A bit of good news..?

Realy

carolt wrote: »

I don't think I'm atypical - recent retail sales figures show I'm clearly not alone.

Hoarding cash rather than spending it was precisely the problem they faced in Japan during their Lost Decade.

Or how about this for more anecdotal:

http://www.mumsnet.com/Talk/1372/625535?discoday=hp&rn=1224025323631

I'm clearly not the only one worrying and preparing to batten down the hatches, if necessary.

I don't think you get what I am saying Carol, spare cash begins to make a economy recover over time.
Even if you hord cash it will go in banks and they will loan it back out again etc.
So any way you look at it spare cash should = more jobs.
Always as done for every economy.

Generali

Realy wrote: »

I don't think you get what I am saying Carol, spare cash begins to make a economy recover over time.
Even if you hord cash it will go in banks and they will loan it back out again etc.
So any way you look at it spare cash should = more jobs.
Always as done for every economy.

Isn't a big part of the problem this time that it is the banks that are hoarding the cash?

I agree that ultimately in a recession the bad and unlucky go to the wall leaving the fit and the profitable who are worth lending to and it is the savings of the wary that are used to provide investment that creates jobs.

Of course things are a little tougher if we get a true global recession as who is going to invest if there is really nobody to sell to. Also, the Chinese have created a huge amount of oversupply so a lot of companies are going to have to go bust before we hit the bottom.

IMO of course.

Realy

Generali wrote: »

the Chinese have created a huge amount of oversupply so a lot of companies are going to have to go bust before we hit the bottom.

IMO of course.

I heared today they are also staggering in to recession. Not good news but will hopefully stop to much investment going abroad.
The only plus I can get out of a global slowdown it will stop all this horded cash being thrown into "the next big market"
But that is no plus at all really.

Generali

Realy wrote: »

I heared today they are also staggering in to recession. Not good news but will hopefully stop to much investment going abroad.
The only plus I can get out of a global slowdown it will stop all this horded cash being thrown into "the next big market"
But that is no plus at all really.

It seems to me that a big part of what Governments are doing is trying to keep the money supply up. The thing is, the velocity of circulation of money is a determinant of the money supply so if people just sit on the extra money they are given then the money supply will dry up anyway.

That is my belief as to what is likely to happen and why I think that there's a good chance that we'll see deflation rather than inflation despite the printing presses being cranked up right now.

Realy

Generali wrote: »

I think that there's a good chance that we'll see deflation rather than inflation despite the printing presses being cranked up right now.

I said that but no one thanks me.:(:rotfl: (well I said I heared inflation is more likely be around or below the 2% target early to mid next year.)

Generali

Realy wrote: »

I said that but no one thanks me.:(:rotfl: (well I said I heared inflation is more likely be around or below the 2% target early to mid next year.)

Well my feeling is that the most likely outcome is a pretty vicious and long lived recession with very low inflation rates. Asset prices aren't likely to recover any time soon either as baby boomers are going to start to retire in large numbers.

There is a decent chance of deflation although it's not the most likely outcome from here.

dopester

Realy wrote: »

3) You can't assume it 50K to build a semi including land costs etc.On top of building you have marketing, snagging, sales, admin etc. 16% or £10k may well be insufficient to cover those costs.

The spending power of the pound will be going up in my opinion - within the UK.

Reason being, way too many debt-junkies, and those who assumed the good times would also last so are short on meeting existing commitments under changed circumstances.

Job losses too. Fewer people have disposable cash. There is competition for those who have it - prices will drop, including labour costs for house building. The minimum wage will be reduced or abolished, as a minimum wage that is set too high for the output produced leads to increased job losses. It isn't so bad if 70p buys you the same item as £1 did 12 months previously.

And with the pound giving greater buying power, it puts pressure on wages, which will need to fall as the deflation goes through the system. Priority.. just keep your job / income.

dopester

Realy wrote: »

I don't think you get what I am saying Carol, spare cash begins to make a economy recover over time.
Even if you hord cash it will go in banks and they will loan it back out again etc.
So any way you look at it spare cash should = more jobs.
Always as done for every economy.

Maybe there are less people, even those who are credit-worthy, who want those loans. A lot of people are guarded about their circumstances - even good credit risks.

Credit revulsion. As I see it there are institutions like Nationwide and Britannia Building Society which have seen a rush of savers... but are writing few mortgages and are trying to get the deposits out to work. Can't pay good interest with dead money in accounts.

It is part of the deflationary spiral - no matter how much liquidity the system pumps into the financial system.. if it isn't going out to productive use.