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Debate House Prices
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Interest rate rise benifits
Comments
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I still cannot figure out why a little deflation is such a terrible thing. Surely this whole site is about consumers trying to drive prices down.
Lower prices are what virtualy every consumer (and that's most of us) want. *
* As long as house prices aren't lower.
30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
I still cannot figure out why a little deflation is such a terrible thing. Surely this whole site is about consumers trying to drive prices down.
I assume you are not in debtHigher rates tend to benefit anyone who is not in debt.'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
It helps old people pay their care home fees as money from a house sale and/or their life savings would generate a larger income through interest, so they'd remain self-funding for longer and not need taxpayers to pick up the tab.
It helps people to save and see savings growth, encouraging a saving ethic.
It helps people who have lost their job and no longer qualify for JSA if they have savings as it brings an income.
There are lots of people with savings interest as their sole or main income, people who can't claim any benefits because of their savings, but who need money to pay for things. Typical of these might be early retired people who can't get a job and were hoping their savings/interest would bridge them into their retirement age.
For me, I have savings and if interest rates were at a more normal level the interest would enable me to be able to afford to rent a 1-bed flat and pay the bills.
For the above groups, interest rates being where they've been for most years until recently brings confidence to spend.0 -
Even if you are in debt, price deflation would leave more free cash to service and pay down the debt with.
I think the dole pays less than the job for most people
'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
Why would price deflation lead to unemployment? It is happening all the time due to competition and efficiency without that effect.
The problem is, that people think that they want deflation - just not for their income from employment or savings.
Competition & efficiency does lead to unemployment - how could it not ?
Otherwise there would be millions of agricultural workers or miners. It is just that we find other things to make or service that create wealth.
The problem is that in severe deflation, there is a huge disincentive to invest or innovate - why create new products when the value of selling them will be less than it is now.
In a true deflationary environment;
savings would pay no interest.
peoples income from work would go done.
Check out the 1930's depression in the USA - there can only be two effects on Labour in deflationary times. Mass unemployment of radically lower wages. History shows that Mass unemployment is the more likely option.US housing: it's not a bubble - Moneyweek Dec 12, 20050 -
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Kennyboy66 wrote: »The problem is, that people think that they want deflation - just not for their income from employment or savings.
Competition & efficiency does lead to unemployment - how could it not ?
Otherwise there would be millions of agricultural workers or miners. It is just that we find other things to make or service that create wealth.
The problem is that in severe deflation, there is a huge disincentive to invest or innovate - why create new products when the value of selling them will be less than it is now.
In a true deflationary environment;
savings would pay no interest.
peoples income from work would go done.
Check out the 1930's depression in the USA - there can only be two effects on Labour in deflationary times. Mass unemployment of radically lower wages. History shows that Mass unemployment is the more likely option.
In the South of England in the 30s, wages stayed constant, employment was high and deflation raised living standards considerably. Different in the North though.0 -
Kennyboy66 wrote: »The problem is that in severe deflation, there is a huge disincentive to invest or innovate - why create new products when the value of selling them will be less than it is now.
We are undergoing a monetary contraction. So those that will benefit are those that invest for a cash return on a longer term basis. Financial engineering based on leveraging up with debt and inflation providing a return are over.0
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