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Inflation, Bring It On


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+1

Houses are not my thing because I think they're expensive for what they are, and so I am mostly in precious metals. What I find so fascinating is the following mentality:

1) The accumulation of a corrupt and debased fiat currency is called 'being prudent'.

2) Taking steps to protect oneself, or even trying to profit, such as borrowing falling currency units to buy real assets, is called 'being feckless'.

Surely the opposite is the truth?

Prices of just about everything have almost doubled (certain assets much more) over the last six years. This means anyone accumulating cash has been taken to the cleaners, and the smart ones are those who bought stuff - even better, those who borrowed money to buy more stuff than could otherwise have bought, since they have leveraged the gains.

Is there anything wrong with my reading of this situation?

Nope, its spot on. I even bought farm land that gives an income and EU aid.

Edited by Peter Hun
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Don't worry, I've had worse happen to me.

Is that the I'm alright Jack attitude the one that wants to see massive house price crash falls, that see families evicted for negative equity and not being able to pay the mortgage, so that someone can buy a house more cheaply?

Let's face it, a lot of people pray for house price carnage on this site, and don't give a damn for the personal consequences

Hi sibley.

How would a fall in prices see families being evicted? I thought that you said wage inflation was keeping up at around 3% so surely no one would have a problem.

btw wage inflation of 3% would still mean people getting poorer. Take a wage of £30k, your 3% rise equates to an extra £900 a year which is more than swallowed by higher fuel prices, gas, electricity, food, tax and insurance costs. Inflation is way above 3% and people are getting poorer which is why it is different this time and inflation wont increase house prices.

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+1

Houses are not my thing because I think they're expensive for what they are, and so I am mostly in precious metals. What I find so fascinating is the following mentality:

1) The accumulation of a corrupt and debased fiat currency is called 'being prudent'.

2) Taking steps to protect oneself, or even trying to profit, such as borrowing falling currency units to buy real assets, is called 'being feckless'.

Surely the opposite is the truth?

Prices of just about everything have almost doubled (certain assets much more) over the last six years. This means anyone accumulating cash has been taken to the cleaners, and the smart ones are those who bought stuff - even better, those who borrowed money to buy more stuff than could otherwise have bought, since they have leveraged the gains.

Is there anything wrong with my reading of this situation?

it was said that anyone who is a saver in an inflationary environment is a sucker but how many here with large deposits do you think would be dumb enough to have it sat in a deposit account through high inflation ffs?

Prices have not doubled - the value of sterling has fallen.

Gold has not increased in value - paper money has fallen against it.

Gold is not the inflationary hedge that you think it is and it will fall hard when US rates rise or there are signs of a recovery there.

Leverage is great in an inflationary environment, so long as you can keep up with payments, but that is not what we have right now in housing.

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Indeed. And that's the important thing here...

You say you're relatively young. I assume you remember a couple of years back, when the oil price was depressed, and projects across the industry were mothballed or completely cancelled wholesale? Not just in the N Sea, but across the whole of the Middle East and the US...

When the PPB hits certain thresholds, projects start getting canned - and when they get to a certain level everything just stops - they even stop pumping the oil just to put the price back up... I know, I work in the industry as well, and have seen it several times now.

Another thing to bear in mind; plenty of folks from the Indian sub-continent, who are happy to earn a few hundred bucks a month, to send home to their folks while they live in an oil company camp for 2-3 years, can spell "oil and gsa" as well.

And the really bright ones are getting degrees, to do the technical stuff as well - in fact, under programmes like Qatarisation, the governments of most M East countries are paying for their their own brightest and best to study in the UK and the US, because it's a matter of policy for them to get up to something like 50% local staffing in a very short period of time. Except quite a few of them stay in the West, because they're loaded and rather like the "extracurricular" that derives from driving a Porsche while their fellow students, or fellow recent grads, take the bus...

All pretty grim for the expat mob, many of whom at times (not unlike your own post,) display a level of hubris that would make an EA wince ;)

So... if you were a "senior f*ckwit" in O&G, who would you pay to do the job; a mature, talented individual with a work ethic to die for, and a relatively modest salary expectation, or someone with a sense of entitlement as big as their ego and their mortgage combined, demanding a king's ransom just for doing them the favour of turning up?

Dangerous things, those Senior F*ckwits :ph34r:

In summary, with that little "O&G Economics 101" in mind, you'd better hope there isn't another dip anytime in the lifetime of your mortgage, otherwise you're going to be in other brown stuff, along with the rest of us.

B

Succinctly put and an excellent riposte.

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