the government's decision in 2008 to kick the can down the road and instead of allowing the enormously unsustainable economy they created to crash and reset as it should, keeping the plates spinning by slashing interest rates and printing money.

I don't keep much of my wealth in the form of easy access cash these days, because of the financial repression deliberately enacted on savers by artificially low interest rates.
A good proportion of my cash is long term index-linked and I'm very glad I invested that when I could do so.
Low rates and QE has interfered with the natual economic destruction/reconstruction cycle for well over a decade now. There are many individuals and companies who should rightfully have been bankrupted for being stupid with their money, who got bailed out instead.
Because the required destructive correction was not allowed to fully play itself out in 2008/9, the bubble never really deflated enough and now it has since reflated to an even more dangerous and unstable state than last time.
Constantly trying to prevent a crash, just stores up the problem. Recessions are economic pressure relief valves that prevent the whole financial system from violently blowing up. There will come a time when a seismic financial event is triggered, most likely by something else happening in the world geopolitically, that is too big for any amount of government or central bank meddling to prevent. Expect it to be even worse than in 1929.

 

[gbb]

It will be difficult but how else can inflation be controlled?

Rates have been kept artificially low since 2008 propped up by QE from the Gov'.

One of the reasons behind the crazy increase in house prices.

I'd hate to be having to solve these huge problems.

According to one prominent US economist of a couple decades ago....stop printing money. Its something i saw on YT. Tò much money, not enough goods will inevitably result in inflation.
Is some of this the result of 20 plus years of quantative easing i wonder ?

 

[jowwy]

Why? 1974.

Because i didnt think you was old enough………had you at around my age

 

[SkipdiverJohn]

According to one prominent US economist of a couple decades ago....stop printing money. Its something i saw on YT. Tò much money, not enough goods will inevitably result in inflation.
Is some of this the result of 20 plus years of quantative easing i wonder ?

Consider what happened during the pandemic. The supply of consumer goods shrank massively due to factory shutdowns and logistics disruption, and at the same time governments all over the world started handing out free welfare money to people with no travel to work costs and little stuff available to purchase.
Simple economics is that more money chasing a reduced supply of products equals inflation. Furlough was printed money. The money supply was artificially increased without any underlying natural increase in the size of the real economy. Once the pandemic restrictions were lifted all the furlough cash that had been stockpiled started to get spent on consumer durables, holidays, and entertainment . The problem was the shutdowns reduced the capacity of all these sectors to supply the goods and services the punters craved, so prices soared.

Then you've got the West's reaction to Putin marching into Ukraine, which has made matters much worse than if they had kept their noses out and left it to Russia and Ukraine to slog it out. Without the West getting involved, it would all be over by now, less fighting, less destruction, and the oil price spike would have been far more subdued.

 

[welsh dragon]

Because i didnt think you was old enough………had you at around my age

I am ancient

 

[raleighnut]

I don't keep much of my wealth in the form of easy access cash these days, because of the financial repression deliberately enacted on savers by artificially low interest rates.
A good proportion of my cash is long term index-linked and I'm very glad I invested that when I could do so.
Low rates and QE has interfered with the natual economic destruction/reconstruction cycle for well over a decade now. There are many individuals and companies who should rightfully have been bankrupted for being stupid with their money, who got bailed out instead.
Because the required destructive correction was not allowed to fully play itself out in 2008/9, the bubble never really deflated enough and now it has since reflated to an even more dangerous and unstable state than last time.
Constantly trying to prevent a crash, just stores up the problem. Recessions are economic pressure relief valves that prevent the whole financial system from violently blowing up. There will come a time when a seismic financial event is triggered, most likely by something else happening in the world geopolitically, that is too big for any amount of government or central bank meddling to prevent. Expect it to be even worse than in 1929.

It doesn't help that people are paying more TAX to the government than at any time since WW 2, the pension 'triple lock' was suspended instead of doing what it was designed to do and so much was fraudulently claimed by 'buisness' in furlough and 'bounce back' loans.

Who is paying for this.

 

[jowwy]

Consider what happened during the pandemic. The supply of consumer goods shrank massively due to factory shutdowns and logistics disruption, and at the same time governments all over the world started handing out free welfare money to people with no travel to work costs and little stuff available to purchase.
Simple economics is that more money chasing a reduced supply of products equals inflation. Furlough was printed money. The money supply was artificially increased without any underlying natural increase in the size of the real economy. Once the pandemic restrictions were lifted all the furlough cash that had been stockpiled started to get spent on consumer durables, holidays, and entertainment . The problem was the shutdowns reduced the capacity of all these sectors to supply the goods and services the punters craved, so prices soared.

Then you've got the West's reaction to Putin marching into Ukraine, which has made matters much worse than if they had kept their noses out and left it to Russia and Ukraine to slog it out. Without the West getting involved, it would all be over by now, less fighting, less destruction, and the oil price spike would have been far more subdued.

Consider what happened during the pandemic. The supply of consumer goods shrank massively due to factory shutdowns and logistics disruption, and at the same time governments all over the world started handing out free welfare money to people with no travel to work costs and little stuff available to purchase.
Simple economics is that more money chasing a reduced supply of products equals inflation. Furlough was printed money. The money supply was artificially increased without any underlying natural increase in the size of the real economy. Once the pandemic restrictions were lifted all the furlough cash that had been stockpiled started to get spent on consumer durables, holidays, and entertainment . The problem was the shutdowns reduced the capacity of all these sectors to supply the goods and services the punters craved, so prices soared.

Then you've got the West's reaction to Putin marching into Ukraine, which has made matters much worse than if they had kept their noses out and left it to Russia and Ukraine to slog it out. Without the West getting involved, it would all be over by now, less fighting, less destruction, and the oil price spike would have been far more subdued.

So in your eyes furlough shouldnt have been paid out to people??? so what should have happened then???

 

[SkipdiverJohn]

So in your eyes furlough shouldnt have been paid out to people??? so what should have happened then???

Furlough should have been paid at a purely subsistence level with a low monthly cap, not at the level that allowed people with reduced outgoings due to being at home, to save it up as free spending money. It was way too generous, and is at least partly to blame for the current inflation spiral.