Thursday, May 19, 2011

Article suggests long term inflation

Inflation: Why There’s No Escaping it This Time

Not so sure I agree but I thought a good article because suggests that there may be no flight to cash i.e. everything is overvalued, the government won't allow writedowns, the money supply will not adjust, but that does not mean necessarily that investors first out leave the indebted behind and look to treasuries of some government variety. They might just run for it. Literally years ago I posted some article about a central banks response to credit deflation, which was basically credibly promise to allow inflation to run riot, even though they won't, which was the fix. Of course, if they truly succeed then they could get in the position that they could not realistically tighten sufficiently later i.e. blow the whole thing up.

Posted by stillthinking @ 07:26 PM (1326 views)
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2 thoughts on “Article suggests long term inflation

  • Major Des Aster says:

    Inflation via low interest rates or Deflation and High Interest rates, which do you prefer HPC’s?

    This following scenario is how I see the situation we are in at this moment in time:

    Say you have a house which at todays prices is “actually” worth £140,000 ie rentable value of £700pcm. Currently you could swap this house for 2 Range Rovers. If interest rates stay low and inflation persists, which it will, that house in 5 years time will still be worth £140,000 but you will only be able to swap house for 1 Range Rover.

    If tomorrow BOE where to raise base rates to 3 or 4 % then your house would fall to £70,000 and you could still swap house for 1 Range Rover. OR if you stuck the 70K in the bank, In 5 years you would still be able to purchase 1 Range Rover.

    The Truth is house prices are going down, which ever method you choose. In 2017 you will only be able to afford one premium SUV, as opposed to two right know.

    I prefer a high base rates of 4%. (The fact that 4% is considered high is laughable and is evidence of how badly the ecomomy has been run by the governments and bankers) Lets get it over with.

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    Inflation is a much needed extra taxation grab through the backdoor stupid.

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