The elephant in the room just got bigger

michaels

Yes but politically it is much easier to swallow than the real cuts in wages and benefits being imposed on the Greeks and Irish even if the overall impact is the same.

On a personal level I would normally never consider a fixed mortgage as I don't claim to be able to out guess the market, I can afford rate volatility and all things being equal fixes should be more expensive because they include a premium for reduced risk in the rate. However I am seriously thinking of taking a punt on against the market and fixing for 5 years at 4.29%. I kind of think there is probably an interesting bimodal range of likely inflation outcomes rather than the nice fan that the boe likes to project with either a growth plus inflation branch or should the debt crisis prove to have an unstoppable momentum a second leg of monetary contraction, negative growth and deflation. I know Gen leans towards the later which would make a fix a big mistake but I am very much oon the fence.

Wookster wrote: »

People forget just how damaging inflation really is.

5.7% (what we currently have) represents a pretty big (negative) lifestyle impact for many many people.

drc

michaels wrote: »

Yes but politically it is much easier to swallow than the real cuts in wages and benefits being imposed on the Greeks and Irish even if the overall impact is the same.

But isn't if unfair on savers because their savings get eroded whilst those with debts get their debts reduced? Kind of immoral to scapegoat people who have been careful with their money and certainly won't encourage people to save in the future.

michaels

Agreed but 'fair' is probably a 'nice to' that you worry about when the economy is growing nicely whereas avoiding default and unrest is probably more of a 'have to'

After all if the banks had been left to collapse to avoid bailing out those feeckless borrowers the savers would have suffered a lot worse.

drc wrote: »

But isn't if unfair on savers because their savings get eroded whilst those with debts get their debts reduced? Kind of immoral to scapegoat people who have been careful with their money and certainly won't encourage people to save in the future.

abaxas

michaels wrote: »

Agreed but 'fair' is probably a 'nice to' that you worry about when the economy is growing nicely whereas avoiding default and unrest is probably more of a 'have to'

After all if the banks had been left to collapse to avoid bailing out those feeckless borrowers the savers would have suffered a lot worse.

The issue is that if you destroy those who have been prudent, others won't follow.

Without those people you dont have an economy or any banking sector. Dont bite the hand that feed you.

mramra

carlot, have you just been on a junior manager's training course or something?

Blue sky thinking, elephant in the room....next you'll be getting your ducks in a row to find some low hanging fruit.

sss555s

I think inflation is going to be one of the best aid's to get us out of this mess and it must happen.

It may be harder for a while and those sitting on the edge may find the edge a bit sharper but i believe it will benefit us all in the long term.

When you look back 20-30 years, Spain, Italy and the likes were very cheap to buy and live in but these places have inflated far more than us in that time and are as expensive now as the UK. I think we can cope being inflated.

When you look at the debt we have had for almost 2 years now where Labour did very little to try and cut it and they even cut vat by 2.5% just to make the inflation figures look good and in-line with their plans even when it was the wrong thing to do.

Labour! 13 years of pizzing in the wind.

kennyboy66_2

sss555s wrote: »

I think inflation is going to be one of the best aid's to get us out of this mess and it must happen.

.

It took a recession (1980-82) roughly the same magnitude as the recent one (and probably more damaging in the long term) to squeeze most (but not all) of the inflation out of the system.

It's the economics of the mad house.

kennyboy66_2

abaxas wrote: »

The issue is that if you destroy those who have been prudent, others won't follow.

Without those people you dont have an economy or any banking sector. Dont bite the hand that feed you.

I'm afraid savers have short memories - or don't learn.

petebates26

13 years of borrowing......now we're screwed.

If the government were to post an SOA on the debt free wannabe board, wonder what advice they'd get???!

Sounds to me like they're trying a combination of consolidation loans and Balance transfers - I'm sure the advice would be focused on spending less, paying back the debts and facing up to their responsibilities.

We're at their mercy, with no way of predicting what will happen.

carolt

mramra wrote: »

carlot, have you just been on a junior manager's training course or something?

Blue sky thinking, elephant in the room....next you'll be getting your ducks in a row to find some low hanging fruit.

The elephant in the room wasn't my turn of phrase; it was just a direct cut and paste of the article title.

The blue skies was me - but I think the phrase you're looking for is just generic cliche, really.