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Britain's £200Bn Time Bomb Of Debt I N T E R E S T

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http://www.telegraph.co.uk/finance/comment/jeremy-warner/8405399/Britains-200bn-time-bomb-of-debt-interest.html

Britain's £200bn time bomb of debt interest
A little bit of inflation is a good thing, right? Well, that's one way of looking at it, and if you were being charitable, it might even provide a decent explanation of why the Bank of England appears to have given up on the inflation target..../
Worse, these numbers are an understatement of the true position. According to data aired at a Taxpayers' Alliance seminar on Thursday, once private finance initiative payments, public sector pensions and other off-balance sheet liabilities are taken into account, the true size of the interest bill will be more like £200bn by the end of the Parliament. I won't trouble you with the projected costs of social security and tax credits, but they are little less alarming.
Against this backdrop of rising expenditure, Ed Balls, the shadow chancellor, accuses the Government of putting the economy "back in the danger zone" by seeking to apply at least a degree of restraint. Mr Balls is much more highly qualified in economics than I am, but he obviously understands nothing about the basic principles of finance.
The miracle is that the bond markets remain as compliant as they are given this toxic mix of inflation and continued public indebtedness. Moody's reaffirmed the UK's triple A rating on Thursday, but it warned inflation posed a significant risk. They can say that again.
There must come a point when the gilts market turns. What higher interest rates would do to that £200bn debt servicing bill scarcely bears thinking about.

We still seem to be avoiding the lunch bill. £ remarkably resilient even after the growth downgrade ( and growth is the only real way out of our debt problems).

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http://www.telegraph.co.uk/finance/comment/jeremy-warner/8405399/Britains-200bn-time-bomb-of-debt-interest.html

Britain's £200bn time bomb of debt interest
A little bit of inflation is a good thing, right? Well, that's one way of looking at it, and if you were being charitable, it might even provide a decent explanation of why the Bank of England appears to have given up on the inflation target..../
Worse, these numbers are an understatement of the true position. According to data aired at a Taxpayers' Alliance seminar on Thursday, once private finance initiative payments, public sector pensions and other off-balance sheet liabilities are taken into account, the true size of the interest bill will be more like £200bn by the end of the Parliament. I won't trouble you with the projected costs of social security and tax credits, but they are little less alarming.
Against this backdrop of rising expenditure, Ed Balls, the shadow chancellor, accuses the Government of putting the economy "back in the danger zone" by seeking to apply at least a degree of restraint. Mr Balls is much more highly qualified in economics than I am, but he obviously understands nothing about the basic principles of finance.
The miracle is that the bond markets remain as compliant as they are given this toxic mix of inflation and continued public indebtedness. Moody's reaffirmed the UK's triple A rating on Thursday, but it warned inflation posed a significant risk. They can say that again.
There must come a point when the gilts market turns. What higher interest rates would do to that £200bn debt servicing bill scarcely bears thinking about.

We still seem to be avoiding the lunch bill. £ remarkably resilient even after the growth downgrade ( and growth is the only real way out of our debt problems).

So UK inflation (twice the rate in the Eurozone) is having a drag on growth and risking the credit rating. The time is coming when the BoE dimwits (well 6 of them) realise that currency debasement inflation is a greater evil than raising IR's and strengthening the pound. When lower inflation trumps protecting house prices as a factor in keeping the aaa rating things will change. That point is rapidly approaching.

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http://www.telegraph.co.uk/finance/comment/jeremy-warner/8405399/Britains-200bn-time-bomb-of-debt-interest.html

Britain's £200bn time bomb of debt interest
A little bit of inflation is a good thing, right? Well, that's one way of looking at it, and if you were being charitable, it might even provide a decent explanation of why the Bank of England appears to have given up on the inflation target..../
Worse, these numbers are an understatement of the true position. According to data aired at a Taxpayers' Alliance seminar on Thursday, once private finance initiative payments, public sector pensions and other off-balance sheet liabilities are taken into account, the true size of the interest bill will be more like £200bn by the end of the Parliament. I won't trouble you with the projected costs of social security and tax credits, but they are little less alarming.
Against this backdrop of rising expenditure, Ed Balls, the shadow chancellor, accuses the Government of putting the economy "back in the danger zone" by seeking to apply at least a degree of restraint. Mr Balls is much more highly qualified in economics than I am, but he obviously understands nothing about the basic principles of finance.
The miracle is that the bond markets remain as compliant as they are given this toxic mix of inflation and continued public indebtedness. Moody's reaffirmed the UK's triple A rating on Thursday, but it warned inflation posed a significant risk. They can say that again.
There must come a point when the gilts market turns. What higher interest rates would do to that £200bn debt servicing bill scarcely bears thinking about.

We still seem to be avoiding the lunch bill. £ remarkably resilient even after the growth downgrade ( and growth is the only real way out of our debt problems).

Whilst I agree with the gist of the article, I think the writer may have a problem with the technicalities of the interest. Most of the interest on gilts is fixed, therefore that £200 billion of interest is fixed, and will not change with interest rate rises. Inflation if it occurs, will reduce the real burden, assuming of course that this inflation extends to the government's tax income.

There will be a rising interest payment of course, from index linked gilts and on issue of debt over the life of the Parliament, but a turning of the interest rate cycle doesnt put the government much deeper in the khaki than it already is.

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The problem will be the interest we are going to have to pay on new issues of debt. Unless Mystic Merv it going to directly fund the govt deficit.

Direct funding of Government expenditure is always an option.

The previous QE bought gilts off of bankers at inflated prices giving them an easy profit. That needs to be outlawed, as it is theft.

Printing to fund government expediture is sometimes the right decision. That too though, should be disallowed, when average total remuneration in the public sector for employees is higher than the private sector.

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http://www.telegraph.co.uk/finance/economics/8405250/OBR-warns-on-effect-of-inflation-and-rising-oil-price.html

The biggest threat to the public finances, the OBR added, "is the possibility that we have overestimated the amount of spare capacity in the economy". Spare capacity measures the pent-up growth potential in the economy once normal service is resumed, as laid-off workers are re-employed and mothballed factories come back on stream.

The OBR estimates that this "output gap" will be 3.9pc this year and 1.4pc in 2015. "If the output gap was roughly 1.5pc smaller then the Government would no longer be on course to" meet its five-year targets for the public finances.

I like this little gem here.

Still we should consider it a beyond-design-basis event

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http://www.telegraph.co.uk/finance/economics/8405250/OBR-warns-on-effect-of-inflation-and-rising-oil-price.html

I like this little gem here.

Still we should consider it a beyond-design-basis event

I am of the opinion that our spare capacity is overestimated. The problem is if people are out of work for a long period of time, they just 'give up'. I dont blame them, the constant rejection can have a psychological affect on people. Being beaten down again and again would cause many to give up. Eventually people find a way to get by on benefits and live a modest life, in a little shell where they can no longer be hurt.

Bringing those people back into the workforce is a huge challenge. Do you take away what little income they have and threaten them with starvation if they dont seek work.

I am normally against government intervention, but for this group of people, I would advocate some sort of public works. Get them doing something with a goal. I like the idea of building new broad guage railways between our major cities. Get the psychologists out, and give the long term unemployed the task of building these things, dont use machinery to assist, because it is the work that is important, getting people used to it again. There would be all sorts of jobs, portakabins for a workforce that moves with the track, logistics of moving the rails on site, levelling ground, laying the rails perfectly, electrical work for signal, site clearance and tidying up, provision of food and clothing, payroll. Loads of jobs. Get people who feel undervalued doing them again.

What people need is to feel valued. Give them a chance to achieve things, and let them know of their achievements.

Properly led, people we might think who are beneath us, can achieve great things.

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http://www.telegraph.co.uk/finance/comment/jeremy-warner/8405399/Britains-200bn-time-bomb-of-debt-interest.html

Britain's £200bn time bomb of debt interest
A little bit of inflation is a good thing, right? Well, that's one way of looking at it, and if you were being charitable, it might even provide a decent explanation of why the Bank of England appears to have given up on the inflation target..../
Worse, these numbers are an understatement of the true position. According to data aired at a Taxpayers' Alliance seminar on Thursday, once private finance initiative payments, public sector pensions and other off-balance sheet liabilities are taken into account, the true size of the interest bill will be more like £200bn by the end of the Parliament. I won't trouble you with the projected costs of social security and tax credits, but they are little less alarming.
Against this backdrop of rising expenditure, Ed Balls, the shadow chancellor, accuses the Government of putting the economy "back in the danger zone" by seeking to apply at least a degree of restraint. Mr Balls is much more highly qualified in economics than I am, but he obviously understands nothing about the basic principles of finance.
The miracle is that the bond markets remain as compliant as they are given this toxic mix of inflation and continued public indebtedness. Moody's reaffirmed the UK's triple A rating on Thursday, but it warned inflation posed a significant risk. They can say that again.
There must come a point when the gilts market turns. What higher interest rates would do to that £200bn debt servicing bill scarcely bears thinking about.

We still seem to be avoiding the lunch bill. £ remarkably resilient even after the growth downgrade ( and growth is the only real way out of our debt problems).

yes your are correct, it is remarkably resilient indeed, it only dropped by 1.5% yesterday... keep up the good work RB

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I am of the opinion that our spare capacity is overestimated. The problem is if people are out of work for a long period of time, they just 'give up'. I dont blame them, the constant rejection can have a psychological affect on people. Being beaten down again and again would cause many to give up. Eventually people find a way to get by on benefits and live a modest life, in a little shell where they can no longer be hurt.

Bringing those people back into the workforce is a huge challenge. Do you take away what little income they have and threaten them with starvation if they dont seek work.

I am normally against government intervention, but for this group of people, I would advocate some sort of public works. Get them doing something with a goal. I like the idea of building new broad guage railways between our major cities. Get the psychologists out, and give the long term unemployed the task of building these things, dont use machinery to assist, because it is the work that is important, getting people used to it again. There would be all sorts of jobs, portakabins for a workforce that moves with the track, logistics of moving the rails on site, levelling ground, laying the rails perfectly, electrical work for signal, site clearance and tidying up, provision of food and clothing, payroll. Loads of jobs. Get people who feel undervalued doing them again.

What people need is to feel valued. Give them a chance to achieve things, and let them know of their achievements.

Properly led, people we might think who are beneath us, can achieve great things.

I agree getting them doing something useful, give them a purpose. Feeling useless and worthless is the disease that consumes the unemployed, being constantly rejected is not good for the human psyche.

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RPI inflation is 5.5%

Wage inflation is 2.1%

If this gap remains then the long term outlook is: nobody can afford to buy anything; systemic business failure; mass unemployment; GDP falls to zero; tax yield falls to zero.

Obviously it would take 20 or 30 years to get that bad, but the pain would start sooner. In fact the pain has already started.

Historically governments in this possition have always taken the view that people must have enough money to eat, so print more money. Then wage inflation rises about price inflation and everyone is happy - for a while. Then the currency collapses. :angry:

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RPI inflation is 5.5%

Wage inflation is 2.1%

If this gap remains then the long term outlook is: nobody can afford to buy anything; systemic business failure; mass unemployment; GDP falls to zero; tax yield falls to zero.

Obviously it would take 20 or 30 years to get that bad, but the pain would start sooner. In fact the pain has already started.

Historically governments in this possition have always taken the view that people must have enough money to eat, so print more money. Then wage inflation rises about price inflation and everyone is happy - for a while. Then the currency collapses. :angry:

The result of people not buying thngs is deflation. Jpan are obsessive savers and don't buy "much." They have deflation.

Merv may be trying to use ST inflation as a deflator in the MT and LT. This is good old Friedman econmics and may be his way of paying for Brown's lunch.

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RPI inflation is 5.5%

Wage inflation is 2.1%

If this gap remains then the long term outlook is: nobody can afford to buy anything; systemic business failure; mass unemployment; GDP falls to zero; tax yield falls to zero.

Obviously it would take 20 or 30 years to get that bad, but the pain would start sooner. In fact the pain has already started.

Historically governments in this possition have always taken the view that people must have enough money to eat, so print more money. Then wage inflation rises about price inflation and everyone is happy - for a while. Then the currency collapses. :angry:

Nationalist,

and dont forget that the post tax wage is falling on average, so workers are seeing their real incomes go backwards faster than that. And public sector workers are still seeing the best pay rises, so the private sector is going back even quicker than that again.

And to have growth, the one thing that the OBR are assuming will come back big time to dig us out of the debt hole the deficit is digging, you need to have energised people in the private sector. I dont think anyone with any energy will be choosing that option given the far better pay scales in the public sector.

It is a shame that the OBR didnt do a borrowing and debt forecast for a zero growth and a -2% negative growth scenario. At least then we could see what awaits us.

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And to have growth, the one thing that the OBR are assuming will come back big time to dig us out of the debt hole the deficit is digging,

We've just come through a huge boom, with money floating around like confetti, financial services going gang-busters, people mewing billions...

...and yet, if I remember correctly, growth was roughly 2.5% p.a., a sort of average acceleration for the UK economy.

So, if we needed the most extreme situation to generate average growth, can we really expect to see significant growth in our new, impoverished circumstances?

Peter.

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I am of the opinion that our spare capacity is overestimated. The problem is if people are out of work for a long period of time, they just 'give up'. I dont blame them, the constant rejection can have a psychological affect on people. Being beaten down again and again would cause many to give up. Eventually people find a way to get by on benefits and live a modest life, in a little shell where they can no longer be hurt.

Bringing those people back into the workforce is a huge challenge. Do you take away what little income they have and threaten them with starvation if they dont seek work.

I am normally against government intervention, but for this group of people, I would advocate some sort of public works. Get them doing something with a goal. I like the idea of building new broad guage railways between our major cities. Get the psychologists out, and give the long term unemployed the task of building these things, dont use machinery to assist, because it is the work that is important, getting people used to it again. There would be all sorts of jobs, portakabins for a workforce that moves with the track, logistics of moving the rails on site, levelling ground, laying the rails perfectly, electrical work for signal, site clearance and tidying up, provision of food and clothing, payroll. Loads of jobs. Get people who feel undervalued doing them again.

What people need is to feel valued. Give them a chance to achieve things, and let them know of their achievements.

Properly led, people we might think who are beneath us, can achieve great things.

Agreed but it's still not going to get them a job if there aren't any jobs.

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The problem will be the interest we are going to have to pay on new issues of debt. Unless Mystic Merv is going to directly fund the govt deficit.

Already happening.

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RPI inflation is 5.5%

Wage inflation is 2.1%

If this gap remains then the long term outlook is: nobody can afford to buy anything; systemic business failure; mass unemployment; GDP falls to zero; tax yield falls to zero.

Obviously it would take 20 or 30 years to get that bad, but the pain would start sooner. In fact the pain has already started.

Historically governments in this possition have always taken the view that people must have enough money to eat, so print more money. Then wage inflation rises about price inflation and everyone is happy - for a while. Then the currency collapses. :angry:

yes, the entire economy is completely off balance just now. It will continue to be like this until the effects of globalisation plateau.

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I think I mentioned something about public works in my post.

Don't forget that "Universal Credit" is scheduled to replace all other benefits. Its purpose is to remove the work penalty which long term unemployed experience where the marginal gain from working is negligable or even nil. The long term unemployed may become re-encouraged when they can put in a few hours work and actually keep the money earned! (Or maybe not, but at least the govt is trying in this area.)

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The result of people not buying thngs is deflation. Jpan are obsessive savers and don't buy "much." They have deflation.

Merv may be trying to use ST inflation as a deflator in the MT and LT. This is good old Friedman econmics and may be his way of paying for Brown's lunch.

RB, does your analysis still hold true if most of the price inflation we experience is actually imported, and due to a falling currency combined with harvest failures abroad and rising Asian demand for commodities, especially oil?

I wonder how much people in the UK not buying much stuff is likely to deflate the world price of oil?

Also, some of our inflation is now endemic having been masked for the first half of the decade by imported deflation. Cheap Chinese tat mainly. Our inflation is actually deflation pressures being removed.

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Don't forget that "Universal Credit" is scheduled to replace all other benefits. Its purpose is to remove the work penalty which long term unemployed experience where the marginal gain from working is negligable or even nil. The long term unemployed may become re-encouraged when they can put in a few hours work and actually keep the money earned! (Or maybe not, but at least the govt is trying in this area.)

I hadnt forgotten about that.

This though is a separate issue. If you have had two years of no one wanting you, you are going to feel down. Very few people persist with what would appear to be futile actions, and if you have been turned down for all sorts of jobs over a period of time, it is normal to feel low self worth. To avoid the pain of rejection, you would simply stop trying. The universal credit would do little to reverse this situation.

Giving state jobs to people, where they can actually work and produce something, work towards goals, and perhaps gain some skills, and just going through the routine of a working day, can address this problem.

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RB, does your analysis still hold true if most of the price inflation we experience is actually imported, and due to a falling currency combined with harvest failures abroad and rising Asian demand for commodities, especially oil?

I wonder how much people in the UK not buying much stuff is likely to deflate the world price of oil?

Also, some of our inflation is now endemic having been masked for the first half of the decade by imported deflation. Cheap Chinese tat mainly. Our inflation is actually deflation pressures being removed.

Food shortages are a complete fraud perpetrated on the Worlds populations by the NWO elites who have been buying up huge amounts of productive farmland and leaving them cropless.

This is so they can introduce their satanised 'saviour' Monsanto monster seed which will have copyright over most of our productive crops, introduced (luringly) cheaply then exponential price rises - they are just waiting in the wings to introduce this!

Cheap Chinese tat is long over!

It's going to be more expensive year by year and loads of USA companies that outsourced previously, have seen the errors of their ways & are looking to restart production back in the States!

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RB, does your analysis still hold true if most of the price inflation we experience is actually imported, and due to a falling currency combined with harvest failures abroad and rising Asian demand for commodities, especially oil?

I wonder how much people in the UK not buying much stuff is likely to deflate the world price of oil?

Also, some of our inflation is now endemic having been masked for the first half of the decade by imported deflation. Cheap Chinese tat mainly. Our inflation is actually deflation pressures being removed.

This article sums up what I basically believe to be tue in relation to inflation and why Merv is right not to hike:

http://www.bloomberg.com/news/2011-03-25/trichet-king-haunted-by-bank-of-japan-s-lost-decade-interest-rate-error.html

Trichet, King Haunted by BOJ’s Premature Interest-Rate Errors
By Simon Kennedy - Mar 25, 2011 12:01 AM GMT
European central bankers agitating for higher interest rates to quell inflation may be ignoring the lessons of Japan’s economic history.
As the European Central Bank and Bank of England consider tightening monetary policy, HSBC Holdings Plc and Fathom Financial Consulting warn officials risk misjudging the inflation threat and may end up hurting their recoveries. That’s what repeatedly happened in Japan in the past quarter century as policy makers constrained credit only to reverse within months when expansion faltered.
“The danger is of a policy mistake,” said Stephen King, HSBC’s London-based chief economist and a former U.K. Treasury official.
“In an attempt to control inflation this year they could set the scene for more disappointing growth in the future as happened in Japan.”
.../

We have a very large assett bubble in the form of grossly overpriced houses (as did the Japs). The economy seems to be ticking over okay but the debt is huge and any inflation faces the sucking power of that debt mountain. Demand is already slowing due to people with less money and the fear factor. Inflation is being imported as, so far, there is no wage push inflation. Unemployment is rising which will dampen enthusiasm fofr "give me a raise or else" threats.

Bottom line: Merv is making the right call.

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Bottom line: Merv is making the right call.

OK, but is there any level of CPI at which you think Merv should act? Is CPI 10% OK, or 20%?

Merv is between a rock and a hard place, it's true. Raise rates and the economic growth (possibly already negative!) will stall, leave them untouched and inflation will soar, mainly due to external factors, not us Brits being greedy with our pay demands.

I wrote my thoughts on this in a blog post a while back. I'll quote myself here.

The BoE is now being ground between a rock and a hard place. They claim interest rates cannot be raised to combat inflation because economic growth would be choked off if debt became more expensive, but growth is already negative. One member of the MPC, Adam Posen, even wants to inject more QE money into the economy to stimulate growth. But QE is inflationary. When they did the first round of QE there were deflationary pressures in the economy which meant the inflationary effect was delayed, but the delay has expired and we're seeing the inflation now. More QE now would be like spraying petrol onto a naked flame. There are now no deflationary pressures to delay the effect.

So to preserve the buying power of sterling we need higher interest rates. And yet there is no doubt MK and his ilk are right, higher interest rates will reduce growth - or rather increase economic shrinkage, since we don't have any growth.

(MK is fond of pointing out that higher interest rates leave less money in the pockets of borrowers so spending is reduced. He never adds that savers get more money. However he's not wrong that spending would be reduced since savers are, by definition, people who are less inclined to spend.)

So what's the answer? Go for growth or try to hold the line on inflation?

Basically there isn't an answer. You have to pick the lesser evil and let it happen. The Bank has clearly chosen inflation as the lesser evil. They'll take growth at the cost of inflation. This is the wrong decision though.

Inflation is like a vampire, sucking wealth from us all. You can kill it with a stake through the heart, but if the stake ever falls out the vampire gets back up again and comes straight at your throat. Trying to do a deal with the vampire is futile. You can say, "I'll let you suck a little blood for now and deal with you later," but all the time it's sucking blood the vampire grows stronger and it doesn't stop until you've died of hyperinflation.

The alternative is to keep the stake in the inflation vampire and have a recession instead. Recessions are of course painful, asset prices drop, house prices drop, jobs are lost, salaries of those lucky enough to have a job decline, but recessions are not self-fuelling. They don't grow stronger the longer they last. In fact they bring their own solutions with them. As jobs are lost, asset prices decline and wages decrease, the country becomes more competitive. Making something, anything, costs less. It costs less to buy the land, to build the factory, to hire the workers, and so exports pick up. Jobs are created, wages rise and the recession is over.

If the BoE had dealt with the inflation vampire years back, when this blog first started making the sign of the cross in the direction of inflation, it wouldn't be facing the current dilemma. However they didn't. They took the easy option and let the vampire have a little suck. A small stake could have fixed the problem back then. Now it will take a big stake and the resulting recession will be worse as a result.

But even now, the sooner they bite the bullet the better it will be.

If they refuse to bite the bullet the path ahead looks something like this.

Sterling will fall relative to other world currencies because there will be little point holding such a low-yielding currency. So commodity prices, set on the world markets, will rise. This will feed through into shop prices in the UK and choke off demand. There will be some attempt to get wages up, but this will mainly fail: in the public sector because of the government's determination to freeze public sector pay, and in the private sector because the profits won't be there to sustain pay rises.

Sterling will then fall further because of a lack of market confidence. One pound is essentially one share in UK plc. With the economy failing there will be little interest in owning such a share. And as sterling falls so imported inflation (oil prices etc) become relatively higher and the economy fails even more.

Then sooner or later the "wage freeze" breaks; it always does, and money will be borrowed or printed to fund pay hikes. Making money is inflationary and the only solution that governments see is to make even more money. And the more money they make, the less it's worth. The cycle is very difficult to break.

Frankly it's better not to get into that state in the first place.

Disclosure: The author of this blog keeps his savings in Swiss francs. In the 1960s £1 would have bought you more than 10 Swiss francs; as recently as a couple of years ago you could have bought over 2 Swiss francs for £1. Yesterday, for the first time, £1 was worth less than one and a half francs. Most likely in the medium term future we will have parity between the Swiss franc and sterling. Then after that 1 franc will buy you more than 1 pound. Somehow the Swiss have managed to hold the value of their currency while we haven't. The fault for this lies with the Bank of England.

Source: http://britishnationalist.blogspot.com/2011/02/gdp-revised-downwards.html

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OK, but is there any level of CPI at which you think Merv should act? Is CPI 10% OK, or 20%?

Merv is between a rock and a hard place, it's true. Raise rates and the economic growth (possibly already negative!) will stall, leave them untouched and inflation will soar, mainly due to external factors, not us Brits being greedy with our pay demands.

I wrote my thoughts on this in a blog post a while back. I'll quote myself here.

Source: http://britishnationalist.blogspot.com/2011/02/gdp-revised-downwards.html

CHF--good move. I suggested Norwegian Kr a couple of years back and wish I had bought some! Currency gambling is too stressful when its your house money. Watching CABLE today and am glued to the screen wondering if today would be a good day to make the move into £ as exchange of contracts is about a week or so away. £ hovering just below 1.61 which appears to be a support level with buying coming in at 1.6075.

I don't think Merv knows which way to move and is betting the Japanese scenario vs. the hyperinflation option. It may all rest on wage-push inflation--if it appears. I suspect Merv knows that a HPC is underway which is a massively deflationary factor--the reason why the VIs are resisting it so much--especially the banksters who will lose out with inflation eroding away debt (bonuses).

The bubble is bursting and that is deflation. A bubble does not inflate when prices are coming down. Houses are too big a factyor in our economy to be in their own isolated microeconmic world. Merv has got it right IMO and we know he is no fan of HPI knowing house prices are opinion whereas debt is real.

Edited by Realistbear

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CHF--good move. I suggested Norwegian Kr a couple of years back and wish I had bought some! Currency gambling is too stressful when its your house money.

Yes, in retrospect I should probably have gone with NOK. Even today though CHF and NOK are not gambling. The UK fundamentals are bad, Swiss and Norweigan fundamentals are good. And of course if I'd gone to gold I'd have been even better off today.

I chose CHF because 1) decades-long track record, 2) account at High Street bank (Barclays, too big to fail, no fees), and 3) widely traded currency. NOK is a bit obscure.

Note that a HPC is not CPI deflationary because houses aren't in the "basket". Ironically for MK CPI will stay high while prices collapse. If he were playing by the rules he would be increasing the bank rate while deflation raged all around.

Of course, he's not playing by the rules.

It remains to be seen what CPI number is a step too far. Is he prepared to lose all credibility by remaining inactive while CPI passes key milestones, 5%, 10%, 15% etc?

I suppose maybe he is.

If we were French, his name would be on the guillotine list. <_<

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  • 311 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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