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gruffydd

Inflation Alert

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I've seen an explosion in business over last 2-3 months (never seen anything like it!). I work across several sectors (though not with construction / property sector). Next comes inflation? Is this the wall of printed money hitting the fan?

I am on list of businesses BoE consults re: business levels, etc., but can't be bothered to tell them. Tried warning them about housing market before, and was politely ignored. Ha.

Edited by gruffydd

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I've seen an explosion in business over last 2-3 months (never seen anything like it!). I work across several sectors (though not with construction / property sector) and have never seen anything quite like it. Next comes inflation? Is this the wall of printed money hitting the fan?

I am on list of businesses BoE consults re: business levels, etc., but can't be bothered to tell them. Tried warning them about housing market before, and was politely ignored. Ha.

They didn't 'print money'. The Bank of England created electronic accounts to buy UK gilts and keep the cost of government borrowing low for the short to medium term. This has had three important effects.

1. The return on pension company investments has been lowered.

2. Money that would have been invested in UK gilts has moved into other markets in search of higher returns which has pushed up asset prices.

3. The government has been able to maintain a deficit and debt burden that would not have been possible otherwise.

This isn't Weimar Germany (yet). All that has happened is markets have been distorted to a greater extent than was happening prior to 2007 and there has been a fallout elsewhere in the economy (lower interest rates, higher house prices, lower pension yields etc). Sterling has also significantly fallen in value.

For the future?

I don't think we will see higher inflation in the traditional sense, just that the markets will continue to correct themselves by channeling investments into riskier areas and wealth is funneled into fewer hands.

The middle class has virtually become extinct with the last vestiges relying on half-decent paying public sector jobs. These jobs will continue to face the axe as whichever party is in power attempts to reign in ever spiraling public sector spending. All the while salaries more generally are eroded by the 3-4% annual rise in the cost of living.

The poor become poorer because without any real assets they are reliant on their wages which are falling in value year after year.

The BoE don't care because they cannot change anything. From the moment private banks were allowed to create money a course was set and actors such as the BoE are just playing their part. This will be the true legacy of our monetary system. Not hyper inflation but a gradual transfer of wealth.

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They didn't 'print money'. The Bank of England created electronic accounts to buy UK gilts and keep the cost of government borrowing low for the short to medium term. This has had three important effects.

1. The return on pension company investments has been lowered.

2. Money that would have been invested in UK gilts has moved into other markets in search of higher returns which has pushed up asset prices.

3. The government has been able to maintain a deficit and debt burden that would not have been possible otherwise.

This isn't Weimar Germany (yet). All that has happened is markets have been distorted to a greater extent than was happening prior to 2007 and there has been a fallout elsewhere in the economy (lower interest rates, higher house prices, lower pension yields etc). Sterling has also significantly fallen in value.

For the future?

I don't think we will see higher inflation in the traditional sense, just that the markets will continue to correct themselves by channeling investments into riskier areas and wealth is funneled into fewer hands.

The middle class has virtually become extinct with the last vestiges relying on half-decent paying public sector jobs. These jobs will continue to face the axe as whichever party is in power attempts to reign in ever spiraling public sector spending. All the while salaries more generally are eroded by the 3-4% annual rise in the cost of living.

The poor become poorer because without any real assets they are reliant on their wages which are falling in value year after year.

The BoE don't care because they cannot change anything. From the moment private banks were allowed to create money a course was set and actors such as the BoE are just playing their part. This will be the true legacy of our monetary system. Not hyper inflation but a gradual transfer of wealth.

Thanks for interesting feedback. If the currency weakens then surely you suck up inflation? Isn't there real potential for a currency crisis? Also, if additional wealth is concentrated in hands of the super-rich, then that fuels speculation, volatility... and inflation? D

Edited by gruffydd

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I agree that consumer spending is very strong - could be they're all optimistic their house prices are on the upward march again due to help 2 buy.

There has been an inflation masking element caused by the US devaluing.

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I agree that consumer spending is very strong - could be they're all optimistic their house prices are on the upward march again due to help 2 buy.

There has been an inflation masking element caused by the US devaluing.

I have little doubt that this is a housing-market-based recovery.

Edited by gruffydd

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I agree that consumer spending is very strong - could be they're all optimistic their house prices are on the upward march again due to help 2 buy.

There has been an inflation masking element caused by the US devaluing.

PPI payouts are the reason for the 'strength'

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PPI payouts are the reason for the 'strength'

I think you're right. I personally know somene who's had 3 payouts totalling several thousand pounds and that's after stupidly using one of those companies that just submit the very same forms you could have filled out yourself and then skim 25% for the privilege.

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I think you're right. I personally know somene who's had 3 payouts totalling several thousand pounds and that's after stupidly using one of those companies that just submit the very same forms you could have filled out yourself and then skim 25% for the privilege.

Its reportedly what's driving car sales upwards at the moment.

Spilling on to the high street is no surprise.

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Its reportedly what's driving car sales upwards at the moment.

Spilling on to the high street is no surprise.

Presumably PPI payouts aren't enough for a whole new car - so it just covers the deposit or makes the buyer feel rich enough to make repayments on credit?

Either way more debt, not less.

Madness.

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  • 404 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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