Hyperinflation and Savings rates ?

nrsql

>> As far as I'm aware, raising interest rates has in the past proven effective at curbing inflation, at least in the UK.

I don't think there is anything in the past that would reflect what is happening now. If we are talking about the collapse of the currency and commodities then increasing interest rates won't have much effect.
In this situation prices would be the determining factor and the low supply would continually push those up with respect to sterling.

Interest rate increases would curb inflation as long as it was reasonably low (i.e. controllable) but once confidence in the currency is lost then it would have a negligible effect.

Masomnia

But to which currency do investors turn? The Eurozone is contracting at record pace, Japanese companies are struggling because the Yen is so strong, and the US is 'printing money' too.

It's a lie that we're much worse off than everyone else.

nrsql

>> It's a lie that we're much worse off than everyone else.

Maybe not that much worse than the US.
Not sure about the others that you mention though. Depends on what you mean by "much".

One problem is that with the depletion of our manufacturing base we can't take advantage of the fall of sterling. As we are dependant on imports there is little we can do.
We put our faith in the city to the detriment of most other industries and are now going to suffer for it (a bit like a banana republic).

JP45

nrsql wrote: »

>> As far as I'm aware, raising interest rates has in the past proven effective at curbing inflation, at least in the UK.

I don't think there is anything in the past that would reflect what is happening now. If we are talking about the collapse of the currency and commodities then increasing interest rates won't have much effect.
In this situation prices would be the determining factor and the low supply would continually push those up with respect to sterling.

Interest rate increases would curb inflation as long as it was reasonably low (i.e. controllable) but once confidence in the currency is lost then it would have a negligible effect.

But are we really talking about a complete collapse of the pound? And why single out sterling? What about the other economies that are under severe strain - Spain, Ireland, Portugal, Greece, Eastern Europe etc. Even the far east has proven vulnerable to the global downturn.

I accept that the UK is in many respects in a worse predicament than many other economies but I still can't see sufficient reason to believe there will be a complete collapse of sterling.

As for commodities, we could well see a significant rise in prices in the future but only if global demand recovers. Again, is it really realistic to suppose that the UK economy will remain stuck in a perpetual recession whilst demand in the rest of the world picks up. And if that were to be the case then surely a massively devalued pound would provide a huge boost to exports and the economy.

nrsql

The thread is about hyperinflation. For that there needs to be a loss of confidence in the currency.

A lot depends on what happens in the next few months.
If we go into wholesale printing of money and the government continues thinking it can produce bogus statistics and statements and get away with it then we will have problems.
They need to be honest and clear about the predicament and how we will proceed. It's all about confidence now and being found to be covering up the situation or being underhand with the strategy would be the worst thing that could happen.