Tuesday, November 10, 2009

Money Illusion

Ratings remarks pressure British pound, gilts

The house price bulls will get what they are asking for. And what they are asking for is a complete collapse in the purchasing power of sterling in a bid to maintain nominal house prices. They will only realise this of course ex-post when the carnage begins to consume both the feckless and the prudent (they are way too selfish to care that the prudent saver is already burning). It is their only hope that the prudent can take enough pain, and have enough savings and earnings capacity to keep their debt-driven phoney wealth levels in tact. My only consolation now, is that when the fires of inflation start consume all in the UK, the house price bulls will finally be consumed along with everyone else.

Posted by jackas @ 12:14 PM (1639 views)
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21 thoughts on “Money Illusion

  • Jackas your first sentence is a very good summary of where we are.

    This is not just about the reckless and the prudent, it is very specifically about not allowing the prudent to take advantage of the reckless, in some sort of darwinian rebalancing that needs to happen for an economy to reprice and remain healthy.

    You are right tho long term we can only keep nominal house prices high if we trash the currency in which the prices are denominated.

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  • cat and canary says:

    > rating agency warnings
    > rising unemployment
    > poor GDP data
    > IMF debt warnings

    dark coulds are gathering above our tyrannical government

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  • > rating agency warnings
    > rising unemployment
    > poor GDP data
    > IMF debt warnings

    dark coulds are gathering above our tyrannical government

    The only thing I see at the moment is economic collapse.

    Sorry, I can’t be more positive.

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  • In 1976 Britain had to go to the IMF for a loan of £2.3bn. That was a lot of money in those days.

    The BoE has created twice that amount of money out of thin air every week this year. Billion, trillion, quadrillion, schmillion.

    Can you believe Simon caused Lucie to be voted off above those evil twins John and Edward? I’m outraged.

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  • time for the prudent saver to move out of sterling to …

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  • general congreve says:

    @5 Indeed, but into what? Hmmmm….

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  • cat and canary says:

    ahahahaa,

    yeah jackass, that simon cowell well is a coward! Even gordon brown said the twins couldn’t sing, and he’s really smart cos he’s our prime minister innit. D’know, I tried gettin a mortgage the other day, innit, but the bank wouldnt gimme a loan cos they said i didnt have a good job. They’re well gonna get beatin’s. I told them “don’t go givin me evils” Anyway, im off to selfridges to nick some clinique cos my face is well gettin dry.

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  • Billion, trillion, quadrillion, schmillion

    zillion, chillion, killion, drillion……..

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  • Marillion, Bob Dillion, Brazillion, Godzillion

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  • mken @5 said “time for the prudent saver to move out of sterling..”
    Is that a bit risky now, given how much sterling has crashed already? Techieman, others, what do you think?
    If the UK is forced to raise IRs because of inflation, might the pound recover somewhat versus the Aussie, swissie, $NZ?
    PS Japanese uncle, where are you these days? I miss your comments!

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  • Is that a bit risky now, given how much sterling has crashed already? Techieman, others, what do you think?
    If the UK is forced to raise IRs because of inflation, might the pound recover somewhat versus the Aussie, swissie, $NZ?
    PS Japanese uncle, where are you these days? I miss your comments!

    This is the big question. Asking for higher interest rates is no small thing…….it’s a bloody massive thing. There are those, whose whole careers now rest on low interest rates…..lol.

    I really wish they were forced to raise interest rates……..it’s absolutely absurd, mis-treating those who have been responsible – at the benefit of those who have behaved wrecklessly……only in a nanny state.

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  • hpwatcher said “I really wish they were forced to raise interest rates….”

    If only! The one-year bonds I took out just before IRs hit the floor have all matured in the last couple of months. The one in my SIPP is now earning an utterly criminal 0.25% until I think of some rescue strategy! Some of the IRs on long term bonds aren’t too shabby but there’s not much choice within a SIPP if you don’t want exposure to the stockmarket. Watching HPI under this scenario is plain depressing.
    I’m starting to think that the only thing I have done right in the last few years was to keep my foreign earnings in foreign currencies.
    But it’s nerve-racking trying to decide when to take profits. I may have missed the boat with the swiss francs, they hit 66p during the flight-to-safety phase and are now down at 59p (and earning virtually no interest).

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  • The only thing holding interest rates down is the housing market once that implodes theres no reason to keep interest rates low they can then raise interest rates till the cows come home.

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  • stillthinking says:

    There must be a lot of people waiting to get out of sterling. For instance, I don’t think many people who intend to retire in Europe will feel like buying a British annuity.
    I feel at the moment that sterling is -just- painfully enough below fair value to stop one sided trading. If you wanted out you missed your chance. I don’t understand how an open economy dependant on imports can devalue by 20% without seeing price inflation at 25%.
    Laptops have gone up a surprising amount. Mine was 380 nearly exactly a year ago and is now 503 for an identical model.

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  • In same boat, not sure what to do with savings. Just watching it slowly disappear. Moving abroad eventually but currency is down about 20% where i want to move to! Do I take a hit now and move cash, or do i wait longer……

    I also have a feeling we’re going to go through a s*** pants phase where cash is going to be circulating around the World as banks go bust, kind of like a really depressing game of musical chairs where the winner is just the last person to lose. There is only so long they can keep this QE up!!

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  • dohousescrashinthewoods says:

    Zimbabrillion?

    “Britain’s budget position has deteriorated sharply amid a deep and long-lasting recession.” QED.

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  • Base rates at a 500 year low, personal insolvencies at an all time high…. Go figure.

    The spread on base rates and loan rates is now massive, if/when base rates go Icelandic. It doesn’t take a genius to work out how that will nail any recovery.

    Taxes could rise….But that doesn’t make a country more productive, the opposite in fact, it will hasten the off shoring process as private employers and those people with enough skills or good ideas move to anywhere that offers more returns for their labour.

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  • multiplying by 100 each time:
    billion
    trillion
    quadrillion
    quintillion
    sextillion
    septillion
    octillion
    nonillion
    decillion
    undecillion
    duodecillion
    tredecillion
    quattuordecillion
    quindecillion
    sexdecillion
    septendecillion
    octodecillion
    novemdecillion
    vigintillion
    unvigintillion
    dovigintillion
    trevigintillion
    quattuorvigintillion
    quinvigintillion
    sexvigintillion

    and so on

    whatever 🙂

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  • I don’t hold myself out as knowing anything “city” but I love this fiscal credibility euphamism. What will it all mean? Public spending cuts like you have never seen. So what? So the economy tanks a lot further given the percentage of people employed by that sector. Those who bash that sector so much won’t escape if they are ordinary employees as their jobs will be the next to go. Still, i agree, it is that or Weimar inflation to keep property from tanking to its proper level (which it probably has already if you got out in early ’07 and spent the proceeds on buying yen)

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  • “The Goddam plane has crashed into the mountain” And over there, and over there as well. Looks like sterling’s being kept of the floor by bumping into the other currencies bouncing off the ropes. If we stop buying then someone’s stopped selling, not good for jobs anywhere.

    If you’re cash rich, and can pick up bargains via cheap sterling then why not. Non-UK based investors can buy up land/property/assets at both reduced sterling prices as well as on the FX gain. So there are some Good times.

    House prices will stay high not ‘nominally’ but precisely because sterling is low. Like the laptop, everything will go upwards, except wages and interest on savings..

    Should that lead to a crash as more can’t afford the higher prices. Possibly, measured by what’s happened in the past maybe. But this time I feel it’s going to be take the pain and take it some more. I doubt there’ll be a house price crash to bring prices back down to ‘affordability’ ratios. It’ll be downsizing and house sharing if you can’t afford the higher prices – and that’s going to be a hell of a lot of us.

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  • 100? * cough * 1000 even!

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