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Mikhail Liebenstein

Could Inflation Be The Hpcers Friend

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Many on the site are patiently waiting for house prices to return to historic multiples so they can afford to buy, and  many have been doing so since the site started in 2004 or even before.

A common assumption is that deflation is your friend, as it makes things cheaper, and clearly asset deflation is what many here desire. However, this isn't the normal course of economics and with things valued in "printy printy" money, it is easy to see why.

Now if the market is always self correcting, then perhaps what the HPCer really needs is a nice dose of cost push inflation to drive up food, heating, fuel and other costs thus making it more expensive for pensioners and retiring boomers to afford to stay in their homes. Overtime they'd exit and sell up as their pension income stayed fixed.

Of course as the labour force shrinks in the UK due to the retiring boomers, there will eventually be upward wage pressure, and so your human capital will become a more valued asset and will eventually command more money and so your income will be much higher than that of the boomers.

I guess its the bit in the middle that will be painful, ie the cost push that will eventually downsize the boomers, will make you feel uncomfortable as well. 

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If inflation is matched with interest rates then it will be HPCers friend. If not then we could just see crack up boom style HPI, partly what's helped cause the last 12 month rally.

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Many on the site are patiently waiting for house prices to return to historic multiples so they can afford to buy, and many have been doing so since the site started in 2004 or even before.

A common assumption is that deflation is your friend, as it makes things cheaper, and clearly asset deflation is what many here desire. However, this isn't the normal course of economics and with things valued in "printy printy" money, it is easy to see why.

Now if the market is always self correcting, then perhaps what the HPCer really needs is a nice dose of cost push inflation to drive up food, heating, fuel and other costs thus making it more expensive for pensioners and retiring boomers to afford to stay in their homes. Overtime they'd exit and sell up as their pension income stayed fixed.

Of course as the labour force shrinks in the UK due to the retiring boomers, there will eventually be upward wage pressure, and so your human capital will become a more valued asset and will eventually command more money and so your income will be much higher than that of the boomers.

I guess its the bit in the middle that will be painful, ie the cost push that will eventually downsize the boomers, will make you feel uncomfortable as well.

Good try - but they are still letting in a 'multitude' of immigrants forcing down wages at certain levels.

I can't believe over 11% of UK are non-Blitish origin already!

Edited by erranta

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Many on the site are patiently waiting for house prices to return to historic multiples so they can afford to buy, and  many have been doing so since the site started in 2004 or even before.

A common assumption is that deflation is your friend, as it makes things cheaper, and clearly asset deflation is what many here desire. However, this isn't the normal course of economics and with things valued in "printy printy" money, it is easy to see why.

Now if the market is always self correcting, then perhaps what the HPCer really needs is a nice dose of cost push inflation to drive up food, heating, fuel and other costs thus making it more expensive for pensioners and retiring boomers to afford to stay in their homes. Overtime they'd exit and sell up as their pension income stayed fixed.

Of course as the labour force shrinks in the UK due to the retiring boomers, there will eventually be upward wage pressure, and so your human capital will become a more valued asset and will eventually command more money and so your income will be much higher than that of the boomers.

I guess its the bit in the middle that will be painful, ie the cost push that will eventually downsize the boomers, will make you feel uncomfortable as well. 

2 observations on your flawed logic:

1. Pensions both private and public are linked to inflation. Although most private schemes have a 5% yoy limit, the oap does not and is guaranteed to rise with inlation or wages, whichever is the highest.

2.A shrinking labour force needs to be looked at in the context of 8 million unemployed and an unlimited supply of eu workers from eastern europe. Where will the upward pressure come from when there is no pressure on companies to increase wages, if anything, the pressure is on wage cuts to compete with the BRIC's.

Inflation will and is occuring but only from a cost push basis. Living standards in the UK will continue to fall which will reduce house prices.

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2 observations on your flawed logic:

1. Pensions both private and public are linked to inflation. Although most private schemes have a 5% yoy limit, the oap does not and is guaranteed to rise with inlation or wages, whichever is the highest.

2.A shrinking labour force needs to be looked at in the context of 8 million unemployed and an unlimited supply of eu workers from eastern europe. Where will the upward pressure come from when there is no pressure on companies to increase wages, if anything, the pressure is on wage cuts to compete with the BRIC's.

Inflation will and is occuring but only from a cost push basis. Living standards in the UK will continue to fall which will reduce house prices.

I agree...we are after all in a global economy so therefore we have to do business with the rest of the world, they are our real competitors,or go down the road of protectionism and currency/trade control.

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Of course as the labour force shrinks in the UK due to the retiring boomers, there will eventually be upward wage pressure, and so your human capital will become a more valued asset and will eventually command more money and so your income will be much higher than that of the boomers.

I guess its the bit in the middle that will be painful, ie the cost push that will eventually downsize the boomers, will make you feel uncomfortable as well. 

Translation: demographics are the long-term friend of those from the smaller generations, as they face less competition from their own contemporaries at all stages of life. This will in due course benefit those born significantly later than the boomers. Those born around 1975 will prove the most fortunate generation since the 1946ers, being clear of the boom but also into the housing market at 1990s historic-low prices, and the following most-privileged generation is currently at school.

That is, if global famine doesn't hit during their natural lifetimes.

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  • 261 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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