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Where Has The Profit From Inflation Gone?


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lets say inflation has been, on average, 5 repent since 2007.

so lots of things cost much more now.

so companies making more.

you would expect some decent wages i inflation .

from my experience peoples wage have no t gone up much, if any, since then.

i personally earn less now.

where has the inflation money gone if not to fund wages increases?

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lets say inflation has been, on average, 5 repent since 2007.

so lots of things cost much more now.

so companies making more.

you would expect some decent wages i inflation .

from my experience peoples wage have no t gone up much, if any, since then.

i personally earn less now.

where has the inflation money gone if not to fund wages increases?

tax

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lets say inflation has been, on average, 5 repent since 2007.

so lots of things cost much more now.

so companies making more.

you would expect some decent wages i inflation .

from my experience peoples wage have no t gone up much, if any, since then.

i personally earn less now.

where has the inflation money gone if not to fund wages increases?

Price up, volume down, total profit = less. Much capacities have been destroyed since 2007 and in a health market, equipment and property prices fall and new entrant comes in and rebuild capacities - this has happen only in a small scale due to the clever guys at BoE.

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tax

No, try again.

The UK tax take (expressed as a proportion of GDP) has remained fairly constant since the 70s (right now it's around the same level as 1975).

While it's true that normal PAYE employees are probably paying more tax, that's simply because some other people are paying less tax, and the amount required is not changing much.

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where has the inflation money gone if not to fund wages increases?

It has gone to the people close to the top of the 'money pyramid' - banks and financial institutions. They can use their privileged access to the pool of freshly printed money to buy assets before the price rises to fully reflect the impact of the money printing. This of course raises prices for the rest of us who can't access unlimited amounts of money at near zero interest to punt on the market for an almost certain profit but then that's a major reason for the inflation policy in the first place - to transfer wealth/debt.

The government has also benefited - rather than have to cut back public spending or face punitive interest rates to borrow the deficit between spending and tax incomes, they have had it printed instead and laundered through the financial system via QE. This has another beneficial effect for them of keeping general interest rates low and thus an over-indebted electorate happy.

And of course, the wealthy establishment whose wealth is invested in assets sees those asset prices maintained. Particularly important if they have leveraged against those assets to buy more assets. Again, pushing the price of assets up for those of us who have to actually earn a fixed salary rather than leverage up ad-infinitum.

Really - for those in positions of power there is EVERY reason to push inflation and no reason to allow deflation (which is what would 'naturally' happen after the bursting of the credit bubble) to happen. This is why we were never going to see real deflation and are most likely to end up with hyperinflation and monetary collapse somewhere directly down the line.

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Assets.

Inflation makes the rich richer.

They are the most leveraged by far using their collateral. Ultra loose money devalues their debts and floats their assets at the same time.

Meanwhile incomes and cash savings are crimped.

The biggest lie the Bank tells us is that it is trying to help 'poor borrowers'.

Assets - to a degree.

My shares may have gone up in nominal terms but if I want to sell in order to pay the gas bill, I won't be that much richer.

So it's not so much the fat cats getting richer - it's the Schrodinger's Fat Cats; the massively leveraged who are simultaneously rich and broke.

The overstretched homeowners are in clover (for now). People like me - assets but no debt - are treading water. The poor risk averse sods who hold cash rather than equity assets are being eaten alive.

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No, try again.

The UK tax take (expressed as a proportion of GDP) has remained fairly constant since the 70s (right now it's around the same level as 1975).

While it's true that normal PAYE employees are probably paying more tax, that's simply because some other people are paying less tax, and the amount required is not changing much.

well, if gdp has risen along with inflation, and tax is in the same proportion, then I would submit, that, within the rules, the excess has gone...to the taxman.

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well, if gdp has risen along with inflation, and tax is in the same proportion, then I would submit, that, within the rules, the excess has gone...to the taxman.

Don't think I understand.

If the taxman is taking almost exactly the same share % wise, but average wage earners are getting a considerably smaller share, where did the rest of the money go?

e.g.

1970: Joe average gets £100 a year wages. If total GDP was 100 million pounds and tax accounted for 40% of that, the taxman takes 40 million.

2013: Joe average gets £600 a year wages. If total GDP was 1000 million pounds and tax accounted for 40% of that, the taxman takes 400 million.

The taxman got his cut of the inflation, but Joe average didn't.

Someone else got Joe's cut.

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Don't think I understand.

If the taxman is taking almost exactly the same share % wise, but average wage earners are getting a considerably smaller share, where did the rest of the money go?

e.g.

1970: Joe average gets £100 a year wages. If total GDP was 100 million pounds and tax accounted for 40% of that, the taxman takes 40 million.

2013: Joe average gets £600 a year wages. If total GDP was 1000 million pounds and tax accounted for 40% of that, the taxman takes 400 million.

The taxman got his cut of the inflation, but Joe average didn't.

Someone else got Joe's cut.

well, assuming everyone got a percentage increase in line with the total pie, then the higher paid also got more in actual £1 notes by default.

I think the actual answer to the question is the rich got richer....and that would be the banks...although they dont actually have the money today...they will get it next month.

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lets say inflation has been, on average, 5 repent since 2007.

so lots of things cost much more now.

so companies making more.

you would expect some decent wages i inflation .

from my experience peoples wage have no t gone up much, if any, since then.

i personally earn less now.

where has the inflation money gone if not to fund wages increases?

Wage increases are about power, not inflation. Labour has less bargaining power now to demand increases based on inflation.

For this reason I find it hard to see how the idea of inflating away debt can work- to a guy whose income is shrinking relative to his living costs his debts are growing larger relative to his dwindling disposable income.

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Wage increases are about power, not inflation. Labour has less bargaining power now to demand increases based on inflation.

For this reason I find it hard to see how the idea of inflating away debt can work- to a guy whose income is shrinking relative to his living costs his debts are growing larger relative to his dwindling disposable income.

Yep, when the "broke the unions" in the 70s they also broke the link between inflation and average wages*. This is neatly illustrated by the spleen venting that accompanies reports of public sector "cost of living" page increases, the fact that the venters don't consider this is normal, or even desirable speaks volumes. Unions were too powerful, now they aren't powerful enough, and with globalisation, they've found a neat trick to side step much of their power anyway.

* We've been using credit in various ways to bridge the gap since.

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Wage increases are about power, not inflation. Labour has less bargaining power now to demand increases based on inflation.

For this reason I find it hard to see how the idea of inflating away debt can work- to a guy whose income is shrinking relative to his living costs his debts are growing larger relative to his dwindling disposable income.

It's not about inflating away the debts of the average person (heaven forbid that Joe Schmoe gets a break) - it's about monetising government debt and making masses of cheap money available to insiders.

This results in inflation which benefits the leveraged with assets. Not so much the pleb with a mortgage although low interest rates plus price support for their overpriced house helps keep them happy to an extent.

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It's not about inflating away the debts of the average person (heaven forbid that Joe Schmoe gets a break) - it's about monetising government debt and making masses of cheap money available to insiders.

This results in inflation which benefits the leveraged with assets. Not so much the pleb with a mortgage although low interest rates plus price support for their overpriced house helps keep them happy to an extent.

thatll be the banks.

they owe more than anyone else and already cant pay...we do have a liquidity crisis...dont we?

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Since 2007 the value of the pound has dropped a reported 25%, so much of the inflation we have seen is just this loss of 'value' feeding back into prices.

The people who gain are those who can hold a large percentage of their assets outside the county - so the better off who have assets in the first place are those who can end up gaining.

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It's not about inflating away the debts of the average person (heaven forbid that Joe Schmoe gets a break) - it's about monetising government debt and making masses of cheap money available to insiders.

This results in inflation which benefits the leveraged with assets. Not so much the pleb with a mortgage although low interest rates plus price support for their overpriced house helps keep them happy to an extent.

The problem they have is that the ability of Joe Schmoe to service his debt is what keeps the whole show on the road- so inflation without wage hikes is not a good idea- eventually people will choose to feed their kids rather than pay their mortgage.

The irony of this whole thing is the fact that the entire leveraged edifice created by the 'sophisticated' investors in the city is ultimately resting on the ability of ordinary people to pay their mortgages and other debts- if they can't pay the whole rotten pile of leveraged bullshite will collapse.

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Yep, when the "broke the unions" in the 70s they also broke the link between inflation and average wages*. This is neatly illustrated by the spleen venting that accompanies reports of public sector "cost of living" page increases, the fact that the venters don't consider this is normal, or even desirable speaks volumes. Unions were too powerful, now they aren't powerful enough, and with globalisation, they've found a neat trick to side step much of their power anyway.

* We've been using credit in various ways to bridge the gap since.

But you do realise that while the few mega corporations (and the government - through taxation) rack in billions or hundred of billions, most SME are just hanging on and they don't have monopoly powers, monopoly licenses or ability to print money and those coercive pay bargain will simply put them out of business.

Public sector gets its rises because it can extract money from others through the use of violence, or failing that get its central bank to print money and then pretend to borrow from it.

If I ring up my customers and tell them they got to buy from me at certain above market prices so that I can have a living wage/inflation linking rise - they will just laugh at me and point me to a few other alternative they can access a few clicks away.

Give me the power the print money (or a monopoly to supply water at any price) and I will be happily meet non market inflation linking wage demands.

The fact is that since the iron curtain fell, many western wage levels just priced itself out of the market (I know I know...there are social implications). On the other hand, Foxconn in China now pretty much agree to the worker's demand - and in this month, allow them to unionised - it is a matter of supply and demand and the power that comes with it.

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Wage increases are about power, not inflation. Labour has less bargaining power now to demand increases based on inflation.

For this reason I find it hard to see how the idea of inflating away debt can work- to a guy whose income is shrinking relative to his living costs his debts are growing larger relative to his dwindling disposable income.

The labour market is now international. Labour has the new power to leave the UK and work elsewhere (think Poles going back home, rather than the British moving to Stuttgart, but that too).

Also, companies that have outsourced work can easily transfer it back to the UK as our wages decrease in real terms.

Both of these should act to increase nominal wages, keeping real wages the same despite inflation.

Also, I believe minimum wage is increased in line with inflation.

So there is really no reason to expect that wages can be inflated away, wages are probably less sticky than ever.

Real terms wages aren't falling because of inflation. Rather, inflation is being used to mask the real terms fall in wages

caused by our decreasing productivity (largely caused by our increasingly inefficient, indebted and structurally compromised

economy). It's quite likely that real productivity has been falling for a decade or more, but it was masked by debt-based consumption.

Inflation doesn't do anything to fix any of the structural problems with the economy, and never can. It isn't 'making us more competitive', or any of that garbage.

All it is is a short-sighted bail out for the indebted, and in particular landlords, bankers, and the state itself.

Edited by (Blizzard)
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Yes I wonder where the profit has gone..

You are correct! :blink:

It's the "un-free" market at work, where one CEO will vote on the rewards of another! Where are the shareholders in this?

Now that would be proper capitalism! :huh:

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  • 415 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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