Great news / terrible news.

Generali

A spoof cover for The Economist from a couple of weeks ago:

http://commercial-archive.com/node/145864

Not a good one for at work or if people that don't like the eff word are around the place

dopester

Generali wrote: »

A spoof cover for The Economist from a couple of weeks ago:

Link

Not a good one for at work or if people that don't like the eff word are around the place

Word count filler

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Die angegebene Seite konnte nicht gefunden werden.

neverdespairgirl

I got a 404 on that one

Generali

Try that instead.

http://commercial-archive.com/node/145864

Cannon_Fodder

Realy wrote: »

But now they are being for stability not because of bringing inflation inline.

If you think lots of pensioners have savings I think you may be wrong.
I think they would be more happy having lots of tax payers so they can still get a pension and front line services.
PS pensioners have children and grandchildren and they tend to want to help thier children in times like this so if you think pensioner would mind I think you are wrong again.
Anythin else is Victoria Sponge.;)

30 seconds browsing over at the Savings forum...

http://forums.moneysavingexpert.com/showpost.html?p=15066469&postcount=14


Can find no up to date figures on levels of Pensioner savings, though Parliament recorded over 70% at the end of the 80s...wonder why no newer stats?
http://hansard.millbanksystems.com/commons/1991/apr/15/pensioners-savings
http://hansard.millbanksystems.com/written_answers/1992/jul/06/pensioners-savings


the real problem for Pensioners is the bureaucracy, though;
http://www.thisislondon.co.uk/news/article-23530976-details/Complex+benefits+system+leaving+700,000+pensioners+below+the+poverty+line/article.do

IveSeenTheLight

dopester wrote: »

It doesn't work that way brainiac. Your debts will get heavier.

How does the fact that my mortgages are now 0.5% lower in interest rates mean that my debt is heavier?

If I owed 200K at 5% interest, then I would have to pay £833.33 per month in interest
With interest down 0.5% to 4.5%, I now only have to pay £750.00 per month in interest.
I now have an extra £83.33 per month to put toward lowering my mortgage debt.
Additionally, lowering the outstanding amount by the £83.33 would mean that as I owe less, there would be less interest to pay the following month.

Now if interest rates were to go down to 2%, I would only have to pay £333.33 in interest saving me £500 per month that I could put towards the debt

I dont know how to make it clearer that lower interest rates, means you have to pay less interest on debts and can pay off those debts quicker (and the debt would be lighter) if you maintain the same monthly payments

Cannon_Fodder

Realy wrote: »

Deflation is nearly here have you not seen oil and comodities?

From http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3218075/Britain-faces-deflation-for-first-time-since-1960.html

Japan suffered almost a decade of deflation and falling economic growth in the 1990s after its debt-fuelled economic bubble burst with painful consequences. Despite cutting official interest rates to zero and pumping cash into the economy, the Bank of Japan was unable to pull prices back up into positive territory for years


Well I suppose using historically low interest rates can't possibly fail, then.

Though I concede that we may not have much choice, such is the state we are in.

IveSeenTheLight

!!!!!!? wrote: »

If we're at the stage where rates have to go below 4.5% to save the borrowers' bacon, they've clearly overextended themselves.

The bottom line here is that people have simply borrowed too much.

And high levels of debt - personal and national - are going to make getting out of recession a lot harder. Interest rates are already low ... not a lot further they can do go down realistically to make servicing debt much easier.

Don't imagine that interest rates can simply be kept low as a matter of course, either - watch out for the 'bond vigilantes'. With the amount of borrowing that the government is going to have to be doing in the next few years I wouldn't be at all surprised to see rates being forced back up irrespective of where the govt would like to see them at.

You have said that now is the time to pay off debts (LINK) but argue against the lowering of interest rates which would diretly help those in debt to pay it off

dopester

IveSeenTheLight wrote: »

How does the fact that my mortgages are now 0.5% lower in interest rates mean that my debt is heavier?

I'm not going to explain it all for you - suffice to say, if you do manage to meet your repayments on both your properties... I expect they will be worth a mind-melting amount less that you bought them for in in 3 to 5 years (sorry).

I'm revising my outlook for a -70% crash to -80%.

http://www.elliottwave.com/deflation/

A trend of credit expansion has two components: the general willingness to lend and borrow and the general ability of borrowers to pay interest and principal. These components depend respectively upon (1) the trend of people’s confidence, i.e., whether both creditors and debtors think that debtors will be able to pay, and (2) the trend of production, which makes it either easier or harder in actuality for debtors to pay. So as long as confidence and production increase, the supply of credit tends to expand.

The expansion of credit ends when the desire or ability to sustain the trend can no longer be maintained. As confidence and production decrease, the supply of credit contracts. The psychological aspect of deflation and depression cannot be overstated. When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation. As creditors become more conservative, they slow their lending.

As debtors and potential debtors become more conservative, they borrow less or not at all. As producers become more conservative, they reduce expansion plans. As consumers become more conservative, they save more and spend less. These behaviors reduce the "velocity" of money, i.e., the speed with which it circulates to make purchases, thus putting downside pressure on prices. These forces reverse the former trend.

The structural aspect of deflation and depression is also crucial. The ability of the financial system to sustain increasing levels of credit rests upon a vibrant economy. At some point, a rising debt level requires so much energy to sustain - in terms of meeting interest payments, monitoring credit ratings, chasing delinquent borrowers and writing off bad loans - that it slows overall economic performance.

A high-debt situation becomes unsustainable when the rate of economic growth falls beneath the prevailing rate of interest on money owed and creditors refuse to underwrite the interest payments with more credit. When the burden becomes too great for the economy to support and the trend reverses, reductions in lending, spending and production cause debtors to earn less money with which to pay off their debts, so defaults rise.

Default and fear of default exacerbate the new trend in psychology, which in turn causes creditors to reduce lending further. A downward "spiral" begins, feeding on pessimism just as the previous boom fed on optimism. The resulting cascade of debt liquidation is a deflationary crash.

Debts are retired by paying them off, "restructuring" or default. In the first case, no value is lost; in the second, some value; in the third, all value. In desperately trying to raise cash to pay off loans, borrowers bring all kinds of assets to market, including stocks, bonds, commodities and real estate, causing their prices to plummet. The process ends only after the supply of credit falls to a level at which it is collateralized acceptably to the surviving creditors.

People seem to take for granted that financial values can be created endlessly seemingly out of nowhere and pile up to the moon. Turn the direction around and mention that financial values can disappear into nowhere, and they insist that it is not possible. "The money has to go somewhere...It just moves from stocks to bonds to money funds...It never goes away...For every buyer, there is a seller, so the money just changes hands." That is true of the money, just as it was all the way up, but it's not true of the values, which changed all the way up.

Asset prices rise not because of "buying" per se, because indeed for every buyer, there is a seller. They rise because those transacting agree that their prices should be higher. All that everyone else - including those who own some of that asset and those who do not - need do is nothing. Conversely, for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high.

If no other bids are competing with that buyer's, then the value of the asset falls, and it falls for everyone who owns it. If a million other people own it, then their net worth goes down even though they did nothing. Two investors made it happen by transacting, and the rest of the investors made it happen by choosing not to disagree with their price. Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land.

The dynamics of value expansion and contraction explain why a bear market can bankrupt millions of people. At the peak of a credit expansion or a bull market, assets have been valued upward, and all participants are wealthy - both the people who sold the assets and the people who hold the assets. The latter group is far larger than the former, because the total supply of money has been relatively stable while the total value of financial assets has ballooned.

When the market turns down, the dynamic goes into reverse. Only a very few owners of a collapsing financial asset trade it for money at 90 percent of peak value. Some others may get out at 80 percent, 50 percent or 30 percent of peak value. In each case, sellers are simply transforming the remaining future value losses to someone else.

In a bear market, the vast, vast majority does nothing and gets stuck holding assets with low or non-existent valuations. The "million dollars" that a wealthy investor might have thought he had in his bond portfolio or at a stock's peak value can quite rapidly become $50,000 or $5000 or $50. The rest of it just disappears. You see, he never really had a million dollars; all he had was IOUs or stock certificates. The idea that it had a certain financial value was in his head and the heads of others who agreed. When the point of agreement changed, so did the value. !!!!!!! Gone in a flash of aggregated neurons. This is exactly what happens to most investment assets in a period of deflation.

Property / houses / flats all come under the same principle - but there even the sellers who converted to cash, were only out for a short time before buying in to the property loop again. There isn't as much money out there as you might think. Cash is king over some illusionary trebling/300% gains in 11 years of property inflation.

As debtors and potential debtors become more conservative, they borrow less or not at all = the "credit revulsion" I've referred to previously, even for the people who satisfy higher qualifications for borrowing. And why the Labour government is totally misunderstanding that a return to 2007 lending levels is impossible as this financial credit bubble (and UK property bubble) reached ridiculous levels... and can't be sustained even if the banks destructively complied.

Also fewer want to borrow to invest in business and startups when everyone is already struggling in most sectors. And banks don't like to lend valuable money to buy property which they fear has much further to fall in price.

Hector-The-Inspector_2

I'm revising my outlook for a -70% crash to -80%.

Dear dopey,

Sorry, you've completely lost it! expect a knock at the door shortly, there will be a couple of people standing there wearing white coats, don't struggle....