Isn't Anyone Worried About Inflation?

[Spoony]

I don't think anyone has raised this. I am scared of a STR pot earning 2.5% less tax with inflation at 5%. What will happen? Government debt eroded, house prices eroded. In fact all the bad debt eroded and we can start again. But with STR pots worth less. Savers were mugs, BTLers and spending spree credit fuelled consumer have their debts wiped out? Am I right?

[Injin]

I don't think anyone has raised this. I am scared of a STR pot earning 2.5% less tax with inflation at 5%. What will happen? Government debt eroded, house prices eroded. In fact all the bad debt eroded and we can start again. But with STR pots worth less. Savers were mugs, BTLers and spending spree credit fuelled consumer have their debts wiped out? Am I right?

As long as -

1) Your bank survives

2) House prices fall faster than inflation eats your savings

3) Some lunatic total collapse doesn't happen

It's not all that bad for you.

[1929crash]

No, I am not in the least bit worried about inflation. I am very worried however about deflation and mass unemployment.

[cartimandua51]

I don't think anyone has raised this. I am scared of a STR pot earning 2.5% less tax with inflation at 5%. What will happen? Government debt eroded, house prices eroded. In fact all the bad debt eroded and we can start again. But with STR pots worth less. Savers were mugs, BTLers and spending spree credit fuelled consumer have their debts wiped out? Am I right?

Real interest rates were negative through most of the 1970s & 80s. "Gear up and pray for inflation" was the mantra. The rich got richer & the poor got poorer - 'twas ever thus.

[eek]

No, I am not in the least bit worried about inflation. I am very worried however about deflation and mass unemployment.

Got to agree (oops no outing) here. Inflation or stagflation aren't an issue at the moment. Any solution that avoids deflation and depression is going to be an acceptable result.

[Pindar]

I'm inclined towards deflation more than inflation. Martin Weiss has been predicting this for some time now and recommends US citizens buy US treasury bonds as a safe haven for their cash. He repeatedly uses the "cash is king" mantra.

[Redcellar]

I don't think anyone has raised this. I am scared of a STR pot earning 2.5% less tax with inflation at 5%. What will happen? Government debt eroded, house prices eroded. In fact all the bad debt eroded and we can start again. But with STR pots worth less. Savers were mugs, BTLers and spending spree credit fuelled consumer have their debts wiped out? Am I right?

Effectively already happening. As inflation nears the interest rates on offer we lose. Don't forget you get taxed on savings (usually) so you are already out of pocket. We are all losing, just perhaps not losing as much as the next guy so you are in fact richer. Pretty cool really.

The tax increases and increased bank charges are what could be the killer. And they have to happen with the planned bailouts no matter what the government have said so far.

[STRLondon]

£250 billion wiped off the FTSE 100 this week. The richest people in the country are loosing all their cash eg. Mital down to £10B from £31B.

£250B is enough to buy say 2 million average priced homes. Jobs will be lost and pay rises will reduce,

this is very defaltionary.

[silver surfer]

I don't think anyone has raised this. I am scared of a STR pot earning 2.5% less tax with inflation at 5%. What will happen? Government debt eroded, house prices eroded. In fact all the bad debt eroded and we can start again. But with STR pots worth less. Savers were mugs, BTLers and spending spree credit fuelled consumer have their debts wiped out? Am I right?

All depends on your time frames. For the next three months inflation will take a bite out of your STR pot. It won't kill you so get over it. For the next three years inflation will be trivial and not worth a second thought. For the next thirty years? Nobody knows, but being in cash for thirty years sounds like a severe emotional problem to me.

[Noginthenog]

No, I am not in the least bit worried about inflation. I am very worried however about deflation and mass unemployment.

That is what the markets are pointing towards, scary hyper reverse leverage. DOW currently down 5.1%

[mightytharg]

No, I am not in the least bit worried about inflation. I am very worried however about deflation and mass unemployment.

Why? We would all (except for the profligate debtors out there) get richer just by doing nothing. Our gains would be tax-free.

Side benefit would be a slowing down of the damage we are doing to the environment.

What's not to like?

[Its time to buy]

They have full control of the currency. If there is hyperinflation, it is out of control

They want high inflation, to get us scared into buying to assets again. But how much inflation will it get us to be scared enough? 5%, 10% 20% ? 100% ? Then you let the hyperinflation monster out of the bag.

Dangerous.

Edited October 10, 2008 by notanewmember

[DebitCrunch]

Effectively already happening. As inflation nears the interest rates on offer we lose. Don't forget you get taxed on savings (usually) so you are already out of pocket. We are all losing, just perhaps not losing as much as the next guy so you are in fact richer. Pretty cool really.

The tax increases and increased bank charges are what could be the killer. And they have to happen with the planned bailouts no matter what the government have said so far.

Yes so people take saving abroad and that pulls down the value of the currency.

maybe it's time to look else where than $,£,Euro's to save you money being eroded by low savings rates and high inflation and with Gold/Silver going down it looks like a sure bet.

[pele]

I don't think anyone has raised this. I am scared of a STR pot earning 2.5% less tax with inflation at 5%. What will happen? Government debt eroded, house prices eroded. In fact all the bad debt eroded and we can start again. But with STR pots worth less. Savers were mugs, BTLers and spending spree credit fuelled consumer have their debts wiped out? Am I right?

I have been worried about this for some time saving rates could go as low as 0 % (happened in Japan)

This is where (IMHO) the £ 2 Trillion in cash sitting on the sidlines will return to the market as dividends will offer a real return on cash

Winter Sale Now On

[Gormless Clown]

I don't think anyone has raised this. I am scared of a STR pot earning 2.5% less tax with inflation at 5%. What will happen? Government debt eroded, house prices eroded. In fact all the bad debt eroded and we can start again. But with STR pots worth less. Savers were mugs, BTLers and spending spree credit fuelled consumer have their debts wiped out? Am I right?

Yeah, this terrifies me. My savings are not STR fund but just hard saving. I thought the BoE were supposed to be independent and only target inflation etc…

Another Labour lie ! :angry:

We could do with someone in the media pointing this out and sticking up for savers in all this mess. We hear plenty about why we should help people who have borrowed more than they should but nothing about the prudent people.

[Parkwell]

MY ASS IS BLEEDING, AND THEY KEEP PRINTING MORE MONEY TO MOP UP THE BLOOD.

STOP ******ING ME IN THE ASS!

[Gormless Clown]

MY ASS IS BLEEDING, AND THEY KEEP PRINTING MORE MONEY TO MOP UP THE BLOOD.

STOP ******ING ME IN THE ASS!

[0q0]

The cutting of IRs usually makes no difference when they are pretty low to start with (anything below 6% is low in my book).

So Vince Cable and all the others including Danny Boy who want IR cuts look brown trousered because it's not as simple as that. Anyway, they'll just ask for more cuts, these types always think yelling "more steam! more steam!" will do the trick.

Cutting IRs was very, very foolish indeed. (Both academically and as a signal to the markets.)

Having "crisis/emergency" meetings sends very much the wrong signal.

Bush standing up for the 19th time and pretty much saying "Calm down dears" sends very much the wrong signal.

Putting out a general idea that you can get into debt and then wish it away either with an IVA or the govt will let you stay in a house you fraudulently purchased, sends very much the wrong signal.

Destroying savers' returns so that you can make a political gesture to the reckless and pretend you can stave off a recession, sends very much the wrong signal.

In normal circumstances, the belief is that IR cuts stimulate interest in investing in the stock markets, for higher than saver-interest returns. But we're not anywhere near normal circumstances.

Banks need to recapitalise (lovely word for get some money in to stop the failing) and the best way they can do that now and help the whole economy is to give savers a decent return on their cash - those savers will then have the money to pay their bills and plough some into the wider economy and spend.

If you cut IRs, you take the money away from savers almost always, they have less to spend, and those with debts may or may not service their debts, but if they do contribute to the wider economy then it's at the peril of the debts they still owe. A child of 5 can see which is the better bet - reward savers.

Cut IRs to stave off recession? What a load of bull. It's a political gesture and one that will do no good. It relies heavily on the ignorant and chavs responding "Ah well, Gord bless us, he did try to stop a bleedin' recession-whatjamacallit, no I ain't got three quid to buy a loaf but I'm gonna vote for that nice man Brown as he's tried his best he has, and so's his chancellor, that gent called Cable, yes they're both gents I tells ya, gets my vote."

It's not going to work, Gordon.

[Gormless Clown]

The cutting of IRs usually makes no difference when they are pretty low to start with (anything below 6% is low in my book).

So Vince Cable and all the others including Danny Boy who want IR cuts look brown trousered because it's not as simple as that. Anyway, they'll just ask for more cuts, these types always think yelling "more steam! more steam!" will do the trick.

Cutting IRs was very, very foolish indeed. (Both academically and as a signal to the markets.)

Having "crisis/emergency" meetings sends very much the wrong signal.

Bush standing up for the 19th time and pretty much saying "Calm down dears" sends very much the wrong signal.

Putting out a general idea that you can get into debt and then wish it away either with an IVA or the govt will let you stay in a house you fraudulently purchased, sends very much the wrong signal.

Destroying savers' returns so that you can make a political gesture to the reckless and pretend you can stave off a recession, sends very much the wrong signal.

In normal circumstances, the belief is that IR cuts stimulate interest in investing in the stock markets, for higher than saver-interest returns. But we're not anywhere near normal circumstances.

Banks need to recapitalise (lovely word for get some money in to stop the failing) and the best way they can do that now and help the whole economy is to give savers a decent return on their cash - those savers will then have the money to pay their bills and plough some into the wider economy and spend.

If you cut IRs, you take the money away from savers almost always, they have less to spend, and those with debts may or may not service their debts, but if they do contribute to the wider economy then it's at the peril of the debts they still owe. A child of 5 can see which is the better bet - reward savers.

Cut IRs to stave off recession? What a load of bull. It's a political gesture and one that will do no good. It relies heavily on the ignorant and chavs responding "Ah well, Gord bless us, he did try to stop a bleedin' recession-whatjamacallit, no I ain't got three quid to buy a loaf but I'm gonna vote for that nice man Brown as he's tried his best he has, and so's his chancellor, that gent called Cable, yes they're both gents I tells ya, gets my vote."

It's not going to work, Gordon.

An excellent post !

Unfortunately in Gordon’s effort to please the stupid he has now made the situation worse. To compound things further he cannot put rates back up as he will be seen by the stupid masses to be causing more problems.

It really was a very stupid short term gesture. What an idiot.

[0q0]

An excellent post !

Unfortunately in Gordon’s effort to please the stupid he has now made the situation worse. To compound things further he cannot put rates back up as he will be seen by the stupid masses to be causing more problems.

It really was a very stupid short term gesture. What an idiot.

Thank you, kind sir. I have to do a good one every now and then just to take everyone by utter surprise.

Not that everyone will agree with you or me, but if they check their history and textbooks they'll see where we're coming from all too easily. Oh yeah sorry, ahem: it's different this time! And we are uniquely well placed to weather this storm, sound fundamentals, sound economy, low unemployment, record growth...

[moneyfornothing]

excellent post last bear ..!! have always wondered why people (read gb) shy away from what is plainly the obvious solution and the right solution .. but you can be sure that there wll never be rising interest rates even if the sky were to fall down becuase in his grand delusion GB thinks that high interest rates are the only symptom of a bust !!

[Gormless Clown]

Thank you, kind sir. I have to do a good one every now and then just to take everyone by utter surprise.

Yeah same here, but I have yet to produce a good one !

I think I would go as far as saying that low interest rates are a sign of a weak economy not a good one as Gordon wants us to believe.

I could never understand why that seemed to be something to brag about, “we have the lowest interest rates for (however many years he claimed)”.

I would have thought the higher the better so he had some wriggle room but what do I know Gordon is much better at all this than me or you.

[Killer Bunny]

I don't think anyone has raised this. I am scared of a STR pot earning 2.5% less tax with inflation at 5%. What will happen? Am I right?

After this deflation of asset prices ends - stocks first by next year - there will be serious negative rates. Of course there will be inflation. Its to get rid of debt.

[quinnbear]

I am sure I read that chap in the Times money section last Saturday (the bloke who looks a bit like Vinny Jones). He said that raising the ceiling on savings to £50K covers 98% of savers in the UK.

Since we are pretty rubbish as a nation at saving it is unsurprising that the government is prepared to let inflation get a bit wild. After all, if you look at the voting public as a whole, how many people have got savings?

In fact, think of all the people you know - how many of them have got any savings?

Inflation is scary because it is tricky to see how it does the damage. If I put my £100 pounds in the bank, then in 3 years time (assuming the bank still functions) I still have £100, well maybe with a bit of interest. The difference is only clear when you compare what £100 would have bought you in 2008 and what it would buy you in 2011. How many can do that?

I recall an item on Ch4 news about the hyperinflation in Zimbabwe. They interviewed someone who said something along the line of the price they paid for their house 10 years ago would now buy a single banana. Now THAT'S inflation. I'm sure even Brown wouldn't let it get that bad!

QB

[0q0]

excellent post last bear ..!! have always wondered why people (read gb) shy away from what is plainly the obvious solution and the right solution .. but you can be sure that there wll never be rising interest rates even if the sky were to fall down becuase in his grand delusion GB thinks that high interest rates are the only symptom of a bust !!

Thanks, and yep.

I'm off out for a tipple, I shall raise a glass later to your and GC's good health, and then stagger in at about 2am, having fought off amorous blondes (or brunettes, or redheads, I don't really mind) as per usual, somehow having got away from their filthy intentions, which would result only in my mind being taken off important once in a century economic matters, just for a little carnal fun that let's face it I can get anytime by just clicking my fingers.