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Am I Missing Something?

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Sorry guys, perhaps I'm missing something here.. perhaps not.

Many people on here are say that inflation will be brought in to help erode debt but without wage inflation to back it up, everyone will just suffer a higher cost of living.

But where exactly will this wage inflation come from? The government are cutting spending and axing 1000's of public jobs and private companies are able to hire new staff on lower wages due to the huge demand for employment, and modern technology increasingly permits outsource solutions.

So who is going to be handing out these pay rises to UK employees?!

The way I see it - and certainly I'm no economist! - is that interest rates will stay low and the £ will decline as other global economies crash earlier and start picking up, resulting in the cost of living increasing for us because we import practically everything. Or rates will increase and the cost of living (i.e. home/debt ownership) will increase.

Either way, the cost of living will increase and wages will stay the same.

I just can't see it going any other way than the majority of working and middle (i.e. working) class citizens getting absolutely ruined over the next 2-3 years.

Call me twisted, but I'm actually looking forward to all this forthcoming pain and misery - the idiots who bought into this celebrity lifestyle through cheap debt deserve nothing less

:ph34r::ph34r::ph34r::ph34r:<_<

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Call me twisted, but I'm actually looking forward to all this forthcoming pain and misery - the idiots who bought into this celebrity lifestyle through cheap debt deserve nothing less

Erm there are many innocent people in all of this you know..

A lot of people say nobody forced you to borrow is false!

If you do not borrow somebody will borrow on your behalf.

Take for example a shop in fact take the chippy I wanted to run they wanted to rent to me but sold it instead.

A and B

If both A & B have £100,000 both can offer £100,000.

Or they can borrow to outbid each other, therefore if A can borrow £50,000 and B can borrow £50,010 it will be sold to B

However B now has a problem in that he has to pay back the £50,010. Therefore the prices of the goods and services they provide have to be increased to service the £50,010 of debt..

Therefore you end up paying more, therefore which ever way you look at it you either pay directly as the shop owner who borrowed or you pay as the consumer who has to pay increased prices to service the debt.

This is replicated through the entire industry and economy. Much like with houses and BTL types you may rent but the rent will be increased to cover the amount borrowed, therefore you pay regardless if you or your landlord signed on the dotted line.

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Hi Ken,

Going on the chip shop analogy, surely if customers can no longer afford to buy your chips, you have to reduce your prices... better to sell some chips than no chips at all..

Leading us back to the original question, where is the wage inflation going to come from?

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Call me twisted, but I'm actually looking forward to all this forthcoming pain and misery - the idiots who bought into this celebrity lifestyle through cheap debt deserve nothing less

:ph34r::ph34r::ph34r::ph34r:<_<

You do realise hyperinflationary collapses don't protect the innocent? It wipes everyone out. So by not having lived the lifestyle you still get to feel the pain of paying say £1bn for a loaf of bread.

As for wage inflation, I think it can be argued the masses over the past decade have had the wage inflation, you might argue prices are now catching up with wages and there will be no increase in wages for some time. Mystic Merv did say we can look forward to a drop in living standards, stagnant wages and increasing prices will deliver that.

On top of all this the BoE have printed even more money and expanded the monetary base even further.

We are genuinely lucky people.

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Hi Ken,

Going on the chip shop analogy, surely if customers can no longer afford to buy your chips, you have to reduce your prices... better to sell some chips than no chips at all..

Leading us back to the original question, where is the wage inflation going to come from?

Oh I know this is where they minimise their losses. The thing is no matter what a % of the priceof the chips will be used to service the debt which means either way you end up paying.

If the business fails, it gets sold on to another person who probably borrows again and the cycle continues.

The wage inflation I reckon it will be Japanese style stimuli whereby either massive unfundable tax cuts are given or simply you are given a cheque as in Japan to go loose with the economy. This could be used to buy votes and such like, I mean with the 200bn bail out they could have given everybody a £500 cheque.

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Hold on hyperinflation can also happen via other means, whereby the government makes good it's unrealistic promises. I.e. the trillions promised in pensions.

They simply print it out and deposit it in the pensioners bank accounts. They can boost child benefits and JSA to £1000 a second and this will get the money into the economy PDQ.

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You do realise hyperinflationary collapses don't protect the innocent? It wipes everyone out. So by not having lived the lifestyle you still get to feel the pain of paying say £1bn for a loaf of bread.

It doesn't wipe out 'everyone'. Only those who have chosen to shackle themselves with debt, subsequently rendering themselves immobile.

As for wage inflation, I think it can be argued the masses over the past decade have had the wage inflation, you might argue prices are now catching up with wages and there will be no increase in wages for some time. Mystic Merv did say we can look forward to a drop in living standards, stagnant wages and increasing prices will deliver that.

It might be catching up relative to previous years but people have already spent the difference and therefore will be unable to afford this lifestyle 'correction'.

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Wages are static or falling and unemployment is rising.

The prices of essentials are going up.

Interest rates will rise, albeit slowly. (By interest rates I mean real ones: 10 yr gilts, 5 yr LIBOR, SVRs. Not that silly irrelevant BoE base thing).

There is a lot less disposable income which is what pays mortgages.

I have been totally confident for a long time that house prices will slide at least 30% RPI-adjusted and have protected myself from inflation to take advanatage. I am now expecting chunky nominal falls as well.

It is not only lazy thinking but false thinking that thinks "inflation = everything inflating" or "interest rates = BoE base". It is either deliberately or accidentally missing how the economy actually works.

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Hi Ken,

Going on the chip shop analogy, surely if customers can no longer afford to buy your chips, you have to reduce your prices... better to sell some chips than no chips at all..

Leading us back to the original question, where is the wage inflation going to come from?

thats all well and good...IF, you havent borrowed and have a monthly interest payment to make.

Fail to make THAT payment, and POW....you are on the Road to Bankruptcy.

reducing prices will help volumes, but will it help PROFITS?...and to make it worse, banks dont seem interested in profits...its turnover they look for...this has happened at Mrs Loos Place....the lenders wanted Increased turnover....they demanded this three times, each time the deals were made better ( for the client)...now the place is packed, the staff are flat out and profits are dwindling....turnover is, however...UP.

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They simply print it out and deposit it in the pensioners bank accounts. They can boost child benefits and JSA to £1000 a second and this will get the money into the economy PDQ.

But in doing so, they will devalue the £ right? and therefore, given that we import practically everything these days, surely the cost of living will just keep on rising.

So how will that solve the problem?

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But in doing so, they will devalue the £ right? and therefore, given that we import practically everything these days, surely the cost of living will just keep on rising.

So how will that solve the problem?

You are seeing it in the wrong terms.... hyperinflation isn't for us, hyperinflation is for the benefit of others.

In Hyperinflation the goal is to lose less than other people. So while the man on the street ie me and you get completely wiped out all of the elites will have massive hedges such as gold silver and all of the tangible hard assets. They'll hyper inflate to wipe everybody else at which at the end of it all everything is stamped property of the bank of England or one of its franchise banks HSBC barclays or whatever.

Zimbabwe is an excellent example, the people are utterly fubar'd Mugabe and the ruling elite are doing nicely though Mugabe even lives near my dad in HOng Kong these days in a 5 million dollar pad.

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thats all well and good...IF, you havent borrowed and have a monthly interest payment to make.

Fail to make THAT payment, and POW....you are on the Road to Bankruptcy.

reducing prices will help volumes, but will it help PROFITS?...and to make it worse, banks dont seem interested in profits...its turnover they look for...this has happened at Mrs Loos Place....the lenders wanted Increased turnover....they demanded this three times, each time the deals were made better ( for the client)...now the place is packed, the staff are flat out and profits are dwindling....turnover is, however...UP.

Okay, so then the business goes bankrupt and the business premises are put up for sale, at a lower price because the bank is selling the property as a repo. Someone buys the property at a lower borrowing rate and that saving is passed on to the customers who can now afford to buy chips again.

Which goes back to the original question: given that the cost of living can only inflate sustainably if there is wage inflation, where is the wage inflation going to come from?

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snip I mean with the 200bn bail out they could have given everybody a £500 cheque.

No.

the QE was money supplied in exchange for future taxation...the BoE has those assets on its books, and the money issued is the balancing liability.

this is simply monetising an asset. Its what banks do.

simply crediting everyone with £500 would have meant the monthly spend would increase by £500 to match the new "wealth".

Course, the bonds the Bank of England bought are now "out of the market"....they wont be traded as the selling of them would reduce the money supply again.

so effectively, QE is just a tax. a tax used to provide liquidity to banks. who are a good investment....

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Okay, so then the business goes bankrupt and the business premises are put up for sale, at a lower price because the bank is selling the property as a repo. Someone buys the property at a lower borrowing rate and that saving is passed on to the customers who can now afford to buy chips again.

That is precisely the point, the shop suddenly becomes property of the bank for a substantially lower cost zero cost actually. Remember when the banks create loans they are actually engaging in an illusion as there is no actual debt.

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It doesn't wipe out 'everyone'. Only those who have chosen to shackle themselves with debt, subsequently rendering themselves immobile.

It might be catching up relative to previous years but people have already spent the difference and therefore will be unable to afford this lifestyle 'correction'.

Have you read when money dies?

Professors are no longer valued, they have to spend all of their savings to buy food. They have to sell possessions to buy food. Doctors don't get paid and nor do they have much work because if you can't afford bread paying for healthcare isn't really a priority.

Hyperinflation wipes everyone out.

Mobility doesn't come into it. Where is everyone going to go?

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Have you read when money dies?

Hyperinflation wipes everyone out.

I would but its a £70 book on amazon!

It doesn't though, those who hedge against it Cnago types and bankers who will hold hard assets will lose less than everybody else therefore in effect they gain.

Edited by ken_ichikawa

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Sorry guys, perhaps I'm missing something here.. perhaps not.

Many people on here are say that inflation will be brought in to help erode debt but without wage inflation to back it up, everyone will just suffer a higher cost of living.

But where exactly will this wage inflation come from? The government are cutting spending and axing 1000's of public jobs and private companies are able to hire new staff on lower wages due to the huge demand for employment, and modern technology increasingly permits outsource solutions.

So who is going to be handing out these pay rises to UK employees?!

The way I see it - and certainly I'm no economist! - is that interest rates will stay low and the £ will decline as other global economies crash earlier and start picking up, resulting in the cost of living increasing for us because we import practically everything. Or rates will increase and the cost of living (i.e. home/debt ownership) will increase.

Either way, the cost of living will increase and wages will stay the same.

I just can't see it going any other way than the majority of working and middle (i.e. working) class citizens getting absolutely ruined over the next 2-3 years.

Call me twisted, but I'm actually looking forward to all this forthcoming pain and misery - the idiots who bought into this celebrity lifestyle through cheap debt deserve nothing less

:ph34r::ph34r::ph34r::ph34r:<_<

Agreed. Putting hyperinflation & FX to one side, I can't see where the money will come from to pay ourselves more.

If I can pay someone in India 1/3 to do the same job as someone here, WHY would I increase the pay of the latter guy? If your job is done 80% behind a screen then it can be done behind an Indian screen for less. It is that simple. Wage deflation is more likely, with the knock on effects of 3.5x a decreasing number...

The majority of that extra 2/3 paid to the person in the UK goes in TAX and rent.

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Mobility doesn't come into it. Where is everyone going to go?

Well, 'everyone' isn't going to go anywhere.

If we assume that 90% of the population will be trapped here due to debt, reliance on a job and with no savings available to just up and leave, there'll only be 10% able to leave. I'd guess they'll go to whatever places are doing less worse.

You say that mobility doesn't come in to it, but I for one am certainly very happy in the knowledge that I have mobility.

But back to the original question, where will the wage inflation come from? There currently seems to be only one answer, which is that it will be printed and we'll all end up screwed... good times ahead then! :ph34r:

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Erm there are many innocent people in all of this you know..

A lot of people say nobody forced you to borrow is false!

If you do not borrow somebody will borrow on your behalf.

Take for example a shop in fact take the chippy I wanted to run they wanted to rent to me but sold it instead.

A and B

If both A & B have £100,000 both can offer £100,000.

Or they can borrow to outbid each other, therefore if A can borrow £50,000 and B can borrow £50,010 it will be sold to B

However B now has a problem in that he has to pay back the £50,010. Therefore the prices of the goods and services they provide have to be increased to service the £50,010 of debt..

Therefore you end up paying more, therefore which ever way you look at it you either pay directly as the shop owner who borrowed or you pay as the consumer who has to pay increased prices to service the debt.

This is replicated through the entire industry and economy. Much like with houses and BTL types you may rent but the rent will be increased to cover the amount borrowed, therefore you pay regardless if you or your landlord signed on the dotted line.

Hi Ken,

Your theory only works if this is a common cost - e.g. all chip shops in an area has that debt cost. Otherwise, everything else being equal (services, quality), then those with the debt cost will go bust. So, if a LVT (or a special VAT) is introduced in the area and all chip shops have to pay it, then that will be reflected in the price. If only one shop have to borrow, then it does not affect the final product price.

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I would but its a £70 book on amazon!

It doesn't though, those who hedge against it Cnago types and bankers who will hold hard assets will lose less than everybody else therefore in effect they gain.

It is not.

When Money Dies: The Nightmare of the Weimar Hyper-Inflation by Adam Fergusson (Paperback - 6 July 2010)

Buy new: £7.68 at amazon.

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Sorry guys, perhaps I'm missing something here.. perhaps not.

Many people on here are say that inflation will be brought in to help erode debt but without wage inflation to back it up, everyone will just suffer a higher cost of living.

But where exactly will this wage inflation come from? The government are cutting spending and axing 1000's of public jobs and private companies are able to hire new staff on lower wages due to the huge demand for employment, and modern technology increasingly permits outsource solutions.

So who is going to be handing out these pay rises to UK employees?!

The way I see it - and certainly I'm no economist! - is that interest rates will stay low and the £ will decline as other global economies crash earlier and start picking up, resulting in the cost of living increasing for us because we import practically everything. Or rates will increase and the cost of living (i.e. home/debt ownership) will increase.

Either way, the cost of living will increase and wages will stay the same.

I just can't see it going any other way than the majority of working and middle (i.e. working) class citizens getting absolutely ruined over the next 2-3 years.

Call me twisted, but I'm actually looking forward to all this forthcoming pain and misery - the idiots who bought into this celebrity lifestyle through cheap debt deserve nothing less

:ph34r::ph34r::ph34r::ph34r:<_<

Firstly, you're right, you are no economist.

Secondly, the sentiments you express are really unpleasant...you should remeber that you could also be in for your own share of

misery and pain.

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The industrial base is currently in countries like china, if theres going to be wage inflation then it will the there. We should just see the cost of imports rise, lowering our pampered standard of living, the silver lining is, IF the price of imports gets high enough then there should be the opportunity to produce goods domestically again. We will have a lower standard of living, but hopefully further down the line there may be a return to actually producing products again which will provide jobs.

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I agree OP. Hyperinflation doesn't seem likely.

What would need to happen is a gigantic dose of protectionism followed by withdrawal of foreign direct investment, the state expanding its share of a contracting economic pie and printed money payrises to keep those workers (who end up forming > 50% of the electorate) happy.

Without protectionism, there will be global wage arbitrage driving wages lower. The more this happens, the stronger the calls for protectionism will be (the Depression and job losses being blamed on global wage arbitrage). It may end up forming a key plank of a future labour policy

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Hi Ken,

Your theory only works if this is a common cost - e.g. all chip shops in an area has that debt cost. Otherwise, everything else being equal (services, quality), then those with the debt cost will go bust. So, if a LVT (or a special VAT) is introduced in the area and all chip shops have to pay it, then that will be reflected in the price. If only one shop have to borrow, then it does not affect the final product price.

You are partially right about it being perfect competition i.e. one party cannot raise prices against another because nobody has control over prices in perfect competition.

However you ignore buying and selling of shops and also the fact that those who are not in debt today may well have been in debt in the past.

There is also a petrol price thing as well whereby you will match what you can get away with, therefore the indebted people charge more, the non debt people charge a price similar to that and take it as extra profit instead. Which I suppose is the reward for the risk taken.

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  • 140 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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