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The Real Target Is Deflation

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Been on this site what nearly fourteen and a half years. STR in 2005, paid the price now. Funds up the wall and a lifetime renter. Too old to get a mortgage, too old to get a well paid job. So having gone from a home owner, well nearly, to a renter on pretty poor pay. I hold my hands up, i was wrong, well my timing was wrong. But my general consensus has changed, i actually think always follow the opposite, if they are saying "we want inflation", what they really mean is "we want to deflate".

By delfate i mean sucking money out of the system, the system is your pocket, your bank account, you spending shillings. Oh yes a symton of this is low to negative interest rates, sucking money out of the system; so attracting more specuation in assets due to debt expansion; and a much higher debt load, yes. So we have seasonal record high house prices, stock markets going north due to cheap credit, this is only expected due to the cheap credit. But we are really getting poorer, as money in our pocket, our wage, our savings, our freedom to buy through work oppurtunity without being debt enslaved is slowly and surely diminishing.

Cash attracts hardly any yield i know, and is losing its spending power relative to goods and services. But, we work for cash, and the deflation we are experiencing, is the deflation in the yield on cash, our wage. I think this was always the central target, as low interest rates, and QE to a certain extent (QE by lowering long term interest rates on Gilts) is impoverishing us all.

If you had twenty years left on this planet, then you die, no questions you die; would you rather a four hundred thousand pounds house which you were no allowed to sell before you die. Or four hundred thousand pounds to spend on whatever you want but it cannot be on a house. A house for me no way. The cash all the way. Me i just think what is slowly becoming visible, is record asset values, zero yields, and cash draining away from the worker, the saver, so in twenty years time, we all will be so much poorer in terms of what we earn, to what we can spend from what we earn. So permanently enslaved through either debt or go begging to the benefits office?

I know, maybe crackpot, but me thinks the target is and has always been DEFLATION. Its just gonna be a long drawn out couple of ten year periods, similar to Japan.

A great blog...A must read..

http://www.kyklosproductions.com/posts/index.php?p=263

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Been on this site what nearly fourteen and a half years. STR in 2005, paid the price now. Funds up the wall and a lifetime renter. Too old to get a mortgage, too old to get a well paid job. So having gone from a home owner, well nearly, to a renter on pretty poor pay. I hold my hands up, i was wrong, well my timing was wrong. But my general consensus has changed, i actually think always follow the opposite, if they are saying "we want inflation", what they really mean is "we want to deflate".

Have you still got your health ?

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So permanently enslaved through either debt or go begging to the benefits office?

...

I know, maybe crackpot, but me thinks the target is and has always been DEFLATION. Its just gonna be a long drawn out couple of ten year periods, similar to Japan.

The target seems to have become "maximum debt (that can be hopefully be repaid)". Whether this is the politicians idea to maximise short term GDP, ensure the next generation pays for the current generation, or bankers wanting to optimise profits, I don't know (maybe all?).

The 'effective marginal rates' of the current tax system seems to encourage high earnings or no earnings, the middle way is disappearing.

I STR'd in 2003 and joined HPC then (different username). By 2010, I realised this was going to take a longer time that I had available so I bought in the 2010 dip from a desperate seller, at 14% below my 2003 selling price. At least I had 7 years of effectively being free of housing costs whilst savings income paid the rent.

You may have got yourself in position where you need to optimise your claims on the benefit system. Can you use pension contributions to lower your salary as far as possible, claim as many benefits as you can (new lower salary) then get the money back at 55+?

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The target has NEVER been deflation and never will be.

The Bankers and Govts NEED inflation or else it's game over.

That Deflation is more powerful than them is all we need to know. Inevitable fallout of debt bubble as well as technology and globalisation.

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Been on this site what nearly fourteen and a half years. STR in 2005, paid the price now. Funds up the wall and a lifetime renter. Too old to get a mortgage, too old to get a well paid job. So having gone from a home owner, well nearly, to a renter on pretty poor pay. I hold my hands up, i was wrong, well my timing was wrong. But my general consensus has changed, i actually think always follow the opposite, if they are saying "we want inflation", what they really mean is "we want to deflate".

By delfate i mean sucking money out of the system, the system is your pocket, your bank account, you spending shillings. Oh yes a symton of this is low to negative interest rates, sucking money out of the system; so attracting more specuation in assets due to debt expansion; and a much higher debt load, yes. So we have seasonal record high house prices, stock markets going north due to cheap credit, this is only expected due to the cheap credit. But we are really getting poorer, as money in our pocket, our wage, our savings, our freedom to buy through work oppurtunity without being debt enslaved is slowly and surely diminishing.

Cash attracts hardly any yield i know, and is losing its spending power relative to goods and services. But, we work for cash, and the deflation we are experiencing, is the deflation in the yield on cash, our wage. I think this was always the central target, as low interest rates, and QE to a certain extent (QE by lowering long term interest rates on Gilts) is impoverishing us all.

If you had twenty years left on this planet, then you die, no questions you die; would you rather a four hundred thousand pounds house which you were no allowed to sell before you die. Or four hundred thousand pounds to spend on whatever you want but it cannot be on a house. A house for me no way. The cash all the way. Me i just think what is slowly becoming visible, is record asset values, zero yields, and cash draining away from the worker, the saver, so in twenty years time, we all will be so much poorer in terms of what we earn, to what we can spend from what we earn. So permanently enslaved through either debt or go begging to the benefits office?

I know, maybe crackpot, but me thinks the target is and has always been DEFLATION. Its just gonna be a long drawn out couple of ten year periods, similar to Japan.

A great blog...A must read..

http://www.kyklosproductions.com/posts/index.php?p=263

I don't believe that assets have had it all their own way. I see houses and the FTSE 100 pretty much where they were in 2007. So actually cash has retained its value well, and yield hasn't always been as poor as the last three years or so.

You left the country I believe, so that is obviously a way to run down your savings and coming back is always going to be a struggle.

The last 11 years for me has been property that has gone absolutely nowhere and been more of a liability than simple renting. ie. my drawings have tended to be lower when renting than owning mortgage free, I have had three years of STR during that time so I can make a fair judgement.

I really wish I had just stuck to cash, it now dwarfs my unmortgaged property equity on my balance sheet.

Renting has won hands down for those living in the North.

Edited by crashmonitor

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Sometimes I think I live on a different planet to everyone else.

Halifax index Q3 2007......646.5..........Q4 2014....606.4.

I guess everybody else's house is in some special area that has bucked the trend. Certainly if you have bought one you like to think it is special.

Well nothing special has happened where I live.

Meanwhile FTSE 100 peaked at 6730 in June 2007 and 6930 in December 1999.

Edited by crashmonitor

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The main political objective is globalisation (by implication that also involves the ever larger eu block being successful/not failing) and control. Bankers profits ties into that that with massive and ever increasing debt. The timing for the debt and the push for globalisation was centred around year 2000 and since year 2000 when western debt went into overdrive along with house price increases, used to compensate for weak wages, necessary to enable equity withdrawal to fund purchases from the developing countries to help developing countries to expand in the pursuit of globalisation.

That's been reasonably successful for them to date and it seems that inflation is the preferred alternative between inflation and deflation. For sure they don't like general official deflation (they're not bothered about deflation in peoples' wages, living standards or their savings etc etc etc etc come official inflation or official deflation - for sure they don't mind that sort of deflation) because it risks their own financial well being and as is evident from just the small period of recent deflation under the current system it does lead to extra volatility and break ups of all sorts of things - that's because deflation is not in their narrow interest and partly because they are so inept, self serving and delusional they've never spent time properly working out how best to deal with it for all concerned.

Edited by billybong

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You have my sympathies, I STR'd in 2005 then bought back in again about five years later.

I can't avoid the fact that my decision was wrong (I'd expected a slump in house prices, triggering BTL landlords to head for the exit, which in turn would have fed into a greater price decline than during 1989/95), but it wasn't calamitous. In particular it drove me to make equity investments at the bottom of the market, and it caused me to re-think my housing needs and buy a much smaller property than I would have otherwise bought, both positive outcomes.

Furthermore, I doubt buying now (either as an occupier or as a BTL investment) will prove a good investment over the long haul. I'm not expecting any imminent material price falls, but I very much doubt there'll be much in the way of capital gains either. Personally I think renting currently makes an awful lot of sense, but if you really really want to be an owner occupier then it's better to regard it as akin to a money pit like owning a boat, in other words it's a self indulgence with a cost attached rather than an investment.

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You have my sympathies, I STR'd in 2005 then bought back in again about five years later.

I can't avoid the fact that my decision was wrong (I'd expected a slump in house prices, triggering BTL landlords to head for the exit, which in turn would have fed into a greater price decline than during 1989/95), but it wasn't calamitous. In particular it drove me to make equity investments at the bottom of the market, and it caused me to re-think my housing needs and buy a much smaller property than I would have otherwise bought, both positive outcomes.

Furthermore, I doubt buying now (either as an occupier or as a BTL investment) will prove a good investment over the long haul. I'm not expecting any imminent material price falls, but I very much doubt there'll be much in the way of capital gains either. Personally I think renting currently makes an awful lot of sense, but if you really really want to be an owner occupier then it's better to regard it as akin to a money pit like owning a boat, in other words it's a self indulgence with a cost attached rather than an investment.

You must have been living in or around London 2005-2010 STR not to work. Would have worked spectacularly well in 85% of the country. Almost dream timing.

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The point about the yields you can command on the money you earn is well made.

It is certainly a by-product of what they have done if not a deliberate intent.

By pushing yields to the floor you cannot save up enough to live off - you cannot break free from the 'system'.

It's a bit psychological.

Getting 2% on 0.5% deflation (I'm expecting come the spring) and drawing down a bit of capital is still better than getting 5% on 5% CPI but keeping nominal savings the same because the 5% covers drawings.

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The point about the yields you can command on the money you earn is well made.

It is certainly a by-product of what they have done if not a deliberate intent.

By pushing yields to the floor you cannot save up enough to live off - you cannot break free from the 'system'.

Yes they are raising the draw bridge. Where once a million would give you enough yield to live on you now need two. If you are on the wrong side of the draw bridge you have little hope of getting a rich rentier life style.

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Yes they are raising the draw bridge. Where once a million would give you enough yield to live on you now need two. If you are on the wrong side of the draw bridge you have little hope of getting a rich rentier life style.

I once read a book that said you needed 20 million to be rich and that was based on a 5% yield.

That was based on the fact that the first million gave you the £50,000 per year to live off, and the rest was to protect the vale of your capital and keep it growing at about 5% a year.

Talk about cake and eating it.

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The target seems to have become "maximum debt (that can be hopefully be repaid)". Whether this is the politicians idea to maximise short term GDP, ensure the next generation pays for the current generation, or bankers wanting to optimise profits, I don't know (maybe all?).

The 'effective marginal rates' of the current tax system seems to encourage high earnings or no earnings, the middle way is disappearing.

I STR'd in 2003 and joined HPC then (different username). By 2010, I realised this was going to take a longer time that I had available so I bought in the 2010 dip from a desperate seller, at 14% below my 2003 selling price. At least I had 7 years of effectively being free of housing costs whilst savings income paid the rent.

You may have got yourself in position where you need to optimise your claims on the benefit system. Can you use pension contributions to lower your salary as far as possible, claim as many benefits as you can (new lower salary) then get the money back at 55+?

''next generation pays for the current generation,''

No... they are not intersted in the real people.. The only generation of import is the mega rich and their line of decent. Anything else is coincidence and luck/bad-luck.

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You must have been living in or around London 2005-2010 STR not to work. Would have worked spectacularly well in 85% of the country. Almost dream timing.

Yes, I was. Plus there were some sleepless nights after the Northern Rock bank run as I had unprotected bank deposits, but as I said, that was one of the triggers that pushed me more into equities at an advantageous moment, so it wasn't calamitous, but it was a mistake. When it comes to money it's important not to re-write history to paint your decisions in a more favourable light, if you do then you'll never learn.

To make STRing work, like any shorting decision really, you need a big price fall. There's the obvious factor of transaction costs, but there's also the more subtle issue that I saw first hand during the 1989/95 crash, namely that the really choice properties that we all want (the south facing garden, the genuinely exceptional location, the absence of ill-considered extensions, etc) are rarer than hen's teeth when the market falls, so you also need to be prepared to endure a long search.

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The point about the yields you can command on the money you earn is well made.

It is certainly a by-product of what they have done if not a deliberate intent.

By pushing yields to the floor you cannot save up enough to live off - you cannot break free from the 'system'.

It's a bit psychological.

Getting 2% on 0.5% deflation (I'm expecting come the spring) and drawing down a bit of capital is still better than getting 5% on 5% CPI but keeping nominal savings the same because the 5% covers drawings.

Agreed crashmonitor. What people can do, in my view, is save up, what may appear to be a slow grind because of yields to the floor, against a coming correction over-valued assets, and too many views like Silver Surfers where he can't see values (or at least house prices) falling in mostly good areas. To then allow you to break free from the system, at the expense of others who took a different market view.

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Most of us were expecting a HPC in 2005 and for most of the world it did happen in 2007/8. The STR losers are the residents of the South East of England - the crash didn't really happen there. The combination of lowest ever interest rates, funding for lending, help-to-buy 1 and 2, open door immigration, QE, a tripling of the nation debt, oligarchs and forbearance managed to avert it.

Or has it just been postponed?

The age issue is interesting. If you could borrow £200K at say age 40 on a 25yr mortgage (paid off age 65) should you take the deal even if you expect prices to fall on the grounds that if you wait 10 years you'll be too old for a mortgage?

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The age issue is interesting. If you could borrow £200K at say age 40 on a 25yr mortgage (paid off age 65) should you take the deal even if you expect prices to fall on the grounds that if you wait 10 years you'll be too old for a mortgage?

I'd never really thought of that aspect of it.

If you rented for those 25 years, at an attractive discount, and religiously invested the saving you were making versus paying a mortgage in a tax efficient wrapper, is there any possibility that you'd have enough to buy outright once you retired.

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I'd never really thought of that aspect of it.

If you rented for those 25 years, at an attractive discount, and religiously invested the saving you were making versus paying a mortgage in a tax efficient wrapper, is there any possibility that you'd have enough to buy outright once you retired.

Again, depends on age group and when you started. At the moment if starting now you are buying high into totally manipulated market with crap yields.

You might not even get the money back you put in.

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