Inflation: an undemocratic stealth tax

hallmark

Another typically excellent article from Alistair Heath, easily the best financial journalist around today:

http://www.cityam.com/news-and-analysis/allister-heath/inflation-undemocratic-stealth-tax

INFLATION is taxation without legislation, as Milton Friedman, the Nobel prize winning economist, once said. He was spot on.....

....the UK is undergoing yet another secret, giant act of redistribution from savers (whose wealth is being eroded as the purchasing power of sterling declines) to borrowers (the value of whose debt is gradually being cut in real terms), from homeowners with no mortgages (whose real terms house prices are falling) to homeowners with mortgages (who are better off from lower real debt but worse off from reduced real house prices), and from workers to those on benefits...


His column ought to be part of the curriculum, altho I'm sure lots of people will gasp in horror at the thought of kids being taught to get out & do well for themselves rather than just hold their hands out & do well out of others.

HAMISH_MCTAVISH

hallmark wrote: »

lots of people will gasp in horror at the thought of kids being taught to get out & do well for themselves rather than just hold their hands out & do well out of others.

Kids should be taught to get out there and invest their money with the associated risks rather than just holding out their hands and expecting risk/effort free returns from savings accounts in banks.

Sorry to break it to you, but the economy is getting exactly what it needs.

A good few years of moderate inflation to inflate away debt, and ultra low base rates to stimulate the economy and compensate for government cuts.

I wouldn't expect to see base rates of 5% again for the next decade or more if I were you.

hallmark

HAMISH_MCTAVISH wrote: »

A good few years of moderate inflation to inflate away debt, and ultra low base rates to stimulate the economy and compensate for government cuts.

Lol genius. Because the last few years of moderate inflation & ultra low base rates have done SO much good for the economy haven't they?

Sorry to break it to you but you don't know what you're talking about. Inflation is an extremely foolish thing to be playing around with in the utterly reckless way that the BOE are doing. Or perhaps you think we can rely on those people - you know, the same ones who utterly failed to see the financial armageddon that was approaching - to steer the economy?

Mervyn King is a dismal failure & the current policy is one of desparation.

HAMISH_MCTAVISH

hallmark wrote: »

Lol genius. Because the last few years of moderate inflation & ultra low base rates have done SO much good for the economy haven't they?.

Actually yes, low rates have done a tremendous amount of good.

Despite the most serious financial crisis and sharpest recession since the 1930's, unemployment remains significantly lower than it was in previous far milder recessions.

Or is another million unemployed, with the associated mass misery and costs to society a price worth paying so you can get a few quid more a month from a risk free savings account?

michaels

I agree 100% - I can't beleive we let the savers get away with 'earning' real returns for taking no risk prior to the credit crunch and then went ahead and bailed them out when the banks they haad lent their savings too woul dotherwise have gone bust.

Had Natwest and Lloyyds HBOS gone bust who would have been out of pocket? The mortgage holders or the savings account holders?

Graham_Devon

The savers, over 35k (I think it was at the time), and the mortgage holders. The mortgage holders wouldn't have suddenly got free houses.

ILW

HAMISH_MCTAVISH wrote: »

Actually yes, low rates have done a tremendous amount of good.

Despite the most serious financial crisis and sharpest recession since the 1930's, unemployment remains significantly lower than it was in previous far milder recessions.

Or is another million unemployed, with the associated mass misery and costs to society a price worth paying so you can get a few quid more a month from a risk free savings account?

Previous recessions have been over much quicker than this one. This one will go on for ages, mainly down to over indebtedness due to years of IRs being too low.

HAMISH_MCTAVISH

michaels wrote: »

we let the savers get away with 'earning' real returns for taking no risk prior to the credit crunch and then went ahead and bailed them

Crazy stuff, ain't it?

Savers loaned their money to the banks, who re-loaned it to mortgage holders and businesses.

When the banks almost went bust and took down the wider economy, we effectively bailed out the savers by rescuing the banks.

And now those same savers want policies that will cause unemployment to rise, more businesses to fail, and more mortgages to default.

In other words, savers want to deliberately cause the people holding their money to be unable to pay it back.

Absolutely mental.:eek:

hallmark

michaels wrote: »

I agree 100% - I can't beleive we let the savers get away with 'earning' real returns for taking no risk prior to the credit crunch and then went ahead and bailed them out when the banks they haad lent their savings too woul dotherwise have gone bust.

Wow, I think I could go a long time without reading such utter drivel again.

You do realise do you, that the credit crunch savers were "bailed out from" was caused by people borrowing money they couldn't pay back?

Let's try saying it again - if all we'd had were savers there would have been no credit crunch.

Or yet again: even if all we'd had were savers + people who could actually repay their debts there would have been no credit crunch.


I genuinely don't think I'll ever read anything so laughably stupid again.

ILW

HAMISH_MCTAVISH wrote: »

Crazy stuff, ain't it?

Savers loaned their money to the banks, who re-loaned it to mortgage holders and businesses.

When the banks almost went bust and took down the wider economy, we effectively bailed out the savers by rescuing the banks.

And now those same savers want policies that will cause unemployment to rise, more businesses to fail, and more mortgages to default.

In other words, savers want to deliberately cause the people holding their money to be unable to pay it back.

Absolutely mental.:eek:

Seem to remember that many businesses did pretty well when base rates were 7 or 8%.

HAMISH_MCTAVISH

hallmark wrote: »

the credit crunch savers were "bailed out from" was caused by people borrowing money they couldn't pay back?.

Utter rubbish.

The credit crunch had precisely nothing to do with UK lending default rates, and everything to do with the global freezing of credit markets thanks to the mis-allocation of risk by the ratings agencies on American toxic debt.

Savers were bailed out. End of story.

You should be grateful you're getting the return of your money, rather than whining about low returns on your money.