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Inflation Sept 1990 To Sept 2010-11-11

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I have a question, well a thought.

In September 1990 person X had £18k in the bank.

Person X was earning a gross salary of £17k per annum based on a 39 hour week. The same role is currently paying £27k per annum based on a 37 hour week.

Person X bought a repossession one bedroom flat for £28k. This flat peaked in price in September 1988 at £37k, and dropped to a low of £22k in 1996. The flat currently has an asking price of around £80k £85k.

Looking at these stats, we have house price inflation over 20 years; we have wage inflation over the same period.

What would you say the purchasing power of that £18k is today………………

Person X is a 44 year old bachelor in my local we discussed this last night. But could not agree on an answer? To me the £18k has lost 50% of its purchasing power. So in essence you would need £36k today to buy the same quantity of service/goods.

If this is the case in 2030, will £36k have the purchasing power of £18k in today’s money?

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http://www.measuringworth.com/ukcompare/

"The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it... But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated... Every commodity, besides, is more frequently exchanged for, and thereby compared with, other commodities than with labour." - Adam Smith, The Wealth of Nations, 1776

Ways to Compute the Relative Value of a U.K. Pound Amount, 1989 to 2009

In 2009, the relative worth of £18,000.00 from 1989 is:

£33,400.00 using the retail price index

£42,000.00 using the average earnings

So in essence, in 20 years you would require £33,400.00 in the bank to have the purchasing power of £18,000.00 in 1989.

You would need to be earning £42,000.00 per annum to equal the salary of £18,000.00 per annum in 1989.. No way?

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I have a question, well a thought.

In September 1990 person X had £18k in the bank.

Person X was earning a gross salary of £17k per annum based on a 39 hour week. The same role is currently paying £27k per annum based on a 37 hour week.

Person X bought a repossession one bedroom flat for £28k. This flat peaked in price in September 1988 at £37k, and dropped to a low of £22k in 1996. The flat currently has an asking price of around £80k £85k.

Looking at these stats, we have house price inflation over 20 years; we have wage inflation over the same period.

What would you say the purchasing power of that £18k is today………………

Person X is a 44 year old bachelor in my local we discussed this last night. But could not agree on an answer? To me the £18k has lost 50% of its purchasing power. So in essence you would need £36k today to buy the same quantity of service/goods.

If this is the case in 2030, will £36k have the purchasing power of £18k in today’s money?

Assuming BOE achieves target 2% inflation over the 20 years, 1.02^20 = 1.4859, so lets call it 50%, so in 2030 £27k would be £18k in todays money. And if I had a nominal $18k in the bank right now I wouldn't expect to have a nominal £18k in the bank in 20 years assuming I didn't top up or draw down, I would expect to have somewhere over £27k nominal (somewhere over £18k real), that is I would expect it to track just slightly ahead of inflation. That is my reward for allowing the bank to use fractional reserve banking and lend out 93% of my savings to fund a profit making loan.

Now, of course today we don't have that, we have above target inflation, negative real interest rates, and this may well continue for some months or years ahead, however 20 years should sort out the peaks and troughs of inflation, savings rates and real rates of return.

o\

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Assuming BOE achieves target 2% inflation over the 20 years, 1.02^20 = 1.4859, so lets call it 50%, so in 2030 £27k would be £18k in todays money. And if I had a nominal $18k in the bank right now I wouldn't expect to have a nominal £18k in the bank in 20 years assuming I didn't top up or draw down, I would expect to have somewhere over £27k nominal (somewhere over £18k real), that is I would expect it to track just slightly ahead of inflation. That is my reward for allowing the bank to use fractional reserve banking and lend out 93% of my savings to fund a profit making loan.

Now, of course today we don't have that, we have above target inflation, negative real interest rates, and this may well continue for some months or years ahead, however 20 years should sort out the peaks and troughs of inflation, savings rates and real rates of return.

o\

Ummmm,

1990 £18k in the bank

Every year after 1990 you get 2.05% growth or net interest up until say September 2010, your £18k retains its 1990 purchasing power value..

So as a 20% tax payer you need a gross savings rate per annum of 2.57% every year since 1990. I know for one the average Gross savings rate since 1990....

http://swanlowpark.co.uk/bank0604.jsp

Is well above 2.57% like +4%..................................

So is cash trash, or will the next 20 years pan out similar to the last 20 years...........

Who needs Gold......................

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Good thoughts Panda. For all the whining on here about inflation destroying the value of savings, in fact just putting it in a savings account over the period and you would come out ahead.

The bank of england has a calculator I use to figure out inflation adjusted value of money. Although it uses the consumer price index, not the RPI. The main difference imo is the RPI includes housing costs.

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Good thoughts Panda. For all the whining on here about inflation destroying the value of savings, in fact just putting it in a savings account over the period and you would come out ahead.

The bank of england has a calculator I use to figure out inflation adjusted value of money. Although it uses the consumer price index, not the RPI. The main difference imo is the RPI includes housing costs.

Alot of it is Gold Ramping, which is a type of bunker mentality attitude, either that or the amount saved in cash is not of a substantial amount. As a substatial amount put in a one year term bond will easily keep pace with wage inflation and RPI.

Edited by Panda

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All eyes were on the Bank of England's Quarterly Inflation Report today. It gives a rare and candid insight into how Britain's prinicipal rate-setters view the wider economy - and what they might do with rates in reaction. In the world of interest rates futures, what they said today was pretty explosive. These 'swap' markets, where banks borrow money, give an indicator of shifting sentiment on when rates will move. The five-year swap, which traded as low as 1.98% in October leapt from 2.13% before the report's publication to 2.25% several hours later. Such a large swing is rare.................................

Next step the cost of borrowing our savings will start to hit the incline............................. You can now get 3.3% on a one year fix, or 3% on a standard rate variable....

Not bad considering jobs are being lost, pay cuts of up to 10%, and house prices teetering along with the biggest credit contraction sorry deflation in credit happening for a generation......................

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Apologies as this is slightly off topic.

I'm trying to negotiate a pay increase at work having not had my promised salary review for years (and business isn't bad so thought I'd try my luck). Question is which inflation scale shold I quote as the basis for a cost of living increase is it the CPI??

Ta

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Apologies as this is slightly off topic.

I'm trying to negotiate a pay increase at work having not had my promised salary review for years (and business isn't bad so thought I'd try my luck). Question is which inflation scale shold I quote as the basis for a cost of living increase is it the CPI??

Ta

The Jag Cars got 5% this year, and 0.5% above inflation next year, i would use that as a starting point, seems to be the norm if we are going to get high inflation to inflate the debt away?

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Overall I think max invested into a good rate tessa and cash isas over that time has done very well with compounded interest. ;)

£100 invested in a savings account in 1986, so 24 years ago, so making sure you move the £100 everytime the rate on the account goes to p!ss poor status, so making sure you keep the £100 in the top paying either instant access or one year fixed rate bond, most of the time.

Then that £100 would today on average be worth somewhere in the region of £360.00.

£100 in 1986, so matching RPI every year would today be worth £260.00, so the savings account outstrip RPI. Not house price inflation, but house are a wobbling at the peak.

Financial advisers never promote holding cash because there is no cut in it for them, but cash ain't all that bad, its just down trodden on here due to ignorance.

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£100 invested in a savings account in 1986, so 24 years ago, so making sure you move the £100 everytime the rate on the account goes to p!ss poor status, so making sure you keep the £100 in the top paying either instant access or one year fixed rate bond, most of the time.

Then that £100 would today on average be worth somewhere in the region of £360.00.

£100 in 1986, so matching RPI every year would today be worth £260.00, so the savings account outstrip RPI. Not house price inflation, but house are a wobbling at the peak.

Financial advisers never promote holding cash because there is no cut in it for them, but cash ain't all that bad, its just down trodden on here due to ignorance.

In 1986 £100 would have got you around half an ounce of gold. Today that would be worth £430. Is that ramping or is there any need to?

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To work out who has lost who has won , what has lost value or gained we need the true inflation figures . Problem is we have not had those for years.

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To work out who has lost who has won , what has lost value or gained we need the true inflation figures . Problem is we have not had those for years.

agreed but without the figures simple charts like this say quite a lot themselves

british-pound-purchasing-power.jpg

stick it in the bank my ar5se

Edited by richyc

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To work out who has lost who has won , what has lost value or gained we need the true inflation figures . Problem is we have not had those for years.

Inflation is a personal thing...lower inflation for those that spend little and/or shop around. ;)

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In 1986 £100 would have got you around half an ounce of gold. Today that would be worth £430. Is that ramping or is there any need to?

Houses peaked in 2007, Gold, well iof it ain't in a bubble, well niether was houses in 2007.

£430 today, i say it could lose 30%, it could gain 30%, but i also could use any other exotic casino type gambles out there like equities or coffee beans.

I will buy my house with cash, i buy my food with cash, i buy my dirty mags with cash, i will stick with cash.

With all this Gold ramping, it has still only out performed cash by £70 per £100 over a 24 year period, and remember gold may be past peak so could fall relative to cash, my cash will not fall relative to my house, so like i said i will stick with my cash.

Gold, no problems with it its just....................

http://forums.moneysavingexpert.com/showthread.php?t=2777330

Crown Currency failure may have Golden sister

"Mayfair and Grant' date=' whose shareholders are also Peter and Susan Benstead of Hayle in Cornwall, same as Crown Currency.

This company sells small amounts of gold at amazing prices which they sell online and store for you on their premises...I would not be very happy if I had put money there recently. I wonder when we will find out how much Gold is in the vaults? Not surprising schemers like this pick on areas where retail punters are getting lured into a toppy bull market."

FACT - Unless you have good possession, bullion isn't worth anything.[/quote']

Edited by Panda

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Houses peaked in 2007, Gold, well iof it ain't in a bubble, well niether was houses in 2007.

£430 today, i say it could lose 30%, it could gain 30%, but i also could use any other exotic casino type gambles out there like equities or coffee beans.

I will buy my house with cash, i buy my food with cash, i buy my dirty mags with cash, i will stick with cash.

With all this Gold ramping, it has still only out performed cash by £70 per £100 over a 24 year period, and remember gold may be past peak so could fall relative to cash, my cash will not fall relative to my house, so like i said i will stick with my cash.

Gold, no problems with it its just....................

http://forums.moneysavingexpert.com/showthread.php?t=2777330

I dont disagree entirely, the post was mostly in response to your mentioning gold ramping.

Leaving cash in the bank is as much a gamble as anything else (see posted chart).

That theoretical half ounce has only out performed by £70 but it is a reasonable percentage that did not take any effort or rate whoring. You could have bought a coin and thrown it in the drawer rather than hitting the high st every year for the last 24 years.

Many things have performed much better but I don't see cash as one of them.

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£430 today, i say it could lose 30%, it could gain 30%, but i also could use any other exotic casino type gambles out there like equities or coffee beans.

How much value has your £ lost against other currencies? Cash is not a one way bet either.

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How much value has your £ lost against other currencies? Cash is not a one way bet either.

House prices rise and fall, gold will rise and fall, currency's rise and fall and rise again. Trick is to buy low and sell high. I am goijng to spend every penny of my savings in the UK, so currency's do not bother me one bit. If i thought gold was low i would buy, i do not, i think, i reiterate i think it is in a bubble, so i am not buying as i only buy low, its not low. House again, are in a bubble, they are high, so again i will not buy. There is nothing relative to cash at good value, bubbles every where, considering all this fake 0000 money sloshing around looking for yield it is not surprising.

For me, buy a house low, sell high, bank cash, swallow low returns while house goes to low again, then buy low, sell high. Very easy, you just need the patience of a saint, unlike the youngsters on here, HPC might take a decade, it took a decade to get up, it will take a decade to get down. For me the earliest buying oppurtunity will be 2015, the latest 2020, i will buy in 2018 probably......................

If i bought my rented house in 1986, it would have cost me £20k, it is now worth £120k, well worth, its asking price is £120k. So for every £100 is now worth £600. Not bad hey, out stripping paper cash in the bank and Gold, great, thats why i am sticking with the source transferable assett, cash, because i will buy again in cash at low.

So when i bought my house cash in 1986, that £20k, i got back £120k in 2007, so i am a happy bear with my return. It now earns 2.5% after tax, while my old house is`falling around 5% per annum. So my cash is rising relative to my old house at 7.5% per annum.

P

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So when i bought my house cash in 1986, that £20k, i got back £120k in 2007, so i am a happy bear with my return. It now earns 2.5% after tax, while my old house is`falling around 5% per annum. So my cash is rising relative to my old house at 7.5% per annum.

OK, but have you considered the risks with this approach? I'm talking about the big elephant in the room, just right here.

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Inflation is a personal thing...lower inflation for those that spend little and/or shop around. ;)

Purchasing power reduces for the masses whether they spend little and/or shop around when their pay rises are based on a false low inflation figure.

They also fall behind when their fixed cost's , ie. council tax , travel costs, insurance and power bills rise way above the given figure.

Their thrift will also mean little if the basket of goods and services that the inflation is based on has high rising components removed and replaced with those that have had little or no inflation .

Coupled with the fact that personnel allowances rise based on flase figures they will be hit again when more of their earnings hits the tax threshold than would have done with a true inflation figure.

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OK, but have you considered the risks with this approach? I'm talking about the big elephant in the room, just right here.

No intention of buying a house, spent a percentage and will spend the rest, long story, but it was just an example, cash is to be spent, it will be, but yes cash is the big if?

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  • 244 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% +
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      • Even
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      • up 5%



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