Printing money

Waterwalker

House's are not good at the moment.
Something physical that someone will want, the good things are hard to find like a small parcel of land that is the only access to a larger piece beyond it (a ransom strip).

nilrem_2

ashbourne wrote: »

what would constitute hyperinflation?

If we had hyperinflation our savings would soon be totally worthless and we would have been better off in stocking 1000's of tins of beans and soup instead!

Reaper

Most of the important points have been made already, but there are a couple of things I'd like to add, so site back and snooze... it's time to talk economics!

Interest rates are the main tool to prevent inflation (set them high) and prevent recession (set them low).

However when interest rates approach zero you can't put them down any further and you have to try something different. When you've borrowed all you can then one of the few options left is "Quantative Easing" which increases the money supply and can cause inflation - remember in Hitch Hikers Guide to the Galaxy when the early inhabitants of planet Earth adopted the leaf as a unit of currency and it took 4 forests to buy 1 peanut?!

Quantitive easing happened in Japan a few years back and now that US intrest rates are approximately zero the US is starting to do it too.

In the UK I would not expect them to try it until they can't lower interest rates any further.

Forget hyper-inflation - it's not going to happen, but high inflation could easily happen. The problem is when there are strong upwards and downwards pressures it can switch from deflation to high inflation too fast to stop. Inflation and low interest rates also cause the value of a currency to drop (or the expection of either in the future).

The very worst that can happen is that the economy stays in recession and we get inflation at the same time. That is known as "stagflation" and is terrible because whether you put interest rates up or down you make things worse.

Class dismissed - you can all go out to play now.

earlgrey_3

There seems to be an assumption that inflation/deflation is the same for everyone.

We've already had massive house-price inflation over the past few years. So for anyone wanting to buy a house, the value of their savings were falling in relation to prices and savings rates of 7% did little to compensate.

Conversely, for those wanting to buy clothing, electronic goods, and other items from China there has been substantial deflation of prices in recent years.

So for individuals talk of inflation or deflation only makes real sense by comparing the value of money with the assets we're likely to buy. For someone with a large mortgage, inflation is likely to be helpful while they might be simultaneously disadvantaged for other purchases. Deflation could mean your house becomes worth less but it's cheaper to heat and get the roof fixed.

For most of us there will be limited advantage in hedging in foreign currencies even if we manage to avoid the risk of incorrectly predicting the direction of currencies we hedge in.

iltisman

Perhaps we should start printing some too.;)

oneforthemoney

Bump.

We also have a chunk of cash in a savings account that we have saved up over the years for a house deposit. We aren't planning to buy yet, as we are currently working abroad.

I'm also worried that inflation will erode away our savings.

I'm considering buying other currencies and buying gold.

Has anyone bought inflation-linked bonds? Does anyone think that they are worth looking into?

Thanks.

OneForTheMoney

purch

I recently heard that there is a good possibility that the government will start printing extra bank notes

They have to do this every year, as without an increase in the money supply any increase in GDP would cause deflation in the economy.

Increasing the money supply during a period of recession, should in normal times have the effect of being inflationary.

However in the current deflationary environment, it is unlikely that they can increase the money supply by enough to counter the deflationary pressures.

The problem that will be encountered will be when the Economy starts to grow again, all this money will need to be removed from the system.

When the Government denationalise the Banks that will remove a huge portion of this money, and selling Government Stock will also do this.

The dangers of the increase in money supply causing a large Inflationary problem in future years has been hugely overstated, and the case for Hyperinflation is simply risable.

buglawton

In the U.S the Base Rate is now practically 0%. The last issue of Govt bonds like this was oversubscribed 400% !

UK to go same way?

meatandtwoveg

buglawton wrote: »

In the U.S the Base Rate is now practically 0%. The last issue of Govt bonds like this was oversubscribed 400% !

UK to go same way?

Alot of cash chasing a safe haven, alot of cash, but watch the yields drop on those investment and pension funds you get back what you pay in basically?