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What Does Uk Stagflation Mean For Us And Western Economies

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http://www.zerohedge.com/article/what-does-uk-stagflation-mean-us-and-western-economies

Inflation in the UK is, according to government figures, 3.7 percent, which is almost double the BoE's target and likely to rise further in the coming months. While the consensus of most economists is that a return to recession is unlikely and inflation will not become a long term threat, unfortunately they will likely be proved wrong once again. The double-digit rates of inflation seen in the 1980s are quite possible again and should not be rejected in a knee jerk reaction to fit preconceived notions.

Some economists are already spinning this as "stagflation-lite" when the reality is that they do not know how severe the stagflation could become. It is as ever best to err on the side of caution and hope for the best but acknowledge the real risks of less benign scenarios. The uber bears continue to warn of hyperinflation and while that scenario does not look highly likely at this time - it is important to acknowledge that the current monetary pathology of the Federal Reserve and some other central banks may lead to an international currency crisis.

Investors and savers should prepare accordingly rather than being complacent and inert with the attendant deleterious consequences.

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Told you so.

HI FIVE! On a serious note its really terrible and as Pole said earlier in the week," we can all bitch and moan but we have to come up with new strategy to deal with the situation we face" (paraphrased) No more normalcy bias

Edited by Scott Sando

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merv may say inflation is a price worth paying but workers and businesses sure wont sit by, and they will react, even if he wont.

if inflation continues to rise, interest rates must go up, like they did in the early 90's.

house prices will plummet like they did in the early 90's too.

Edited by mfp123

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We just recently took all our money out of the bank (left enough in to cover rent and basic monthly bills), bought a safe, and now keep our cash at home.

I know, it feels so primitive, but I don't trust the banks.

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We just recently took all our money out of the bank (left enough in to cover rent and basic monthly bills), bought a safe, and now keep our cash at home.

I know, it feels so primitive, but I don't trust the banks.

so now rather than using an ISA or other such low risk investment vehicle to limit the devaluing of your cash you have taken it out of the systemvand are taking the whole 4.8% hit.

Fair enough.

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We just recently took all our money out of the bank (left enough in to cover rent and basic monthly bills), bought a safe, and now keep our cash at home.

I know, it feels so primitive, but I don't trust the banks.

I'm going to say this even thou its not allowed, buy gold and silver on the dip.

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if inflation continues to rise, interest rates must go up, like they did in the early 90's.

<devils advocate> Why must they ?

Bond holders are already accepting a negative return on their money anyway..

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<devils advocate> Why must they ?

Bond holders are already accepting a negative return on their money anyway..

people will start demanding higher wages, businesses will start requiring a higher rate of return, and that creates instability, which businesses just do not like.

businesses like stability more than anything else. when it becomes unpredictable things become a mess as they dont know whats happening. they cant plan, things that were profitable last week becomes unprofitable in 3 months time.

in retail for example, most businesses earn 80% of yearly profits at christmas, they start planning their stock and logistics in march time to have stocks ready in november. high inflation tears apart your plans, things change so fast its like a free for all.

Edited by mfp123

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people will start demanding higher wages, businesses will start requiring a higher rate of return, and that creates instability, which businesses just do not like.

businesses like stability more than anything else. when it becomes unpredictable things become a mess as they dont know whats happening. they cant plan, things that were profitable last week becomes unprofitable in 3 months time.

in retail for example, most businesses earn 80% of yearly profits at christmas, they start planning their stock and logistics in march time to have stocks ready in november. high inflation tears apart your plans.

Nobody likes instability.....but that is exactly what we have got.....business relies upon sales, fewer jobs and falling value of income both savings and wages means less sales and work and any wage increases paid will have to be less than inflation.

This is the big problem the government should be tackling....ways of creating jobs that pay the rent and mortgage........or their deficit will not be coming down any time soon. ;)

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We just recently took all our money out of the bank (left enough in to cover rent and basic monthly bills), bought a safe, and now keep our cash at home.

Always worth posting on the internet that you keep substantial cash sums in your house... :o

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businesses like stability more than anything else. when it becomes unpredictable things become a mess as they dont know whats happening.

This is true in the absolute sense.

The few who can secure payrises will be people who transparently add value and negotiate an increased salary or contract rate while promising not to ask for more money for a long time and not to leave - ie. bring stability for a known price.

Sadly most work is so disconnected from the bottom line that few will get past 1st base.

Those who can secure real increases in income are going to be in a powerful position as the rest of the population see their wealth & income wither.

Investment Bankers for instance are very clear on this. Keeping everyone else back is the 'follow through' when it comes to getting seriously well off.

I'm regularly suprised when socialists clearly don't 'get' that the wealthy are not so much concerned with the masses getting ahead as with maintaining the all important differential.

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I chatted to a friend of mine who bought a flat to rent out - he himself couldn't afford a place to house his family (so is renting) but thought he'd buy a tiny flat in 2007 as an investment. I told him yesterday he should sell it because prices are dropping and he said I was mad. He said: "the rent covers the mortgage (and running costs) so at the end of the mortgage term I have a free house".

Now at the time I was a little confused, how could he have figured out a way to make himself free money so he could retire with a lovely asset worth hundreds of thousands of pounds at NO cost to him? Why have I been so stupid to have missed this trick?

Then I read this Zero Hedge piece and also chatted to my mum who had to live through crippling IR's in the 80's which nearly saw us homeless even though they only had a 2.5 x multiple on their mortgage. It was then I realised why my friend’s argument was COMPLETELY flawed. He is relying on the benign/low/ZIRP environment which fuelled HPI in the last decade to continue for the next 30 years. Which of course it won’t; you’d have to be mental to only use the last 10 years within your calculations. I am not suggesting IR's will go high any time soon but if they hit 10% at any time in the next 25 years he is fecked.

Having though this through I now realise I haven’t missed some free money trick.

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We just recently took all our money out of the bank (left enough in to cover rent and basic monthly bills), bought a safe, and now keep our cash at home.

I know, it feels so primitive, but I don't trust the banks.

I think maybe you shouldnt be posting such information with your name, locale, and photo on full display !

;)

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We just recently took all our money out of the bank (left enough in to cover rent and basic monthly bills), bought a safe, and now keep our cash at home.

I know, it feels so primitive, but I don't trust the banks.

The thing about fiat money is they can rob you without ever opening your safe.

At least change the cash into something more durable first, eg CHF or NOK, or PM. (You have to pay VAT on silver but not gold... :clue: )

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Maybe stagflation will mean fewer people in the UK buying in France due to poor exchange rates. Maybe fewer visiting due to dearer flights. Maybe local businesses suffer due to drop in tourist spending. Unemployment. Continual loop. House prices plummet, which is great if you have a wad of cash. Useless for everyone else who have tighter and tighter budgets or no job. :unsure:

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We just recently took all our money out of the bank (left enough in to cover rent and basic monthly bills), bought a safe, and now keep our cash at home.

I know, it feels so primitive, but I don't trust the banks.

Well done!

I was tempted to do the same to stop them lending it out whilst giving me feck all, but bottled it and bought premium bonds as a half way measure.

If more people could be bothered I would cash my bonds and thereby withdraw my support to the government too.

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The thing about fiat money is they can rob you without ever opening your safe.

At least change the cash into something more durable first, eg CHF or NOK, or PM. (You have to pay VAT on silver but not gold... :clue: )

not so if you buy certain types of ag or use gm etc

Edited by p.p.

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We just recently took all our money out of the bank (left enough in to cover rent and basic monthly bills), bought a safe, and now keep our cash at home.

I know, it feels so primitive, but I don't trust the banks.

I find it hard to believe that people post things like that in an open forum.

It's just taken me a couple of minutes to show you how silly it is:

I live in London. Here's my observation (even at the higher end of the market). People are getting very nervous.

When we first moved here in 2007, there were NO for sale signs in the Maida Vale/ St. John's Wood area (unsightly you know ;) ). Now I see them fairly often, and this is on properties of over 2 million.

In the building I live in, 2 flats were on the market for over 8 months, neither sold. (Of course I think they were asking too much). Anyway the owner (he owned both properties) took them off the market and rented them out instead.

Something is happening, and its going to affect every aspect of the housing market.

How is your Edinburgh property hunting going? Have you definitely ruled out 94 Findhorn Place?

My husband and I are thinking of offering 285,000 GBP for this place. Just wondering what the experts here think of our chances?

I would say this place needs at least 100,000 GBP to modernise. It has been on the market awhile.

Edited by Redhat Sly

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not so if you buy certain types of ag or use gm etc

I'm not aware of any lawful means by which you can buy a substantial quantity of silver and take physical possession without paying tax.

Amazingly Gordon Brown did one good thing in his life - he took the VAT off gold so we can protect ourselves from all his other decisions. :P

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I'm not aware of any lawful means by which you can buy a substantial quantity of silver and take physical possession without paying tax.

Amazingly Gordon Brown did one good thing in his life - he took the VAT off gold so we can protect ourselves from all his other decisions. :P

well i guess the definition of substantial is for the buyer

but there's 50% coins (which do trade amazingly close to spot / divide by 2):

http://cgi.ebay.co.uk/ws/eBayISAPI.dll?ViewItem&item=130477894704&ssPageName=STRK:MEDWX:IT

http://cgi.ebay.co.uk/ws/eBayISAPI.dll?ViewItem&item=260722469634&ssPageName=STRK:MEDWX:IT

then there's sterling coins

http://cgi.ebay.co.uk/555-grams-pre-1920-1902-silver-coins-5-face-scrap-/160536039015?pt=UK_Coins_Bullion_Bars_SM&hash=item2560b18e67

and the great thing is these are hard to fake / not worth it because its 'scrap' coinage (i.e. not numismatic)

DYOR

ps for all those people who sneer at pre 47 - good leave it for the rest of us!!

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  • 312 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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