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If Inflation Was To Be Their Plan...

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Paul Fisher at the Bank of England hints at more money printing to keep deflation at bay (by deflation, he must be talking about property in some areas or referring to large screen televisions, as I can't think of much else that's going down in price across the UK)

If the plan of the BoE were to inflate away HM Government's debt, who would want to buy debt from the DMO in the future having seen what the BoE did this time?

AFAIK only a minority of HMG debt is not index-linked, this means they can only inflate some (that minority) of the debt away. Am I mistaken, is it vice versa? Or will they inflate and fiddle the indexes?

Or is simply that with QE, it matters not a jot what the Gilt markets think, because basically HMG is buying its own debt via the BoE anyway with a middle-man to keep it legal?

Finally, do you get a Knighthood these days if you pretty much halve the value of Sterling over 10 years and preside over a disastrous bubble while doing little more than stuffing your gormless face with chocolate digestives and claiming for a railcard on expenses?

Edited by inflating

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If the plan of the BoE were to inflate away the HM Government's debt, who would want to buy debt from the DMO in the future having seen what the BoE did this time?

UK banks. Paid for by you and me with savings rates at 0.5% and credit card rates at 20%. Neat huh ?

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Paul Fisher at the Bank of England hints at more money printing to keep deflation at bay (by deflation, he must be talking about property in some areas or referring to large screen televisions, as I can't think of much else that's going down in price across the UK)

If the plan of the BoE were to inflate away HM Government's debt, who would want to buy debt from the DMO in the future having seen what the BoE did this time?

AFAIK only a minority of HMG debt is not index-linked, this means they can only inflate some (that minority) of the debt away. Am I mistaken, is it vice versa? Or will they inflate and fiddle the indexes?

Or is simply that with QE, it matters not a jot what the Gilt markets think, because basically HMG is buying its own debt via the BoE anyway with a middle-man to keep it legal?Finally, do you get a Knighthood these days if you pretty much halve the value of Sterling over 10 years and preside over a disastrous bubble while doing little more than stuffing your gormless face with chocolate digestives and claiming for a railcard on expenses?

That I think, but now that QE is done I was hoping the fabled bond vigilantes would be riding for vengeance.

Everything just keeps ticking along, it's very tiresome.

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UK banks. Paid for by you and me with savings rates at 0.5% and credit card rates at 20%. Neat huh ?

This is the obligatory purchase of HMG debt I presume. Neat, like an episode of The Real Hustle

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The BOE must be the most useless (independent..... :lol:) government body ever created.

It is actually shocking watching Merv try and justify their actions of keeping the base rate at 0.5%, meanwhile every person in the country is seeing their income fall down a hole.

Pathetic. But it looks like they're about to make the situation even worse with more frigging printy, printy. :blink:

Like I said on the other thread....Oh dear!! This isn't going to end well. :rolleyes:

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The BOE must be the most useless government body ever created.

It is not, and never will be a 'government' body.

It is perhaps better to say that the BOE is the most corrupt and efficient organisation ever created.

Bringing you inflation since 1694.

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It is not, and never will be a 'government' body.

It is perhaps better to say that the BOE is the most corrupt and efficient organisation ever created.

Bringing you inflation since 1694.

lol, my point though was that they might as well be a government body, because Merv gets his orders from the PM and then has to talk bullsh!t in order to pull the wool over the publics eyes.

It really is getting pathetic now, as there can be no justification for keeping rates at 0.5%. None imo. :rolleyes:

Edited by Wait & See

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lol, my point though was that they might as well be a government body, because Merv gets his orders from the PM and then has to talk bullsh!t in order to pull the wool over the publics eyes.

It really is getting pathetic now, as there can be no justification for keeping rates at 0.5%. None imo. :rolleyes:

Oh yes there is.

The ONLY two tools available to a central banker are:

1- Credit

2- Interest on credit

Hence why we have 'economic cycles' or whatever naive term you want to label these controls. No matter what you do now you will lose. No deposit interest, massive loan interest, restricted credit.

At the end of this you will see, as we are seeing in smaller scale now, is wholesale purchasing of commodities and property, by bankers, for pennies on the pound.

Is that clear enough for you>

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Oh yes there is.

The ONLY two tools available to a central banker are:

1- Credit

2- Interest on credit

Hence why we have 'economic cycles' or whatever naive term you want to label these controls. No matter what you do now you will lose. No deposit interest, massive loan interest, restricted credit.

At the end of this you will see, as we are seeing in smaller scale now, is wholesale purchasing of commodities and property, by bankers, for pennies on the pound.

Is that clear enough for you>

Yep, it's rolling snake eyes for us all then.

All I'm interested in is not paying for the diddy mortgage holder but it looks like Merv has other ideas. The old b4st4rd that he is. :blink:

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Oh yes there is.

The ONLY two tools available to a central banker are:

1- Credit

2- Interest on credit

Hence why we have 'economic cycles' or whatever naive term you want to label these controls. No matter what you do now you will lose. No deposit interest, massive loan interest, restricted credit.

At the end of this you will see, as we are seeing in smaller scale now, is wholesale purchasing of commodities and property, by bankers, for pennies on the pound.

Is that clear enough for you>

With only two levers to pull, I trust they don't cost us much.

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Paul Fisher at the Bank of England hints at more money printing to keep deflation at bay (by deflation, he must be talking about property in some areas or referring to large screen televisions, as I can't think of much else that's going down in price across the UK)

He's talking about asset prices. I suppose this includes houses, but more importantly, it relates to keeping gilt prices high, which is the same as saying keep interest rates down.

If the plan of the BoE were to inflate away HM Government's debt, who would want to buy debt from the DMO in the future having seen what the BoE did this time?

Somebody who wants to get most of their money back?

AFAIK only a minority of HMG debt is not index-linked, this means they can only inflate some (that minority) of the debt away. Am I mistaken, is it vice versa? Or will they inflate and fiddle the indexes?

I'm pretty sure it's the other way round, but it doesn't really matter. QE is not designed to cause (a huge amount of) inflation, it is designed to allow it. (And protect previous inflation, but I'll leave that one to Injin).

They are not trying to inflate, they are trying to survive, and reset the ponzi:

Which allows the broad money supply to inflate later.

Or is simply that with QE, it matters not a jot what the Gilt markets think, because basically HMG is buying its own debt via the BoE anyway with a middle-man to keep it legal?

Pretty much. Don't forget the middle men are being paid rather well.

Finally, do you get a Knighthood these days if you pretty much halve the value of Sterling over 10 years and preside over a disastrous bubble while doing little more than stuffing your gormless face with chocolate digestives and claiming for a railcard on expenses?

IMWO, you get a knighthood if you come out the other end of this with your head on your shoulders and a functioning fiat money system.

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Timm, thanks, but unless I'm reading this wrong, no more than 30% are index linked

http://www.dmo.gov.u...T%20MARKET%20(3)&reportpage=Portfolio_Composition

I can't get much from your link, but I'd be surprised if more than 30% were linkers.

So we seem to agree.

Perhaps I misread your previous post, or perhaps you miswrote it?

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I can't get much from your link, but I'd be surprised if more than 30% were linkers.

So we seem to agree.

Perhaps I misread your previous post, or perhaps you miswrote it?

My point in that post was that a minority of gilts are index-linked to inflation. Therefore the UK govt can, in theory, inflate their debts away on the majority of their debt.

I had asked who would want to touch UK debt in future if that were the case, but seems they may have a cosy arrangement with the UK banks they own to buy their debt, which is basically the govt buying their own debt, which is what Zim did, am I correct?

You seem all in favour of QE, I'm not, and I consider the UK economy under the stewardship of the BoE to be highly questionable for some years now, with no sign of that improving

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FACT: They are going to inflate, they have no other choice. I mean we borrowed £250 for every man, woman and child in May alone to keep the ponzi scheme going, do you honestly think we'll ever pay it back in real terms? If they don't inflate, the UK defaults. So, they have chosen the insidious and politically more acceptable path of stealth default through inflation. END OF STORY.

So, please stop acting so surprised. And while you are screaming bloody murder, I am punching the air in jubilation.

Keep your savings in paper and Merv is public enemy No. 1. Buy some gold and silver and every time he goes near that printy, printy button Merv is working for you.

Money for nothing and the cheques for free! :D

Make the right choices and it this will be the opportunity of a lifetime, rather than your worst nightmare.

Edited by General Congreve

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My point in that post was that a minority of gilts are index-linked to inflation. Therefore the UK govt can, in theory, inflate their debts away on the majority of their debt.

Then we agree, though don't forget that gilts are not the only promises the state has made: Many pensions are also index linked, and there are many many more promises out there.

I had asked who would want to touch UK debt in future if that were the case, but seems they may have a cosy arrangement with the UK banks they own to buy their debt, which is basically the govt buying their own debt, which is what Zim did, am I correct?

I'm no expert, but I think Zimbabwe printed actual currency to pay the bills and allowed it to roam free in the economy. This was not just inflationary (in terms of increasing the money supply), but turbo charged (in terms of the effect on velocity). UK QE may to some extent monetise (and therefore fund) government debt spending, but the side effect appears only to increase the capital base to protect credit money promises already made, and keep the cost of money low. In this, it is quite different to Mugabe's inflation.

You seem all in favour of QE, I'm not, and I consider the UK economy under the stewardship of the BoE to be highly questionable for some years now, with no sign of that improving

Whilst a continuation of the current status quo is not in the best interest of long term societal health, the human race, or the planet, it is IMHO in the best interest of most humans currently living in the west and the politicians that they elect.

My VI has for many years been (and continues to be) for deflation. I no longer expect such an outcome, and am positioning myself changing my VI accordingly.

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So, please stop acting so surprised. And while you are screaming bloody murder, I am punching the air in jubilation.

Keep your savings in paper and Merv is public enemy No. 1. Buy some gold and silver and every time he goes near that printy, printy button Merv is working for you.

Why are you punching the air? All you are doing with gold and silver is maintaining your purchasing power - you are not getting any richer. It's better than having the value of your cash inflated away but if a gold sovereign buys a washing machine today it will still only buy a washing machine in 10 years time, even if the price in sterling is a million pounds by then.

My VI has for many years been (and continues to be) for deflation. I no longer expect such an outcome, and am positioning myself changing my VI accordingly.

Sadly, I'm starting to agree that this looks like the most sensible course of action.

Then I wonder whether i'm falling for a double bluff, as it seems even the shoe-shine boys are expecting high inflation...

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Why are you punching the air? All you are doing with gold and silver is maintaining your purchasing power - you are not getting any richer. It's better than having the value of your cash inflated away but if a gold sovereign buys a washing machine today it will still only buy a washing machine in 10 years time, even if the price in sterling is a million pounds by then.

They say an ounce of gold has always been equivalent to a fine suit. £950 would seem about right in that respect would it not? However, something has been lost in translation over the ages. Originally 'fine suit' was meant to mean a set of fine regal robes worthy of royalty. Think you'll get that knocked up in all it's pomp and finery for £950?

What I'm getting at is that gold is historically undervalued at this point in time. This is because it's price is suppressed and also because it is out of favour as a store of wealth.

The suppression side of the equation comes from the fact that a large part of the gold market comprises of paper gold. Paper gold allows people to buy and trade gold without ever taking delivery through the use of paper contracts relating to real gold in a vault somewhere. This is very convenient for trading and also very convenient if you want to make free money by conjuring a contract from thin air, knowing full well the percentage of buyers who demand delivery is so smallthat you are unlikely to get caught. So far this has worked. However, with reportedly 100 paper contracts for every 1 real ounce of physical gold in the world, it is a massive ponzi waiting to collapse. I'm not saying gold will rocket 100 times in value when the wheels come of this ruse, but the paper ponzi is certainly responsible for suppressing the price of gold by a significant leveraged amount.

The store of wealth side relates to the fact that historically in the 20th century (up until the mid-80's) around 25% of global wealth was held in gold, the rest being in cash, shares, bonds, property etc. Today that figure is 0.8%. Let me repeat that, 0.8%. Property is in a global bubble, as are bonds and fiat currencies. Shares, while perhaps not as bubblicious as the others are definitely trading way over true value. When the markets finally do panic and all that wealth flees for safety from these bubbles, it is a dead cert some of it will flow to gold (what else is left?). Even if a tiny 0.8% of wealth flows into gold, that is a doubling of demand for gold. What if we get back to historic norms or beyond? Supply and Demand rules the day.

The same facts broadly apply to silver too.

So, while gold/silver do directly protect from inflation and currency devaluation, they are also highly geared within the current economic climate with regards to growing your wealth. If you need any further evidence of this see the attached images.

Oh, and last time I checked sterling was buying 40% less petrol than a year or so ago. But if that's to your taste, you are welcome.

Average UK house price in ounces of gold since 1999.gif

Average UK house prices in ounces of silver since 1999.gif

post-20010-0-48160900-1308695929_thumb.gif

post-20010-0-12942500-1308695937_thumb.gif

Edited by General Congreve

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historically in the 20th century (up until the mid-80's) around 25% of global wealth was held in gold, the rest being in cash, shares, bonds, property etc. Today that figure is 0.8%. Let me repeat that, 0.8%.

...

Oh, and last time I checked sterling was buying 40% less petrol than a year or so ago. But if that's to your taste, you are welcome.

Interesting post, thanks. Any links to where the 25% and 0.8% come from?

I hold all sorts of stuff, including gold and sterling. Gold seems an excellent hedge, but I'm not sure it is in line for the 25/0.8 = 3100% rise that you imply. As time goes on I'm leaning more towards an inflationary scenario, but I'm still not sure.

If we get into a situation where:

- Greece and other PIIGS default

- Most big banks blow up as a result

- Political pressure makes bailing them out again untenable

- The banks are allowed to go bust, with huge falls in stockmarkets and losses of savings resulting

This would be amazingly deflationary - 2008/9 all over again but worse. We could easily see 40%+ falls in stockmarkets and house prices. Money wouldn't rush into gold - the point is they'd be less money. It would have been destroyed in the defaulting.

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Interesting post, thanks. Any links to where the 25% and 0.8% come from?

I hold all sorts of stuff, including gold and sterling. Gold seems an excellent hedge, but I'm not sure it is in line for the 25/0.8 = 3100% rise that you imply. As time goes on I'm leaning more towards an inflationary scenario, but I'm still not sure.

If we get into a situation where:

- Greece and other PIIGS default

- Most big banks blow up as a result

- Political pressure makes bailing them out again untenable

- The banks are allowed to go bust, with huge falls in stockmarkets and losses of savings resulting

This would be amazingly deflationary - 2008/9 all over again but worse. We could easily see 40%+ falls in stockmarkets and house prices. Money wouldn't rush into gold - the point is they'd be less money. It would have been destroyed in the defaulting.

True. The big question is what happens the next time the interbank market grinds to a halt and a bank or several banks begin to wobble. My bet is they'll just magic up more funny money and that we're heading for inflation. As a politician you actually get kudos for this - you've saved the day, acted decisively etc. etc. You've done something rather than just let everything fall to rack and ruin.

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Sadly, I'm starting to agree that this looks like the most sensible course of action.

Then I wonder whether i'm falling for a double bluff, as it seems even the shoe-shine boys are expecting high inflation...

If it looks like a duck, waddles like a duck, and quacks like a duck, then it probably is a duck!

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Why are you punching the air? All you are doing with gold and silver is maintaining your purchasing power - you are not getting any richer. It's better than having the value of your cash inflated away but if a gold sovereign buys a washing machine today it will still only buy a washing machine in 10 years time, even if the price in sterling is a million pounds by then.

And by how much have house prices fallen when priced in gold, there's your house price crash B)

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(...)

Sadly, I'm starting to agree that this looks like the most sensible course of action.

Then I wonder whether i'm falling for a double bluff, as it seems even the shoe-shine boys are expecting high inflation...

Perhaps they are expecting the wrong type of inflation.

Most of the inflation we are used to is broad money based.

I expect more narrow money inflation, at least in the short / medium term.

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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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