Inflation positives and negative

[Gooose]

Can the more financial savvy of you explain the positives and negatives of inflation and how you can position yourself to make the best of high and low periods of it.

I’ve just read a little bbc news story on it and it was generally negative. Just trying to get a better understanding of it really?

[stongle]

It erodes debt servicing cost.

If your mortgage was 500quid a month 20 years ago, in real terms that a lot less now. Assuming your earnings went up. Inflation doesn't exist in isolation, it comes with growth. Well ideally. If it doesn't, then you are fked.

[thekingisdead]

Good - it erodes debt (one of the reasons governments target low inflation

Bad - it devalues your salary / savings
(Money only has value when exchanged for goods or services - cost of goods goes up = your money has less value)

[bitchstewie]

It's why your savings in the bank earning sod all are losing value in real terms because the stuff you might spend them on is going up at 2.5% a year or whatever inflation is.

The thing you can buy today for £100 might be £102.50 next year but the £100 you've put in the bank to buy it is still £100 in a year.

[Dr Jekyll]

thekingisdead said:

Good - it erodes debt (one of the reasons governments target low inflation

Bad - it devalues your salary / savings
(Money only has value when exchanged for goods or services - cost of goods goes up = your money has less value)

So essentially the government are raiding your savings to pay off their debt.

If inflation was uniform it wouldn't matter so much, it's the uncertainty caused by different things inflating at different and unpredictable rates that causes the issue.

[red_slr]

The issue is during normal times interest rates track inflation to some extent and now we will probably see a period of high inflation and low interest rates which means savers with cash saving will be hit hardest. Everyone else will probably do ok in general.

Mortgage rates will be low.
Stock prices will probably go up.
House prices will go up.
Wages for many will go up.
Sp goes up.

Main negative for regular joe is expensive food, clothing, cars and goods in general.

[Gooose]

Thanks for all the replies! I have a little cash in the bank and in premium bonds but I’m thinking about investing more in stocks and shares which could be a better idea if inflation starts to go up!

[Soleith]

Gooose said:

Thanks for all the replies! I have a little cash in the bank and in premium bonds but I’m thinking about investing more in stocks and shares which could be a better idea if inflation starts to go up!

In high inflation periods consider investing in commodities and miners. Cash and premium bonds will be significant losers in a high inflation period until interest rates catch up.

[markcoznottz]

Dr Jekyll said:

So essentially the government are raiding your savings to pay off their debt.

If inflation was uniform it wouldn't matter so much, it's the uncertainty caused by different things inflating at different and unpredictable rates that causes the issue.

That’s all inflation is, it’s the government moving away from its own obligations. A form of soft default if you like. Very rarely talked about nowadays, apart from ‘the 70’s’, like it’s never happened since..

[bitchstewie]

Gooose said:

Thanks for all the replies! I have a little cash in the bank and in premium bonds but I’m thinking about investing more in stocks and shares which could be a better idea if inflation starts to go up!

Forgive me if I'm patronising you but one thing to keep in mind with this is that if losing 2-3% in spending power a year due to inflation pisses you off you might not like it when stocks and shares dump 30%.

You say "investing more" so assume you already so but I always feel it's worth pointing out.

[Pit Pony]

If you are investing in shares don't buy shares in aerospace companies just before a global pandemic.

Just my tip of the day.

[alfaspecial]

Gooose said:

Can the more financial savvy of you explain the positives and negatives of inflation and how you can position yourself to make the best of high and low periods of it.

I’ve just read a little bbc news story on it and it was generally negative. Just trying to get a better understanding of it really?

I posted this a while back.
https://www.pistonheads.com/gassing/topic.asp?h=0&...




Quote:
"Question: Just what is meant by the (economic) term 'Financial Repression'?
Answer: Financial Repression is a government policy where interest rates are deliberately held below the rate of inflation - the benefit to the state is that the real cost of borrowed money becomes negative. "


I'm staggered that there hasn't been any (real) media investigation into successive Governments (of all denominations) deliberate policy of asset inflation paid for by (legal) theft......

[citizensm1th]

Op If you like a risk cornish metals may be worth a punt.

[98elise]

markcoznottz said:

Dr Jekyll said:

So essentially the government are raiding your savings to pay off their debt.

If inflation was uniform it wouldn't matter so much, it's the uncertainty caused by different things inflating at different and unpredictable rates that causes the issue.

That’s all inflation is, it’s the government moving away from its own obligations. A form of soft default if you like. Very rarely talked about nowadays, apart from ‘the 70’s’, like it’s never happened since..

Governments don't control inflation, they can only try to influence it.

[Gooose]

bhstewie said:

Gooose said:

Thanks for all the replies! I have a little cash in the bank and in premium bonds but I’m thinking about investing more in stocks and shares which could be a better idea if inflation starts to go up!

Forgive me if I'm patronising you but one thing to keep in mind with this is that if losing 2-3% in spending power a year due to inflation pisses you off you might not like it when stocks and shares dump 30%.

You say "investing more" so assume you already so but I always feel it's worth pointing out.

Not patronising at all, I’m a complete beginner in S&S so I wouldn’t ever start to pick and choose individual companies, it would be something one of the bigger players like Vanguard offer really, just looking around and researching a few things myself. Has to be better in the long run that having 50k in premium bond which I didn’t even get £25 this month

[98elise]

Gooose said:

bhstewie said:

Gooose said:

Thanks for all the replies! I have a little cash in the bank and in premium bonds but I’m thinking about investing more in stocks and shares which could be a better idea if inflation starts to go up!

Forgive me if I'm patronising you but one thing to keep in mind with this is that if losing 2-3% in spending power a year due to inflation pisses you off you might not like it when stocks and shares dump 30%.

You say "investing more" so assume you already so but I always feel it's worth pointing out.

Not patronising at all, I’m a complete beginner in S&S so I wouldn’t ever start to pick and choose individual companies, it would be something one of the bigger players like Vanguard offer really, just looking around and researching a few things myself. Has to be better in the long run that having 50k in premium bond which I didn’t even get £25 this month

I prefer to buy funds. Over the past 5 years mine have more then doubled in value.

I'm crap at individual stocks so am happy to let Fund Managers deal with it.

[MikeKite]

98elise said:

Gooose said:

bhstewie said:

Gooose said:

Thanks for all the replies! I have a little cash in the bank and in premium bonds but I’m thinking about investing more in stocks and shares which could be a better idea if inflation starts to go up!

Forgive me if I'm patronising you but one thing to keep in mind with this is that if losing 2-3% in spending power a year due to inflation pisses you off you might not like it when stocks and shares dump 30%.

You say "investing more" so assume you already so but I always feel it's worth pointing out.

Not patronising at all, I’m a complete beginner in S&S so I wouldn’t ever start to pick and choose individual companies, it would be something one of the bigger players like Vanguard offer really, just looking around and researching a few things myself. Has to be better in the long run that having 50k in premium bond which I didn’t even get £25 this month

I prefer to buy funds. Over the past 5 years mine have more then doubled in value.

I'm crap at individual stocks so am happy to let Fund Managers deal with it.

They're pretty crap too.

[98elise]

MikeKite said:

98elise said:

Gooose said:

bhstewie said:

Gooose said:

Thanks for all the replies! I have a little cash in the bank and in premium bonds but I’m thinking about investing more in stocks and shares which could be a better idea if inflation starts to go up!

Forgive me if I'm patronising you but one thing to keep in mind with this is that if losing 2-3% in spending power a year due to inflation pisses you off you might not like it when stocks and shares dump 30%.

You say "investing more" so assume you already so but I always feel it's worth pointing out.

Not patronising at all, I’m a complete beginner in S&S so I wouldn’t ever start to pick and choose individual companies, it would be something one of the bigger players like Vanguard offer really, just looking around and researching a few things myself. Has to be better in the long run that having 50k in premium bond which I didn’t even get £25 this month

I prefer to buy funds. Over the past 5 years mine have more then doubled in value.

I'm crap at individual stocks so am happy to let Fund Managers deal with it.

They're pretty crap too.

I'm happy with doubling my money. It's a major part of my early retirement

[MikeKite]

98elise said:

MikeKite said:

98elise said:

Gooose said:

bhstewie said:

Gooose said:

Thanks for all the replies! I have a little cash in the bank and in premium bonds but I’m thinking about investing more in stocks and shares which could be a better idea if inflation starts to go up!

Forgive me if I'm patronising you but one thing to keep in mind with this is that if losing 2-3% in spending power a year due to inflation pisses you off you might not like it when stocks and shares dump 30%.

You say "investing more" so assume you already so but I always feel it's worth pointing out.

Not patronising at all, I’m a complete beginner in S&S so I wouldn’t ever start to pick and choose individual companies, it would be something one of the bigger players like Vanguard offer really, just looking around and researching a few things myself. Has to be better in the long run that having 50k in premium bond which I didn’t even get £25 this month

I prefer to buy funds. Over the past 5 years mine have more then doubled in value.

I'm crap at individual stocks so am happy to let Fund Managers deal with it.

They're pretty crap too.

I'm happy with doubling my money. It's a major part of my early retirement

The late 90s had many people that had doubled their money (and more) with various clever fund managers. Alas, what goes up has a nasty habit of going down and many people got burnt.

[jimPH]

Do we have actual inflation at the moment or is it temporary?