Inflation - a perfect storm on its way
Discussion
This isn't a "doom and gloom" prediction but I just think a perfect storm for inflation is on our way.
We already have a mismatch between inflation (4.4% last month) on the one hand and our interest rates/general economy (eg recession)on the other hand.
The effects of QE have no way fully worked through yet.
An unstable government on its way with the weakening of the pound with us as a net importer.
The Bank of England keeping interest rates too low due to recession.
Double digit inflation coming?
(I do remember when it was high in the 70's - not good)
We already have a mismatch between inflation (4.4% last month) on the one hand and our interest rates/general economy (eg recession)on the other hand.
The effects of QE have no way fully worked through yet.
An unstable government on its way with the weakening of the pound with us as a net importer.
The Bank of England keeping interest rates too low due to recession.
Double digit inflation coming?
(I do remember when it was high in the 70's - not good)
musclecarmad said:
Kees said:
What's the most efficient way to protect yourself against this inflation scenario?
inflation proofed national savings possiblyshares are quite good too
just not cash!
Linky
It seems to me that actual inflation is running a long way ahead of the official stats too.
Although it could just me being an old miser
summit7 said:
This isn't a "doom and gloom" prediction but I just think a perfect storm for inflation is on our way.
We already have a mismatch between inflation (4.4% last month) on the one hand and our interest rates/general economy (eg recession)on the other hand.
The effects of QE have no way fully worked through yet.
An unstable government on its way with the weakening of the pound with us as a net importer.
The Bank of England keeping interest rates too low due to recession.
Double digit inflation coming?
(I do remember when it was high in the 70's - not good)
Not just inflation but Stagflation !!We already have a mismatch between inflation (4.4% last month) on the one hand and our interest rates/general economy (eg recession)on the other hand.
The effects of QE have no way fully worked through yet.
An unstable government on its way with the weakening of the pound with us as a net importer.
The Bank of England keeping interest rates too low due to recession.
Double digit inflation coming?
(I do remember when it was high in the 70's - not good)
I would be tempted by gold if it had not already gone up so much.
At the moment I just don't know what to do with my savings, but i really am worried that it will get eaten up by inflation.
ds know this and what it means if they do print. It is scary that the same people that fHello. The Whiff and I are but a few months away from reaching our larger than originally planned house deposit and are wondering if we ought to revert to the original and buy now as rising rates will negate the better rates a larger deposit will bring (1st time buyers by the way). Any advice greatly welcomed please! Thanks in advance 
Am I the only person who doesn't think we'll see high inflation then?
I think that the pending massive government cuts will have a deflationary effect, I think the double dip's more likely than high inflation, especially once the drop in the value of sterling has finished working it's way through.
I think that the pending massive government cuts will have a deflationary effect, I think the double dip's more likely than high inflation, especially once the drop in the value of sterling has finished working it's way through.
The government has huge liabilities for providing pensions in the public sector. One of the early post-election "cuts" has to be public sector pensions, including removal of "index-linking".
Once the indexation is removed the government then poisitively benefits from letting inflation run at a higher level. Inflation erodes the value of the £ in your pocket and in real terms reduces the government's liability for public sector pensions.
This has the same effect as a pay cut in the public sector and will appeal to the government as it's "easier to get away with".
As someone mentioned above, to escape inflation you need to own stuff which inflates. Typically stuff which attaches to "here and now reality" such as houses and shares. Avoid cash which just goes backwards, especially when base rate is so low.
Example: Inflation 3% Bank interest 1%. At the end of the year you've "lost" 2% of your money (buying power) even though the figures on your bank statement have got bigger.
Once the indexation is removed the government then poisitively benefits from letting inflation run at a higher level. Inflation erodes the value of the £ in your pocket and in real terms reduces the government's liability for public sector pensions.
This has the same effect as a pay cut in the public sector and will appeal to the government as it's "easier to get away with".
As someone mentioned above, to escape inflation you need to own stuff which inflates. Typically stuff which attaches to "here and now reality" such as houses and shares. Avoid cash which just goes backwards, especially when base rate is so low.
Example: Inflation 3% Bank interest 1%. At the end of the year you've "lost" 2% of your money (buying power) even though the figures on your bank statement have got bigger.
You're very unlikely to see double-digit inflation. In the 1970s inflation peaked around 15% and actual interest rates around 19%, so "real" interest of 4%.
With actual interest rates of, say, 2% where we are today it is virtually inconceivable that inflation could hit 15%. The implication would be savers losing more than 10% of their money every year!
With actual interest rates of, say, 2% where we are today it is virtually inconceivable that inflation could hit 15%. The implication would be savers losing more than 10% of their money every year!
Trommel said:
turbobloke said:
Presumably if they're debtors they're also 'losing' debt.
Borrowing costs a lot more than saving makes at the moment.Ozzie Osmond said:
turbobloke said:
Presumably if they're debtors they're also 'losing' debt.
Which makes people with a low tracker mortgage feel particularly pleased with themselves right now. The real value of the mortgage debt is being eroded much faster than the 1% or so interest they are paying. Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff