Saturday, March 7, 2009

What’s the worst kind of inflation?

Now we've seen what happens when a house price-cum-credit bubble bursts, what's the worst kind of inflation?

This is highly subjective of course, but I'd be interested to know your views. One day, sooner or later, we have to get away from the idea that property ownership is a route to riches, being ultimately a zero-sum game.

Posted by mark wadsworth @ 04:49 PM (1180 views)
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4 thoughts on “What’s the worst kind of inflation?

  • Mark – housing may be a zero sum game but it is a route to riches for most home owners because they accumulate wealth as house prices go up, and the government cushions the blow when they go down. Admittedly a few people who bought near the top get their fingers burnt but everyone else is laughing. Look at what’s happening now – zero interest rates, printing more money… sounds like good news for people with massive mortgages and rotten luck for everyone else.
    Personally I think they should tax property more heavily but this is political suicide so I can’t see it happening.

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  • The environment remains deflationary with salaries shrinking, unemployment rising (check what is happening in the US), corproate profits are decimated, stocks are killing pensions and investmetns and houses prices dropping cutting off equity withdrawl. Overall sentiment has altered utterly, this is now a cycle and can’t be stopped. If we pursue this to its logical conclusion we will all be unemployed and vey poor with the possibilty of regeneration.

    An attempt to fiddle with money supply to disguise the primary trend won’t full the market and won’t full the consumer. There will be a full scale run on the sterling and rampant inflation ie we will reach the same end point but with the possibilty of regeneration destroyed.

    Either way its grim.

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  • Another thought is how much property price inflation has killed productive enterprise. So much capital has to be engaged in just paying interest on the relartive debt or on rents.

    Trying to keep property prices high defeats regeneration. Its a bit like unions and uncompetitive workforce

    A devalued currency likewise, in a world of alternatives money has got to be worth something if you are going to work for it.

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  • landofconfusion says:

    @ 3. bellwether said…

    “The environment remains deflationary”

    Excluding total tat, the prices on most things have actually risen from where I’m standing. Food prices are up, petrol at the local station is up (albeit by 1p), the high-quality digital camera that I want is up, the computer parts I want are up, the bits for the garden are all up. Other than housing where exactly is this deflation?

    Oh, I see that sterling is down.

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