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Inflation, Bring It On


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#1 Bobbins

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Posted 18 January 2011 - 12:13 PM

Not everyone is upset with the inflation figures. Being young (relatively) with a £200k mortgage and little savings, I'll take as much inflation as you can give to me. That is as long as my salary keeps up with it, and given I work in the oil industry that should not be a problem. :D

Just look at anyone who bought a 5 bed stucco in Knightsbridge in 1970 for £20k.

As long as your salary rises with inflation, then you may have a few of years of pain as interest rates kick up, but after that it's plain sailing, living virtually mortgage free for the rest of your life.

Inflation hurts old people. Young people with massive debt is its friend, as long as you can bunker down and continue to repay during the high interest rate period.

With high inflation but low saving rates, anyone who has a big deposit but no house is screwed.

Inflation, bring it on.

Edited by Bobbins, 18 January 2011 - 12:20 PM.


#2 leicestersq

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Posted 18 January 2011 - 12:30 PM

Not everyone is upset with the inflation figures. Being young (relatively) with a £200k mortgage and little savings, I'll take as much inflation as you can give to me. That is as long as my salary keeps up with it, and given I work in the oil industry that should not be a problem. :D

Just look at anyone who bought a 5 bed stucco in Knightsbridge in 1970 for £20k.

As long as your salary rises with inflation, then you may have a few of years of pain as interest rates kick up, but after that it's plain sailing, living virtually mortgage free for the rest of your life.

Inflation hurts old people. Young people with massive debt is its friend, as long as you can bunker down and continue to repay during the high interest rate period.

With high inflation but low saving rates, anyone who has a big deposit but no house is screwed.

Inflation, bring it on.



Alas, global wage arbitrage.

If an Indian is prepared to do the same job as you for one tenth of the money, expect the relative wages of you and said Indian to move until there is parity. Part of this correction mechanism is an increase in the prices you pay for the stuff you want. Wage inflation is also part of the correction mechanism, but only for the Indian.

#3 J-Hi

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Posted 18 January 2011 - 12:31 PM

With high inflation but low saving rates, anyone who has a big deposit but no house is screwed.

Not if they intend using that deposit to buy a house which is falling in value numb nut

#4 Bobbins

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Posted 18 January 2011 - 12:38 PM

With high inflation but low saving rates, anyone who has a big deposit but no house is screwed.

Not if they intend using that deposit to buy a house which is falling in value numb nut

Not all houses fall in value precipitously. If you wan't to aspire to a very desirable area then I think this image tells a good story. And don't come back to me with this in poncy craphole London. This gets mirrored in the nicer parts of Harrogate, Leeds, Bristol etc.

Anyway, the person with the deposit will be stumping up for a 25 year (large) mortgage after the inflation has happende, while those with property will be a lot closer to being mortgage free, having had their debt inflated away.

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#5 Roseland69

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Posted 18 January 2011 - 12:39 PM

Thank heavens wage inflation is through the roof!!

Oh....

#6 Bobbins

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Posted 18 January 2011 - 12:43 PM

Thank heavens wage inflation is through the roof!!

Oh....

I agree the public sector is struggling, but there'll be carnage soon. Just look what happened in the '70s. When you've had a £300 per month cut in mortgage payments, you are less likely to worry about whehter you get a 1 or 3% increase. Push up interests though and the unions will be screaming for inflation busting pay rises

As for the private sector wage growth is already up near 3%. History tells us that inflation and wgae grwoth go hand in hand.

Edited by Bobbins, 18 January 2011 - 12:48 PM.


#7 leicestersq

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Posted 18 January 2011 - 12:46 PM

I agree the public sector is struggling, but there'll be carnage soon. Just look what happened in the '70s.

As for the private sector wage growth is already up near 3%. History tells us that inflation and wgae grwoth go hand in hand.



History also tells us that what happened in the past is no indication of future performance.

#8 Alan B'Stard MP

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Posted 18 January 2011 - 12:48 PM

It's not inflation - it's people getting poorer.

Edited by Alan B'Stard MP, 18 January 2011 - 12:49 PM.


#9 Bobbins

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Posted 18 January 2011 - 12:49 PM

History also tells us that what happened in the past is no indication of future performance.

History tells us inflation eats debt, or are you going to argue that it's different this time :lol:

#10 babesagainstmachines

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Posted 18 January 2011 - 12:50 PM

I hope you get a pay freeze, lose your house and go bankrupt.



Ok, I don't really, but you have an "I'm alright, Jack" attitude which is a bit repugnant. You will need prudence to be rewarded one day, and I'm sure you will sit on the other side of the fence.

Edited by BabesAgainstTheMachine, 18 January 2011 - 12:50 PM.


#11 Brave New World

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Posted 18 January 2011 - 12:52 PM

Not all houses fall in value precipitously. If you wan't to aspire to a very desirable area then I think this image tells a good story. And don't come back to me with this in poncy craphole London. This gets mirrored in the nicer parts of Harrogate, Leeds, Bristol etc.

Anyway, the person with the deposit will be stumping up for a 25 year (large) mortgage after the inflation has happende, while those with property will be a lot closer to being mortgage free, having had their debt inflated away.



I live there and although not as strong as neighbouring areas (rural York, Leeds and Bradford) there have been are an ever increasing amounts of drops - one house has dropped £100k, in a nice area of HG.

As others have mentioned the abscence of wage inflation defeats your point.

To really let inflation do the job of eroding such big debts (i.e. a large mortgage) inflation would have to increase much more - with the MSM picking up on inflation (through stories of fuel, heating price hikes etc) do you really think the 'masses' would be able to stomach such jumps in prices when their wages and disposible income are already struggling to keep pace at the moment?

London, due to its international profile of buyers, will always be inherently different to your examples above. From my own experience of working in Leeds there ain't the well paid jobs in the region to sustain these prices, let alone the available credit to support purchases of cheaper property in these areas.

These areas are perfect 'creme brulee' examples of a few people with money and a lot of people playing catch up using previously cheap credit. Even at the top end a couple of weeks ago in Harrogate all of the £million properties for sale - non were STC.

#12 SomethingHasToGive

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Posted 18 January 2011 - 12:52 PM

Not everyone is upset with the inflation figures. Being young (relatively) with a £200k mortgage and little savings, I'll take as much inflation as you can give to me. That is as long as my salary keeps up with it, and given I work in the oil industry that should not be a problem. :D


In a economic environment with high and potentially rising unemployment, anyone who is replaceable can have their wage frozen. Some of the irreplaceable people will also get hit with the same stick, because of the arbitary target setting of large companies who are trying to keep their costs down and silly politics in large companies.

We still have 'the cuts' to come and their effect on the labour market.

As such, we'll just get eroding standards of living.
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When cartoon characters run off a cliff, they keep running for some time before looking down. When they do, the game is over and … down they go. The mainstream residential property market looks a bit like this.

#13 Georgia O'Keeffe

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Posted 18 January 2011 - 12:53 PM

It's not inflation - it's people getting poorer.

sshhh, dont let the cat out of the bag

#14 singlemalt

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Posted 18 January 2011 - 12:53 PM

Inflation - Good for some.
Deflation - Good for some.
Stability - Good for everyone.

#15 SomethingHasToGive

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Posted 18 January 2011 - 12:54 PM

Inflation - Good for some.
Deflation - Good for some.
Stability - Good for everyone.

+1
__________________________________________________
When cartoon characters run off a cliff, they keep running for some time before looking down. When they do, the game is over and … down they go. The mainstream residential property market looks a bit like this.




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