Debate House Prices


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Mervyn King : "Inflation may not fall back as strong as expected"

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Comments

  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    No sense in putting rates up until we get some growth in the economy.
    Inflation isn't all bad in our current predicament - at least it is eroding the value of the nation's debts at a faster rate than we could pay it off. It will also help with the financial sector's dodgy assets which caused this mess in the first place.

    It's not eroding debts at all.

    It's only eroding peoples debts for whom have had a payrise over and above inflation. So people who are seeing payrises of say 5% plus.

    For everyone else, especially those with no payrises this year and last it's making debt harder to service.

    For most, based on average payrises, debt is getting harder to service due to inflation, not easier, as they have less money left after all the commodity rises each month.
  • WardwarkOwner
    WardwarkOwner Posts: 1,766 Forumite
    It's not eroding debts at all.

    It's only eroding peoples debts for whom have had a payrise over and above inflation. So people who are seeing payrises of say 5% plus.

    For everyone else, especially those with no payrises this year and last it's making debt harder to service.

    For most, based on average payrises, debt is getting harder to service due to inflation, not easier, as they have less money left after all the commodity rises each month.

    Wrong. Inflation is reducing the national debt which I was clearly referring to as well as personal debts because by definition inflation is reducing the value of the currency it is measured in.

    Of course people are struggling at the moment. There are no painless solutions to the current problem. Raising rates and damaging the economy further would just make things worse. Inflation has positive and negative elements something that seems to be lost on some posters on here. We desperately need growth, and low rates help.
  • lemonjelly
    lemonjelly Posts: 8,014 Forumite
    1,000 Posts Combo Breaker Mortgage-free Glee!
    Perhaps everyone moaning about low interest rates should be jumping on NS&I's ILSC's to protect their capital?
    It's getting harder & harder to keep the government in the manner to which they have become accustomed.
  • chucky
    chucky Posts: 15,170 Forumite
    10,000 Posts Combo Breaker
    before the usual suspects try to deliberately mislead people, the cost push/imported inflation that we have now is unlikley to be here medium/long term so the disposable income argument is very weak.

    inflation means that the amount you owe is less in real terms than it used to be, provided the interest rate is less than the rate of inflation.

    just like house prices can be worth less in real terms so will debt.
  • lemonjelly
    lemonjelly Posts: 8,014 Forumite
    1,000 Posts Combo Breaker Mortgage-free Glee!
    Of course people are struggling at the moment. There are no painless solutions to the current problem. Raising rates and damaging the economy further would just make things worse. Inflation has positive and negative elements something that seems to be lost on some posters on here. We desperately need growth, and low rates help.

    Whilst I agree in general terms, I would argue that the case that there is growth has yet to be proven, which may be why a lot of people continue to be concerned.
    It's getting harder & harder to keep the government in the manner to which they have become accustomed.
  • WardwarkOwner
    WardwarkOwner Posts: 1,766 Forumite
    lemonjelly wrote: »
    Whilst I agree in general terms, I would argue that the case that there is growth has yet to be proven, which may be why a lot of people continue to be concerned.

    Fair point, but if there is no growth then the argument for low interest rates is even stronger, unless inflation goes way above its current level.

    The BoE can only act on the information they have and at the moment they are, in my view, making the right decisions.
  • ILW
    ILW Posts: 18,333 Forumite
    Fair point, but if there is no growth then the argument for low interest rates is even stronger, unless inflation goes way above its current level.

    The BoE can only act on the information they have and at the moment they are, in my view, making the right decisions.

    What would you consider to be an unacceptable level of inflation that require action?
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    One fund manager yesterday made the observation that its the amount of financial stimulus in the global economy that's impacting on commodity prices. As the cash injected by QE and bank support schemes will surface somewhere and push up asset prices.
  • WardwarkOwner
    WardwarkOwner Posts: 1,766 Forumite
    ILW wrote: »
    What would you consider to be an unacceptable level of inflation that require action?

    What stupid question. Inflation is only one factor in the rates decision. What you do with rates depends on the current levels of inflation AND growth, forecasts for both, etc, etc.

    The decision just isn't as simple as you seem to think.
  • ILW
    ILW Posts: 18,333 Forumite
    What stupid question. Inflation is only one factor in the rates decision. What you do with rates depends on the current levels of inflation AND growth, forecasts for both, etc, etc.

    The decision just isn't as simple as you seem to think.

    I your previous post you stated that things would need to be done "if inflation went way over it's current level", just wondering what you meant by "way over".
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