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Realistbear

Deflation --Its Already Here

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In a globalised world it is just plain nonsense to suggest that if wages fall in one country that deflation will automaticly ensue. We have had several years of very low wage growth, but my weekly shop in Tescos has risen in price at a record rate during thattime. The reason being is that our currency has gone through the floor and if we don't buy things at higher prices, other people around the world will. If the British can no longer afford as much, the same items will be sold to others who can afford them.

Wage deflation may drive down the price of 3 bed semis though, as only British people really want to buy them. However, whilst they may get cheaper, other essential items are getting more expensive, so the money left for accomodation will be even less. This will however not help most people. It would have done though if money had not been printed, so this is an example of printing money destroying the buying power of the people - just like it has always done.

+1 When eastern workers living in company appointed dwellings get a 30% pay increase to stop them killing themselves for producing IPads after 70 hours a week....

That's not inflation...and will not have implications both locally and globally. The whole reason for Merv's good decade quote was China's massive industrialisation, currency fix and its effect on western inflation...

Once that monkey's out the bag, it will be our back! and his best mate (Competative global tax/salaries) will be humping our leg.

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It's good for the consumer if they don't have a huge mortgage around their necks, after sharing in the lunacy of the credit boom. The same would go for businesses.

Tough on them, they new the risks when borrowing 5 times their salary or more through a self-certified liar loan.
If they put interest rates up, people/companies will default on said huge loans, crystallizing the losses for the banks. If many banks are technically insolvent, if they marked to market, then they would be in real trouble if people started defaulting on their loans. Then we have more bank bailouts, more printing and more mess.
Well they don't have to bail banks out next time. It was probably against European law when they were bailed out last time.
The problem is, there is so much leverage, that the politicians will find the idea of inflation appealing. The problem is, it causes problems in the economy, with business (and individuals) not being able to plan/price easily, which causes productivity to drop, which compounds the problems. What is needed to pay off the debt is genuine growth and monetary reform to stop it happening again.
That's going to be difficult in a country with very little industry and where our European customers are also having a recession. In the 80's we had North Sea oil to sell at $27 per barrel, now we have to buy oil and gas more than we sell.
It seems to me that the current financial system is a stack of jellies - once they start wobbling, they are very tricky to keep upright. We have a wobbly way of adding monetary base/fiat and an even wobblier fractional reserve banking system on top of that. Then add in the various over leveraged (because of the aforementioned) businesses and individuals and you have the blancmange on top! Worse still, the only way we can control any of it, is by moving the plate about a bit at the bottom. No wonder we are in a mess!
And your blancmange doesn't sound too good either. What's wrong is people need to get their nose down do a lot of work and try to pay back their debts instead of pretending to be high flying entrepreneurs who end up begging for policies that mean just by borrowing money they can get rich. Edited by caparn

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Tough on them, they new the risks when borrowing 5 times their salary or more through a self-certified liar loan.

Well they don't have to bail banks out next time. It was probably against European law when they were bailed out last time.

That's going to be difficult in a country with very little industry and where our European customers are also having a recession. In the 80's we had North Sea oil to sell at $27 per barrel, now we have to buy oil and gas more than we sell.

And your blancmange doesn't sound too good either. What's wrong is people need to get their nose down do a lot of work and try to pay back their debts instead of pretending to be high flying entrepreneurs who end up begging for policies that mean just by borrowing money they can get rich.

The problem is, letting people go to the wall and letting the banks fail could cause an even bigger mess - the very one they tried to avoid a couple of years ago. If the bailouts were in exchange for financial reform, it may be worth it, but if they are to let this whole farce go through the phases again, it would be depressing to say the least.

It is easy to say "let it all fail", but it's a long way down from the top. We would have been better off never letting things get as bad as they have, but we don't have that choice to make now. It's about picking the least worst way down from the summit now, IMO.

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The problem is, letting people go to the wall and letting the banks fail could cause an even bigger mess - the very one they tried to avoid a couple of years ago. If the bailouts were in exchange for financial reform, it may be worth it, but if they are to let this whole farce go through the phases again, it would be depressing to say the least.

It is easy to say "let it all fail", but it's a long way down from the top. We would have been better off never letting things get as bad as they have, but we don't have that choice to make now. It's about picking the least worst way down from the summit now, IMO.

And on the moral case - people didn't borrow. most people are like I was - I arranged to borrow money (cash) I didn't arrange to be given wacky options to options and a contract that said one thing but did another and was presented as a third by general practice.

They were told it had happened, but it almost certainly hadn't and the liars just crossed their fingers.

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Some might say that deflation comes when the supply of goods exceeds demand over a sustained period. If the world has excess capacity and slowing demand, deflation is a greater probability than inflation. Will demand slow in this country and the EU if austerity is the new order of the day or will people continue to spend regardless of their ability to earn or pay? Have the days of Brown-style loose credit gone and will this lead to a fall in demand?

That said...................

Deflation is not a friend of goldbugs. Gold is a good investment if you don't hold on too long as it has a history of violent crashes from which it may never recover (Gold would have to reach $2473.60 per ounce to equal the high 30 years ago).

Was gold saved by the bell today and will tomorrow see a resumption of today's sell off or something more dramatic? Anyone's guess really.

GOLD 06/03/2010 17:15 1207.80 1208.80 -16.20 -1.32%

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Some might say that deflation comes when the supply of goods exceeds demand over a sustained period. If the world has excess capacity and slowing demand, deflation is a greater probability than inflation. Will demand slow in this country and the EU if austerity is the new order of the day or will people continue to spend regardless of their ability to earn or pay? Have the days of Brown-style loose credit gone and will this lead to a fall in demand?

And some would be talking out of their hats.

Deflation is a reduction in the money supply.

Which isn't happening.

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Some might say that deflation comes when the supply of goods exceeds demand over a sustained period. If the world has excess capacity and slowing demand, deflation is a greater probability than inflation. Will demand slow in this country and the EU if austerity is the new order of the day or will people continue to spend regardless of their ability to earn or pay? Have the days of Brown-style loose credit gone and will this lead to a fall in demand?

...and in time they will make less of the things, as the demand is lower. Companies are hardly likely to keep pumping stuff out at a heavy discount if there isn't sufficient demand, are they? Sure, there were some bargains to be had in late 2008/early 2009, such as cars and lots of clearance sales. Since then, much of the supply has rebalanced to the new demand levels.

Over a longer period of time, different products may become popular, which is probably why they change the basket of items in CPI price indexes periodically (and why it isn't a good measure of inflation). What it doesn't mean, is steak will get cheaper, but it may mean there are fewer cattle, with more people eating cheaper cuts/burgers.

That said...................

Deflation is not a friend of goldbugs. Gold is a good investment if you don't hold on too long as it has a history of violent crashes from which it may never recover (Gold would have to reach $2473.60 per ounce to equal the high 30 years ago).

Was gold saved by the bell today and will tomorrow see a resumption of today's sell off or something more dramatic? Anyone's guess really.

GOLD 06/03/2010 17:15 1207.80 1208.80 -16.20 -1.32%

Neither is inflation a friend of gold. Gold is insurance against dislocation, when the risks are high. The risks haven't eased and are arguably getting worse, with the news being punctuated more frequently with bad economic news again.

Do you think the Greeks and the Spanish would hold gold as a hedge against inflation or do you think they are more concerned with waking up to a bank holiday, with all their Euros switched to new, rapidly devaluing currency?

Do you not think people in the UK are concerned that there could be a run on the pound or that hyper-stagflation (oh err!) could become a problem? House prices may fall, but it's cold comfort if your currency falls in value and the price of everything else goes up. What if the government has to default on bonds?

There are many reasons to hold gold (and/or other commodities) at the moment and there will continue to be until there are genuine efforts to change the way the system works or until it reaches a conclusion. While there may be a few hoping to ride the bubble, IMO, it is more likely that people are just clinging onto a rock of safety.

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By which they mean there is a pile of cash that's been allocated to them.

This whole debacle is going on to keep the myth that commercial banks deal only in legal tender banknotes to white van man. White van man won't be "repaying" anything he has "borrowed" otherwise.

You must think everybody's an imbecile. Do you think that we suppose that a BACS transfer involves a bike messenger and brown envelope of cash?

Nobody believes the bank has a pile of cash with their name on it, and most people are aware that banks don't have the cash to cover the ammounts recorded on their computers. Given people are actually taught this at school, I'd have thought it was quite obviously the case.

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You must think everybody's an imbecile. Do you think that we suppose that a BACS transfer involves a bike messenger and brown envelope of cash?

Nobody believes the bank has a pile of cash with their name on it, and most people are aware that banks don't have the cash to cover the ammounts recorded on their computers. Given people are actually taught this at school, I'd have thought it was quite obviously the case.

Similarly, the gold sellers do not have the gold they are selling which is why they sell paper facsimiles instead. A classic PONZI that will discolour the whole gold market when a sizable correction begins.

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Similarly, the gold sellers do not have the gold they are selling which is why they sell paper facsimiles instead. A classic PONZI that will discolour the whole gold market when a sizable correction begins.

I agree with you there. Paper gold trading has just begun here in Thailand. I ask myself where all this extra gold has appeared from, part 2 of the Gold Bubble.

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Similarly, the gold sellers do not have the gold they are selling which is why they sell paper facsimiles instead. A classic PONZI that will discolour the whole gold market when a sizable correction begins.

I very much doubt that those buying for safety are buying ETFs. ETFs may push the prices up for now, but if there is a scramble for bullion, the two markets will likely diverge. I also think that most people buying unbacked ETFs know that they have no claim on gold either - they are just riding the crest of the wave.

BTW, given that Gold may be more leveraged now, wouldn't you expect the price to exceed previous highs before any bubble would burst?

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You must think everybody's an imbecile. Do you think that we suppose that a BACS transfer involves a bike messenger and brown envelope of cash?

You must be confusing me with someone who hasn't asked a load of randoms stranger on the high street what they thought was happening.

Nobody believes the bank has a pile of cash with their name on it, and most people are aware that banks don't have the cash to cover the ammounts recorded on their computers.

Wrong. They do think there is cash at the end of the rainbow and it's why they "repay" their "debts."

Given people are actually taught this at school, I'd have thought it was quite obviously the case.

Wrong again.

Why not pop down to your local high street and find out like I did?

:)

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You must be confusing me with someone who hasn't asked a load of randoms stranger on the high street what they thought was happening.

Wrong. They do think there is cash at the end of the rainbow and it's why they "repay" their "debts."

Wrong again.

Why not pop down to your local high street and find out like I did?

:)

Did you ask them "Do all banks hold equal or more than the sum of their deposits IN NOTES AND COINS?" The answer to this question is likely to be most commonly "no" followed by "I don't know" followed by "yes".

And even if you are right, I am fully aware that my bank creates money out of thin air and only holds a fraction of what is deposited in cash, and yet I pay my debts. Why? Because not doing so would inconvenience me.

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Did you ask them "Do all banks hold equal or more than the sum of their deposits IN NOTES AND COINS?" The answer to this question is likely to be most commonly "no" followed by "I don't know" followed by "yes".

And even if you are right, I am fully aware that my bank creates money out of thin air and only holds a fraction of what is deposited in cash, and yet I pay my debts. Why? Because not doing so would inconvenience me.

Then you aren't particularly intelligent.

Still if you want to spend 25 years paying back a loan that never happened rather than just calling a spade a spade, it's your life to waste.

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And even if you are right, I am fully aware that my bank creates money out of thin air and only holds a fraction of what is deposited in cash, and yet I pay my debts. Why? Because not doing so would inconvenience me.

A bank does not create money out of thin air. It uses it to earn money. How do you think they can afford to pay interest on your savings?

If you put £1000 in a bank it can use most of it, minus a small fraction, to lend out to a customer who pays interest on their loan. I don't even think that would come as a surprise to, and I'm not going to use the word imbecile, someone who is intellectually challenged. So if everyone asks for their money out at the same time it is obvious they won't have it. It makes me wonder why people think a bank should put your money under their 'mattress' and also pay you interest and somehow make a profit, where would the business be in that?

Edited by caparn

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Then you aren't particularly intelligent.

Still if you want to spend 25 years paying back a loan that never happened rather than just calling a spade a spade, it's your life to waste.

I see. How do you feel that explanation would have gone down with a bailiff?

Debts don't go away if you pretend they're not real. Just because the financial system is an abstraction, a fiction even, it doesn't mean it has no effects on the real world.

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I see. How do you feel that explanation would have gone down with a bailiff?

Debts don't go away if you pretend they're not real. Just because the financial system is an abstraction, a fiction even, it doesn't mean it has no effects on the real world.

Debts do go away if you ask for evidence of money changing hands though.

:)

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A bank does not create money out of thin air. It uses it to earn money. How do you think they can afford to pay interest on your savings?

If you put £1000 in a bank it can use most of it, minus a small fraction, to lend out to a customer who pays interest on their loan. I don't even think that would come as a surprise to, and I'm not going to use the word imbecile, someone who is intellectually challenged. So if everyone asks for their money out at the same time it is obvious they won't have it. It makes me wonder why people think a bank should put your money under their 'mattress' and also pay you interest and somehow make a profit, where would the business be in that?

I'm not disputing what you are saying. But I view this process as a creation of money, at least in the short term, as the money "exists" in two places at the same time. Just a question of semantics anyway.

Debts do go away if you ask for evidence of money changing hands though.

No. They don't. Could you give an example of when this has happened?

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I asked around at work. Graduates in their twenties.

I asked: "Do you think the bank has the money represented in your account in cash in a vault somewhere?"

Everyone said "no, of course not". One pointed out that "if everyone went to the bank and asked for their money it'd be a disaster". Someone else said "I don't get how money works. It's mad."

Another obvious point is that why would there have been a bank run on NR the other year if everyone thought the bank had their cash right there?

I don't work for a financial institution.

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I asked around at work. Graduates in their twenties.

I asked: "Do you think the bank has the money represented in your account in cash in a vault somewhere?"

Everyone said "no, of course not". One pointed out that "if everyone went to the bank and asked for their money it'd be a disaster". Someone else said "I don't get how money works. It's mad."

Another obvious point is that why would there have been a bank run on NR the other year if everyone thought the bank had their cash right there?

I don't work for a financial institution.

Injin did his straw poll on skid row in Liverpool. Would a similar survey-says in mayfair be equally valid?

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Deflation is not a friend of goldbugs. Gold is a good investment if you don't hold on too long as it has a history of violent crashes from which it may never recover (Gold would have to reach $2473.60 per ounce to equal the high 30 years ago).

So you are saying - be wary buying gold: it's just under half its all time high price in real terms. :blink:

Similarly, the gold sellers do not have the gold they are selling which is why they sell paper facsimiles instead. A classic PONZI that will discolour the whole gold market when a sizable correction begins.

But surely when people discover there is LESS of something than they thought there was, the price of it would go UP? Isn't that why Goldfinger wanted to irradiate Fort Knox?

if you want to spend 25 years paying back a loan that never happened rather than just calling a spade a spade, it's your life to waste.

Whether or not the loan happened, surely it's rational to say "I'd like to give up 1/3 of my earnings for the next 25 years in exchange for a house at the end"?

Or to mis-quote Merv "the debt may be a matter of opinion, but the house at the end is real" :lol:

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I asked around at work. Graduates in their twenties.

Ask on the high street.

I asked: "Do you think the bank has the money represented in your account in cash in a vault somewhere?"

Ask them "when you borrow money there is there cash involved?"

Everyone said "no, of course not". One pointed out that "if everyone went to the bank and asked for their money it'd be a disaster". Someone else said "I don't get how money works. It's mad."

Another obvious point is that why would there have been a bank run on NR the other year if everyone thought the bank had their cash right there?

There was a bank run because people thought NR had lost the cash that is supposed to be there.

I don't work for a financial institution.

Grats.

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Whether or not the loan happened, surely it's rational to say "I'd like to give up 1/3 of my earnings for the next 25 years in exchange for a house at the end"?

Or to mis-quote Merv "the debt may be a matter of opinion, but the house at the end is real" :lol:

Yes, that's a much saner proposition than paying 6 months wages for an abode outright.

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Injin did his straw poll on skid row in Liverpool. Would a similar survey-says in mayfair be equally valid?

You could ask a load of bankers what they thought was happening - or/and you could ask a load of lorry drivers, postmen, unemployed folks, academics, students etc etc.

Which is more valid?

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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