Sour Mash

Seconded. Cretins like him put all our liberties at risk.

I didn't attempt to pay in cash - I was merely reading the terms of sale in the contract I signed after putting down the deposit. They were very explicit on only accepting the deposit/up to 2k in cash. The full balance had to be paid by bank transfer 'to protect against money laundering' of course And good luck moving it back into the banking system if for example, you had taken it out to protect against bank collapse as you'll be asked to prove that you came by it legally - to the authorities satisfaction (no definition exists of what would actually prove it). If they decide you can't prove it, say bye bye to your money as it will be confiscated. Oh, and you'd better hope that if you decide to store your cash savings in somewhere like a safety deposit facility that the authorities don't decide to raid it and confiscate everything they find: Met. raid Finchley Road The bottom line is that you can't legally use physical cash to purchase anything more expensive than a couple of thousand quid these days and even holding more than a few thousand quid in cash can see it taken away from you with no proof required from the authorities. So if you have tens of thousands of quid of savings and can even get it into cash and store it safely (both from criminal theft and the authorities), good luck using it to do anything like buying a house or a car.

From what I can see, a lot of people are already struggling thanks to low wages, high costs of living and large debt burdens to service. Low interest rates have let them cling on a bit longer but the problem hasn't gone away. Inflation resulting from the low rates will take away their disposable income just as surely as interest rises would have done. The only thing that can save them now is wages rises and an improvement in the economy taking away risk of redundancy.

Not really - the price of the goods in dollars will rise to compensate for a falling dollar or they will switch to selling their resources in other currencies if the sellers perceive that the currency really is entering its death throes. The only benefit would be if people jumped into the pound as a 'safe' currency, making energy and commodities cheaper for us. More likely that the pound would go down with, or shortly after, the dollar IMO.

Those who say that wages cannot rise always forget that when the currency is debased, exporters have much more scope to award pay rises as they are selling in harder currencies. Then there's the massive public sector - plenty of scope there for the government to spend billions of freshly created money into the market. Of course, they don't want to pay more but once you have opened the money printing sluices and you are faced with crippling strikes (from people whose spending power has dropped as a result of your money printing) then it becomes a lot easier to print a bit extra and award wage rises. Those wage rises won't of course keep pace with inflation - history shows they never do - but a lot better to get a nice fat pay rise than see your fixed salary be worth less and less. Of course, the real beneficiaries of the printing are those with first access to the new magic cash and the strategy of printing is based on trying to make sure that those other than the likes of bankers don't also get in on the game of getting newly printed money (i.e. the general public). Printed money won't find it's way as easily to the rest of us but eventually it will get there. Those who'll see the flow from the money pump the last are those in industries servicing the UK internal market. And of course those living on savings won't get to see it at all.

Strange you should pick that example... I recently spent about that much on a new car and whilst the garage would accept up to a 2k deposit in cash they were clear (it's in the contract conditions) that they could accept no more than 2k in cash towards the car. Try buying something in excess of 10k, for cash, and see what happens. Even when just moving money between banks, when I went to the bank to set up the BACS transfer to the car dealership I was asked to state for what purpose I was moving (electronically) the money. I also can't transfer more than 10k at a time via eBanking without speaking to a representative of the bank and explaining why I am wanting to transfer more than 10k. The bank holds assets equivalent to about 5% of the liabilities to its customers and that's held mostly in assets, not cash. Going in and asking for 100k of your own money in cash means taking the money directly from their core capital. Something they do NOT want to do.

Suppose you have 100k 'saved' in the bank - what do you think your chances are of getting them to give you one hundred thousand pounds of legal tender cash notes (even with a week's notice)? Hint: Slim to none. They will offer to give you a couple of grand at most and transfer the balance to another bank. Physical cash and bank credit are NOT the same thing even though under normal circumstances they are treated as equivalent and fully exchangeable. Then of course you have the problem of what to do with all that money and how to actually spend it on anything more than minor, cheap things. Any attempts to spend large amounts of cash will see you fall foul of 'money laundering' laws.

Obviously whenever the deflation that you have been going on about endlessly kicks in.

Wow, just imagine how much money you can save by never buying then Just because you expect to take on less debt due to house price deflation (whenever you do buy)it doesn't mean that the day to day cost of living inflation is somehow offset. Also, more inflation in lower order consumer goods tends to imply less deflation in higher order capital goods (i.e. property). If you want to see really appreciable drops in house prices you wouldn't be cheering on consumer price inflation.

You need to get the difference between currency units and wealth straight. Currency is supposed to be a fair representation of wealth/production but only if the supply of money stays in proportion to the production it represents. Debts are taken on/issued in in fiat currency. All that is required to repay them are valid fiat currency. Doesn't matter whether that currency was earned through actual production, loaned into existence or flat out printed from thin air. The currency is valid because the authorities decree it is valid. The clue is in the name: FIAT currency. definition of fiat When you loan someone money the debt is only enforceable in fiat currency. When you swap your labour or an asset for fiat currency, that's it. Once you've 'bought in' to fiat then you accept the consequences that your 'wealth' or past production surplus is only worth as much as those in control of the currency allow it to be worth. Of course the consequences of printing your way out of trouble are pretty serious down the line but right now what matters to the powers that be is getting themselves out of the current mess. They believe that they can print just enough to extricate themselves from the massive mess they have created. And of course if all else fails, those running the show have plenty of chance to secure their wealth (and indeed, acquire more) as currency destruction runs its course. Just look at the history of the Weimar hyperinflation to see how those at the top benefited whilst everyone else saw their standard of living and savings wiped out.

It doesn't matter what the public think (not that many of them do) and it certainly won't make any difference which bunch of politicians get elected. The bankers own the politicians and money printing/ inflation/ currency debasementis in their interests so that is what we will get.

So, money supply has not shrunk whereas supply of goods/services almost certainly has shrunk. Therefore we are not having a deflation. Money and wealth have never been the same thing. You don't need to generate any real wealth to cover debts - just more monetary units. It's all just figures on a sheet. Of course, the people in credit get screwed by money printing but the banks will be more than happy to avoid going bust due to not getting their loans back as would otherwise have been the case and they can rake in ever larger shares of the freshly printed money as long as it keeps being printed. The wealth cake might be shrinking but money printing allows those with first access to the fresh cash (the big boys of finance) to acquire more of the wealth .. as long as people are willing to swap their production for what is increasingly looking like monopoly money of course. The whole point of measuring general inflation is to show how out of kilter money is at representing real wealth.

You heard it here first, folks ... ignore food inflation as you can grow food in your garden.

Ahhh but of course .. inflation is always 'temporary' and can thus be ignored. Are you Merv by any chance

Using the official metrics we've only had continuous deflation for four months back at the end of 2008. Based on 'the cost of stuff I spend my money on' then we most certainly are having 'inflation'. However, higher prices are just the symptoms of inflation whereas the strict definition is supply of goods and services vs supply of money chasing them. So - has the total money supply actually shrunk or grown? Has the amount of goods and services seeking buyers shrunk or grown? Look it up and then tell me if you still think we have deflation?

Here's another interesting article: http://www.newscientist.com/article/dn19653-are-we-having-another-food-crisis.html Not too hard to see what is happening to prices of essentials in the wake of a tide of printed money and government stimulus cash.

BBC article We'd better hurry up and print some more money to pay for all this stuff and stop an all-out deflationary death spiral, eh

Yeah - the market always get it right. It really predicted the huge credit bubble bust, didn't it

The OP in that thread has to be a troll. Love the way she claims that they weren't stupid (to take on all that debt), just 'unlucky': Classic case of irresponsibly taking on massive financial commitments with no planning for adversity - then blaming 'bad luck' when it all goes wrong. The best advice they got was to move to the UK and take advantage of the lax insolvency arrangements there in order to divest themselves of their debts in as painless a manner as possible. Seems to be a popular course of action for people in other EU countries with proper bankruptcy laws that punish fecklessness.

The economies that haven't built up a crippling debt load are the ones that are raising rates. Our economy OTOH is based on everyone borrowing through the nose hence rates are being kept low until there is no choice but to raise them (by which time it's too late). Sadly, our politicians seem to think that our currency is 'hard' by right and don't seem to understand that as you print your debts away, everyone else catches on and you lose that status and hence the ability to print your way out of trouble. Unlike the dollar which is the defacto world reserve currency, petro currency and commodities currency, the pound has little to back it. Bad news when we import so much of our needs, including food and energy.

Oh noes! We're deflating (according to TPTB)!!!!!!! Well, nothing for it but to print, print, print in order to 'fight the deflationary death spiral'. After all, it's just to fight deflation and not at all because we are broke and we desperately want to inflate our debt away.... oh no, not at all Still waiting to see some actual deflation manifesting in my day to day living. I'd dearly love to see it as my salary and savings ain't going up much but there's no sign whatsoever of it happening. Higher Order Capital Goods will of course have to get cheaper relative to Lower Order Consumer Goods but it's pretty damned obvious that the authorities will inflate consumer goods to support assets prices.

It reduced their original debt (on the first house) but unfortunately they splurged their profit by buying a second, more expensive house which more than ate up their 'gains'. End result - deeper in debt and without HPI to bail out the second purchase - ruh roh! Do pay attention please.

Yep - as someone else on HPC posted, houses are a massive, leveraged hedge against inflation. Of course, like any asset there is a time to buy and a time not to buy. When they are well out of kilter with historical norms and bubbling out of control it is pretty obviously a time NOT to buy. Nor is it a good idea when they are still near all time highs but falling. After all, leverage works against you on the way down. Over the long term, inflation is pretty much guaranteed so you are on to a winner if you buy when they represent decent value for money.

Part of the reason is that a rampaging economic boom enables even idiots and the incompetent to make good money, despite being rubbish at their jobs. These self-appointed geniuses then decide that their undoubted intelligence should be applied to the field of investment so as to make themselves even richer and there wasn't any easier way to make an unearned buck in the last decade than property speculation. A self-reinforcing feedback loop - until it all bursts of course. And the Irish bubble has burst, bigtime. Just as membership of the Eurozone made the boom even stronger so it's making the bust even worse.

They're in for a bit of a shock then ... Ireland is screwed for at least a decade, probably longer. At least most people from their late 30s onwards are old enough to remember what it was like before the boom times and can adjust easily, it's the 20-somethings and early 30-somethings that are about to have their perception of reality and sense of entitlement shattered.