Bank Of England Warns Families To Expect Fall In Living Standards

[interestrateripoff]

http://www.telegraph.co.uk/finance/economics/7450009/Bank-of-England-warns-families-to-expect-fall-in-living-standards.html

Families have been warned by the Bank of England to expect an effective pay cut in the coming months because of the economic climate.

In a blunt warning issued in a key report, the Bank also said that it is too early to conclude that unemployment has peaked.

It said that although thus far many workers had been willing to accept pay reductions, or reluctantly to work part-time, employees may have failed to realise that the costs of goods and services are likely to rise faster than their wages in coming months.

The Bank report said that one risk was that employees would be “unwilling to accept a further squeeze in real wage growth”, adding: “That could lead them to push for higher pay settlements this year. But if companies cannot afford the increase, then they may shed labour in order to contain labour costs.”

It said: “There remains a risk of further falls in employment if, for example, the recovery in demand proves more sluggish than businesses have expected. Businesses may respond to any future squeeze in profits by shedding staff.”

The warning comes amid worries that Britain could fall victim to a double-dip recession, slumping backwards no sooner than the economy had escaped it.

Such worries were reinforced further on Monday as a Bank policymaker and Monetary Policy Committee member Kate Barker conceded that the economy could shrink for a period this year.

It added that although most of its regional experts anticipate no major change in unemployment in the coming months, there is a significant chance that, with some companies vulnerable to demands from their creditors, businesses may feel they have no option other than to cut jobs further.

The report said this “may imply further redundancies if the economy does not grow sufficiently quickly.”

Does this mean that it will be unexpected then if there is a major change in unemployment?

I'm so glad we've got these experts who know what they are talking about.

[OnlyMe]

No mention of the fall of living standards thanks to trashing the currency to prop up their piggy friends is there?

[Lock and load]

The Whole government doesn't matter who they are,are a bunch of gypsies in suits,get rid of the whole lot and start again with people on standard wages,standard expenses who actually give a f*** about this failing country

[zilly]

No major change in unemployment in the coming months?

Really??!!

Full employment for all our school and college leavers this year then?

Crumbs McDonalds, Greggs and Costa must be going on one hell of an expansion drive.

I smell the strong whiff of bullpoo.

[@contradevian]

no regrets from the Bankrupt of England on pumping an unsustainable credit and housing bubble in the first place then. Why has no one resigned? They have no shame.

[scottbeard]

No major change in unemployment in the coming months?

Really??!!

Full employment for all our school and college leavers this year then?

Don't forget

(1) About a quarter of young people are out of work as it is - that continuing is "no change"

(2) Despite the economic climate, some people at the other end will still retire or die

['Bart']

Why has no one resigned?

Given the current state of the economy, they need the money!

[Gone baby gone]

If only they'd given this warning in the mid 90s, it might have been useful!

BoE = Bunch of Eejiits

[libspero]

They have caught themsleves between a rock and a hard place..

"Proper" inflation is dropping like a stone..

"Make believe" Price inflation is rocketing..

As far as I can tell they are setting policy based on M4 while pretending to follow the CPI.

Looks like they've ditched the currency to try to get nominal growth, and now they'll have to explain to everyone why CPI is through the roof but they are still fighting deflation.

It all feels like a total mess.. I wish they'd just be more honest and open about it all.

[LuckyOne]

They have caught themsleves between a rock and a hard place..

"Proper" inflation is dropping like a stone..

"Make believe" Price inflation is rocketing..

As far as I can tell they are setting policy based on M4 while pretending to follow the CPI.

Looks like they've ditched the currency to try to get nominal growth, and now they'll have to explain to everyone why CPI is through the roof but they are still fighting deflation.

It all feels like a total mess.. I wish they'd just be more honest and open about it all.

It is funny how fashions change.

When I first started out working in a trading room, the only numbers that anyone paid any attention to were the money supply numbers. Slowly but surely the focus shifted to CPI and then to NFP.

It seems that the market always needs a self defined critical data point to "hang it hat on" that acts as a catalyst for market moves.

I think that we will eventually go back full circle and focus again on the money supply as you imply (sort of). QE and the concerns about withdrawing it at the right time are effectively telling us that central banks and markets think that inflation and deflation are truly just monetary phenomena.

[guitarman001]

Every time I see some report on the news or in the paper I see a family outside a massive home which I'm sure they can't afford. I'd love to go knocking on doors finding out what these people DO. Maybe I'm being cynical but all these people can't afford to live in what looks like £200k+ houses and the sooner they get a shock the better, as those that CAN afford a place will hopefully get one without having to pay insane prices.

[Ben from Dover]

Thank God it only applies to families and that my living standards will be fine. The only surprise is that it also effects soft-working families.

Did anyone also pick up a sort of desperate attempt by the BoE to try and control wage driven cost push inflation here. They seem to be trying to scare people into not asking for a pay rise (with inflation at 3%) because it will be bad for the overall economy.

Edited March 16, 2010 by The Edge

[OnlyMe]

..........and there's still no real growth to speak off

Just growth in money supply, even then the figures are rubbish, measure the GDP in a basket of currencies and GDP has collapsed.

[Blue Peter]

It said that although thus far many workers had been willing to accept pay reductions, or reluctantly to work part-time, employees may have failed to realise that the costs of goods and services are likely to rise faster than their wages in coming months.

Don't worry, we've got an independent monetary policy committee to make sure that prices don't rise too fast...wait a minute...

Peter.

[Ruffneck]

Don't worry though , the banksters won't suffer a drop in living standards

Not under a liblabcon government anyway

[Neil B]

Every time I see some report on the news or in the paper I see a family outside a massive home which I'm sure they can't afford. I'd love to go knocking on doors finding out what these people DO. Maybe I'm being cynical but all these people can't afford to live in what looks like £200k+ houses and the sooner they get a shock the better, as those that CAN afford a place will hopefully get one without having to pay insane prices.

They cant afford them: They all took out IO mortgages that were 10x their salaries. As soon as IRs go up they will be stuffed and if they survive that then in a few years time when they come to the end of their mortgage term they'll get repo'd as they wont have 200k lying around to pay the capital off.

[R K]

They have caught themsleves between a rock and a hard place..

"Proper" inflation is dropping like a stone..

"Make believe" Price inflation is rocketing..

As far as I can tell they are setting policy based on M4 while pretending to follow the CPI.

Looks like they've ditched the currency to try to get nominal growth, and now they'll have to explain to everyone why CPI is through the roof but they are still fighting deflation.

It all feels like a total mess.. I wish they'd just be more honest and open about it all.

The easiest way to fix the M4 chart would be to re-employ Peter Cummings. The effect you are looking at is his removal from the workforce.

[wren]

Every time I see some report on the news or in the paper I see a family outside a massive home which I'm sure they can't afford. I'd love to go knocking on doors finding out what these people DO. Maybe I'm being cynical but all these people can't afford to live in what looks like £200k+ houses and the sooner they get a shock the better, as those that CAN afford a place will hopefully get one without having to pay insane prices.

That'll be the gold bulls then. The ones with real money (physical gold only, not paper gold).

[Laughing Gnome]

They cant afford them: They all took out IO mortgages that were 10x their salaries. As soon as IRs go up they will be stuffed and if they survive that then in a few years time when they come to the end of their mortgage term they'll get repo'd as they wont have 200k lying around to pay the capital off.

You don't know that.

Many that appear a little stupid and don't seem to do a great deal may have inherited wealth. They will be perfectly safe, and complacent about how "hardworking" they have been.

Hard to know for sure, but there appears to be a huge amount of it about, and in the hands of some very unremarkable people.

[Neil B]

You don't know that.

Many that appear a little stupid and don't seem to do a great deal may have inherited wealth. They will be perfectly safe, and complacent about how "hardworking" they have been.

Hard to know for sure, but there appears to be a huge amount of it about, and in the hands of some very unremarkable people.

I do know that. It is hard fact. I only an odd few people that have been lucky enough to inherit enough wealth to be able to afford a 200k+ house when they are under 45. I know many many people who are on average wages or below average and have bough houses that would traditionaly been beyond their budgets. They are all on IO mortgages with multiples well beyond 4 x their salary.

From whatprice.co.uk:

More than 25% of homeowners are paying for their homes with an interest-only mortgage say the Abbey. The reason is obvious - their monthly payments are much less. For example, a £125,000 interest only mortgage at an interest rate of 5% and repayable in 25 years time, costs £525 per month - but on a repayment basis the monthly cost rises by £210 to £735 per month.

Interest Only Mortgages popular with borrowers

Understandably, this level of cash saving has proved highly popular with first time buyers struggling to get the feet on the property ladder and others working on a tight monthly budget. But there's a time bomb lurking. 37% of homeowners with interest only mortgages are failing to save any money for repaying the mortgage when the mortgage capital eventually becomes repayable at the end of the term.

Read more: Interest Only Mortgages - The pros and cons of Interest Only Mortgages for Borrowers and Lenders

http://www.whatprice.co.uk

Edited March 16, 2010 by Neil B

[MrPin]

They are all on IO mortgages with multiples well beyond 4 x their salary.

Yes!

[kilroy]

I do know that. It is hard fact. I only an odd few people that have been lucky enough to inherit enough wealth to be able to afford a 200k+ house when they are under 45. I know many many people who are on average wages or below average and have bough houses that would traditionaly been beyond their budgets. They are all on IO mortgages with multiples well beyond 4 x their salary.

From whatprice.co.uk:

More than 25% of homeowners are paying for their homes with an interest-only mortgage say the Abbey. The reason is obvious - their monthly payments are much less. For example, a £125,000 interest only mortgage at an interest rate of 5% and repayable in 25 years time, costs £525 per month - but on a repayment basis the monthly cost rises by £210 to £735 per month.

Interest Only Mortgages popular with borrowers

Understandably, this level of cash saving has proved highly popular with first time buyers struggling to get the feet on the property ladder and others working on a tight monthly budget. But there's a time bomb lurking. 37% of homeowners with interest only mortgages are failing to save any money for repaying the mortgage when the mortgage capital eventually becomes repayable at the end of the term.

Read more: Interest Only Mortgages - The pros and cons of Interest Only Mortgages for Borrowers and Lenders

http://www.whatprice.co.uk

Just to back up what you're saying.

http://www.fsa.gov.uk/Pages/Doing/Regulated/Returns/IRR/statistics/index.shtml

[Alan B'Stard MP]

They have caught themsleves between a rock and a hard place..

"Proper" inflation is dropping like a stone..

As far as I can tell they are setting policy based on M4 while pretending to follow the CPI.

Looks like they've ditched the currency to try to get nominal growth, and now they'll have to explain to everyone why CPI is through the roof but they are still fighting deflation.

It all feels like a total mess.. I wish they'd just be more honest and open about it all.

Do you have the graph for M4 Holdings?

[winkie]

A double whammy...not only a fall in living standards, but also a fall in working standards.

[200p]

All standards have been falling since the 70s.

You name it, living, healthcare, education, state housing, pension etc. It's all been watered down. The illusion of wealth, growth etc is failing fast.

There's only one standard we need to go back on to restore it all and that's the gold standard.

Edited March 16, 2010 by Money Spinner