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Inflation Genie Well And Truely Out Of The Bottle?

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http://www.bankofeng...ws/2010/070.htm

Question 1: Asked to give the current rate of inflation, respondents gave a median answer of 3.6%, the same as in May 2010.

Question 2: Median expectations of the rate of inflation over the coming year were 3.4%, compared with 3.3% in May.

Question 3: By a margin of 62% to 9%, survey respondents believed that the economy would end up weaker rather than stronger if prices started to rise faster, compared with 56% to 11% in May.

Question 4: 54% of respondents thought the inflation target was ‘about right’, compared with 56% in May, while the proportions saying the target was ‘too high’ or ‘too low’ were 19% and 15% respectively.

Question 5: 24% of respondents thought that interest rates had fallen over the past 12 months, compared with 34% in May, whilst 29% of respondents said that interest rates had risen over the past 12 months, compared with 23% in May.

Question 6: When asked about the future path of interest rates, 48% of respondents expected rates to rise over the next 12 months, compared with 52% in May. 5% of respondents expected interest rates to fall over the next 12 months, compared with 6% in May.

So not only do people increasingly think the BoE is losing control of inflation, they increasingly think that this is a bad thing and that the BoE is going to do absolutly nothing about it. Expect King and his chums to move to address these perceptions, particually the one relating to their likely future actions, over the coming weeks. Yes, they may even become vigilant.

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Gold's in a bubble... yeah, right. PAPER is the bubble. Everything priced in paper looks like it is in a bubble..

Paper is not in a bubble. It's in a submarine.

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Gold's in a bubble... yeah, right. PAPER is the bubble. Everything priced in paper looks like it is in a bubble..

Scoreboard, year to date, metals

Gold ...........+ 15.9%

Silver...........+21.3%

Platinum......+9.2%

Copper.........+4/0%

Palladium.....+35.5%

Agriculture, year to date (consumers take note)

Cattle...........+14.2%

Coffee...........+42.5%

Corn.............+15.3%

Cotton...........+24.1%

Lumber..........+5.8%

Orange J........+18.2%

Soy beans......-1.4%

Wheat...........+30.1%

yeah but no but yeah, wot about soy beans

obviously deflation (esp. after you eat them)

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When you're hurtling down the motorway in the fog at 100 mph you can either take your foot off the gas, or you can reassure your passengers by saying, "it's OK, I seem to remember there's an uphill bit in a couple of miles..."

What I'd like to know is, in case there are any really smart people out there and I'm missing something really obvious, why is it impossible to raise the interest rate just a bit? After all, they lowered it quickly enough, and could always do it again. Couldn't they?

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Let's take it that we are in for 70s style inflation.

The usual advice re coping during inflationary times is to pay down short-term debt, get rid of cash, and take on long-term,relatively low interest, secured debt.

Why aren't we all running out and buying houses? :huh:

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A few years of moderate inflation will help to inflate away those over-sized mortgages.

You mean, save you from having to pay back those mean old savers what you actually owe them for your BTL empire.

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Let's take it that we are in for 70s style inflation.

The usual advice re coping during inflationary times is to pay down short-term debt, get rid of cash, and take on long-term,relatively low interest, secured debt.

Why aren't we all running out and buying houses? :huh:

because it isn't like 70s style inflation

where are the big wage rises? also the overhang of debt through excess credit is far more severe than the 70s, because Nixon closed the gold window (amongst other things), free floating fiat expansion was possible in the short-term, four decades later some chickens are looking to come home to roost

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because it isn't like 70s style inflation

where are the big wage rises? also the overhang of debt through excess credit is far more severe than the 70s, because Nixon closed the gold window (amongst other things), free floating fiat expansion was possible in the short-term, four decades later some chickens are looking to come home to roost

Looks like English, sounds like English, but I don't understand half of it.

Surely the wage rises will be a trailing indicator as opposed to a leading indicator. Employers will be forced to pay more when the NMW isn't enough to feed/clothe/house their staff. This in turn will lead to more inflation, and the spiral continues......... :(

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Looks like English, sounds like English, but I don't understand half of it.

Surely the wage rises will be a trailing indicator as opposed to a leading indicator. Employers will be forced to pay more when the NMW isn't enough to feed/clothe/house their staff. This in turn will lead to more inflation, and the spiral continues......... :(

you are suggesting that (paraphrasing) property would be a good place for money right now since we are due a 70s style inflation (also known as the DaddyBear argument)

I disagree that we are not due a period of 70s style inflation, what we have now is deflation in highly leveraged assets and inflation in commodities.

wrt to wage increases, yes, these are trailing to some extent, but the capacity to increase wages rapidly is not there any more unlike the 70s when the gold window was closed and fiat money could 'go it alone', four decades later we are witnessing the results of fiat money expansion unhinged to any prevailing commodity or historical physical money.

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Looks like English, sounds like English, but I don't understand half of it.

Surely the wage rises will be a trailing indicator as opposed to a leading indicator. Employers will be forced to pay more when the NMW isn't enough to feed/clothe/house their staff. This in turn will lead to more inflation, and the spiral continues......... :(

We are now in a glow-ball-ised economy. Buyers of your product couldn't care less if your workers can eat, if it costs too much they'll just buy from China.

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Let's take it that we are in for 70s style inflation.

The usual advice re coping during inflationary times is to pay down short-term debt, get rid of cash, and take on long-term,relatively low interest, secured debt.

Why aren't we all running out and buying houses? :huh:

That's what I'm doing. Finally found a forced seller with big plot, just sorting a base+1.69% mortgage whilst getting RPI+1% tax-free on savings. Interest rate arbitrage is working for me. If economy survives, we can extend the house enormously (+1200sqft) if required. If economy falls apart, enough space to live in as it as and grow plenty of food, walk kids to school and cycle to work in 15 minutes.

This plot is cheaper than plots of half the size were going for 2 years ago with no house on. It's more than £50K cheaper than the house I sold in 2003. Basically, there has been a 60-70% land price crash in my area.

Basically I'm going from short to neutral on housing with the option to go long (get 3x mortgage) at a later date if things look good.

I'm very concerned that my cash is becoming worthless faster than house prices are dropping so would rather take the opportunity to have no net savings/debt and maximise safety.

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P.S. Isn't anyone else concerned that the western economies are FUBAR'd and the only option is a big devaluation? I am a natural deflationist by day but the scale of this crisis is now impossible to resolve that way IMO.

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You mean, save you from having to pay back those mean old savers what you actually owe them for your BTL empire.

Sounds good to me!

(and also to a big chunk of the population who have big loans)

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A few years of moderate inflation will help to inflate away those over-sized mortgages.

*Wage* inflation erodes debt and that doesn't appear to be happening.

When prices are rocketing and wages are not - that over sized mortgage will be taking up a larger percentage of your pay packet, not a smaller one... ;)

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That's what I'm doing. Finally found a forced seller with big plot, just sorting a base+1.69% mortgage whilst getting RPI+1% tax-free on savings. Interest rate arbitrage is working for me. If economy survives, we can extend the house enormously (+1200sqft) if required. If economy falls apart, enough space to live in as it as and grow plenty of food, walk kids to school and cycle to work in 15 minutes.

This plot is cheaper than plots of half the size were going for 2 years ago with no house on. It's more than £50K cheaper than the house I sold in 2003. Basically, there has been a 60-70% land price crash in my area.

Basically I'm going from short to neutral on housing with the option to go long (get 3x mortgage) at a later date if things look good.

I'm very concerned that my cash is becoming worthless faster than house prices are dropping so would rather take the opportunity to have no net savings/debt and maximise safety.

Why not invest in an asset class which isn't depreciating? I'm sure there will be better investments than houses, considering we've just had a huge boom.

My plan is to avoid cash, stay in commodities and wait for the prices of land to adjust against them. I'll then liquidate said commodities and buy some land to build a house on. It's a several year plan though.

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P.S. Isn't anyone else concerned that the western economies are FUBAR'd and the only option is a big devaluation? I am a natural deflationist by day but the scale of this crisis is now impossible to resolve that way IMO.

Yup.

IMO, it has been inevitable for a good while now.

P.S. If you hold commodities without counter party risk, you are hedging against both inflation and deflation (bank failure => hair cuts to savings).

Edited by Traktion

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Why not invest in an asset class which isn't depreciating? I'm sure there will be better investments than houses, considering we've just had a huge boom.

I'm mostly buying for the location/plot and that has already crashed 50-70%, the house is a bonus. I'm pretty much at the giving up and de-risking stage where I just want a bit of safety and get away from all these rigged markets. I'm pretty much a cash buyer and the idea of putting my families capital at risk is not acceptable.

When the central banks and governments control the markets, I want to take my ball home.

The bank/government/markets can then do whatever they like and it will hardly affect me any more.

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I'm mostly buying for the location/plot and that has already crashed 50-70%, the house is a bonus. I'm pretty much at the giving up and de-risking stage where I just want a bit of safety and get away from all these rigged markets. I'm pretty much a cash buyer and the idea of putting my families capital at risk is not acceptable.

When the central banks and governments control the markets, I want to take my ball home.

The bank/government/markets can then do whatever they like and it will hardly affect me any more.

Fair enough. Land here in NI is still falling and I expect it to continue to do so (both nominal in the short term and inflation adjusted in the long term) for a while yet.

I hear your point though - who knows what will happen next.

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Employers will be forced to pay more when the NMW isn't enough to feed/clothe/house their staff.

If prices of imported food and clothes double, how does that give your employer more money to pay you?

They can't be forced to pay what they don't have - their employees will just go hungry (but not as hungry as the people without a job at all)

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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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