Saturday, July 19, 2008

Deflation apparent in some sectors

Luxury market feels the pinch

Deflation was notable in some of the index’s items, including cars and watches. A Panerai Luminor Submersible watch is now almost 17 per cent cheaper than last year at £4,500, and an Aston Martin DBS is down 15 per cent from £188,000 to £160,000.

Posted by gardeniadotnet @ 09:05 AM (1487 views)
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27 thoughts on “Deflation apparent in some sectors

  • The membership of the public service unions don’t buy many Aston Martins!

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  • Surely the reduction in prices is not because the wealthy are feeling the pinch, since they are still buying those expensive handbags and paintings. I suspect where prices have fallen is in the markets where people tend to purchase with borrowed money.

    Incidentally Omega (watches) have put their prices up recently. The Planet Ocean is still a steal at £2000 and you can generally get at least 15% off if you ask nicely.

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  • last_days_of_disco says:

    This is a bit miss-leading. By the popular definition of inflation and deflation I suppose this would be called deflation. This is really the consequences of deflation. There is less money around, so things become cheaper. The proper definition of deflation is a reduction on the amount of money (or the money supply). Because we treat credit as money (we believe in it), the credit crunch = massive reduction in the money supply.

    The thing to realize is that the economic system has dynamics. This is often hard to grasp, but basically deflation has *already happened* by the time you see prices falling deflation is working it way into the rest of the system. Many banks have already written down billions and billions of pounds. That basically is like sucking out a big chunk of money. However it takes time for that money vacuum to be filled. How the flow happens between various markets, etc is extremely complicated and I suppose that is where the traders are trying to exploit the opportunities.

    The scary thing is governments often respond to populist measures, so they see prices going down and start the money pumps and only succeed in destabilizing the situation further. Also political processes are long winded, by the time they actually act, the situation has changed completely and their actions actually could make things worse not better. The more these guys tinker the worse its going to get and the more they will howl for even more power to “fix” things (bazooka, not a squirt gun). Its the Bruce Almighty problem. There are basic laws that do have to be followed no matter who you are.

    The reality is that this deflationary depression has already got a life of its own. The sooner we understand what is going on and act to protect ourselves and our families, the better.

    1. Get rid of debt.
    2. keep some cash on hand for the rough patches
    3. Keep a reasonable store of food and water (1 month of food + a few days of drinking water)
    4. Some gold or silver just as an emergency reserve
    5. Sell your house at a discount if you have a big mortgage and rent or buy a place with a much smaller mortgage, take on any loss as a personal loan and start paying it back aggressively.
    6. Sell now, don’t wait. Be the first seller in the market to recognize reality. Take the financial bloody nose now, rather than losing your entire head.
    7. If you have a mortgage, fix the rate for as long as you can (10 years is good). Change to a lender who has the best chance of surviving and pay the premium. Make sure your monthly mortgage payments are low enough to cover with a less fancy job than you currently have.
    8. Keep some savings to handle a situation of losing your job.
    9. Have income insurance if you can afford it, but don’t rely on it, it may not be there when you need it, its risky.

    Still don’t have any physical gold or silver, working on that.

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  • last_days_of_disco says:

    Oh and one extra thing if you live in Israel/Lebanon/South Africa/Zimbabwe/Other hot spot, get the hell out of there ASAP.

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  • disco, I was going to say the same thing but couldn’t be bothered to think through how to say it.

    Deflation is a macroeconomic term, but these anecdotal stories are not. Deflation is a much more serious issue, one which we may not see at all if the UK inflates the money supply in the same way as the US.

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  • last_days_of_disco says:

    And finally, its a race to the bottom, if you lose, no one is going to have the resources to help you so you will just suffer (think Germany 1938).

    Its a dog eat dog world out there.

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  • I’ve always regarded chavs with £4500 watches, expensive mobile phones and flash cars as posers with an inferiority complex. My quartz watch is submersible to 60m, looks good and keeps great time – all for £15.

    Must be getting old!!

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  • p doff – bit blinkered isnt it?I mean isnt it up to individuals how they spend their money (not that ive got those things – but i know people that have and i wouldnt label any of them as having an inferiority complex – complacement wives maybe……). Anyway the point is discretionary spending across all sectors is hit first and hardest – thats just me repeating what i said a few days back.

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  • p.doff
    You’ll find an Omega Seamaster will be waterproof to 2000ft with a nitrogen release valve for re-surfacing so you don’t blow the face off.
    Handy if you overfill the bath !

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  • Actually I think that might be Helium not Nitrogen

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  • It’s already been said that the title of this blog article is misleading.
    Prices on lots of items always got through periods of price falls, (ipods, HDTV’s, USB memory devices). Items like the aforementioned typically make their way into the CPI basket of goods!!!

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  • last_days_of_disco

    If you are a borrower, it doesn’t really matter if your lender survives or not. If you have a 10 year fixed rate mortgage, you can’t be asked to pay more than the contract says you have to pay over those 10 years.

    If the leder goes bust, the mortgage will be sold to someone else, almost certainly at a discount to nominal value. The new lender will earn the extra interest from paying the discounted amount, and getting repayment of the nominal amount in due course.

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  • Yeah Techie, you’re probably right, It is blinkered and I’m no doubt guilty of stereotyping. It’s just that in my job I’ve learned that the people who most ostentatiously display the trappings of wealth are often those applying for the biggest mortgages. You know the type – ‘fur coat and no knickers’ – you can recognise them by their tendency to talk loudly in crowded pubs. IMHO these people ARE posers with an inferiority complex

    If I saw e.g. a genuinely wealthy, but incognito footballer in his Aston, I couldn’t care less how he spends his money – it’s just that I couldn’t help but associate him with one of the above described chavs.

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  • a friend of mine just bought a porsche from a distressed seller, he reckons it cost him 10k less than it should have been, as the seller could not sell car on autotrader, ………………….

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  • last_days_of_disco says:

    I think you will find that all mortgages have a get of jail free clause in them. That the rate can change in exigencies. And you will find one of those exigencies is going out of business. The reason banks won’t change rates is basically economic.

    1. You are paying your mortgage, so its good money
    2. Deflation has made it worth more, so they are winning, so at that point they don’t want to push you over the brink too.

    Its being so cheerful that keeps me going :-D.

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  • I gave up wearing a watch eight years ago – so many things carry the time these days, it’s not really necessary

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  • Sittingitout says:

    No matter where you are in the world . . . . . . . . . . you can akways get home with a Rolex

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  • gardenidiot – I hope you are pleased with your watch!

    nutter! get back to your effing tomataoes – dur brain.

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  • gardeniadotnet says:

    malct…

    For your information I wear a Swatch – Swiss precision without the price tag.

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  • The mechanical watch is a wonderful engineering masterpiece —– as close as you can get to friiction-free motion on planet Earth.
    It has beauty,value and usefulness and therefore is no longer required by the sheeple.

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  • gardeniadotnet says:

    >as close as you can get to friiction-free motion on planet Earth

    Except for the “Free-Energy Machine” that I’m patenting.

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  • gardeniadotnet @ 20

    I Like It ! I’ll have one..Promise (To go with my Breguet)

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  • last_days_of_disco says:

    @plato

    You have a Brequet! Really?

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  • gardeniadotnet says:

    @plato… >I Like It ! I’ll have one..

    Sorry, not for sale – but I’ll tell you how to make your own.

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  • gardeniadotnet says:

    When I’m rich I’m gonna buy a Rolex from Liverpool Market – £100 quid.

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  • gardeniadotnet says:

    >You had better keep growing those tomato-based free energy machines then

    Hey TC – that’s supposed to be OUR secret!

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  • gardenia – word to the wise – bung a video on youtube and malct will become your biggest supporter…

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