Inflation falls to 2.4%

Graham_Devon

HAMISH_MCTAVISH wrote: »

Prudence is using reason, shrewdness, skill and good judgement to manage your financial affairs and minimise risks, including the risk of interest rates falling in the event of a recession.

It really is that simple.

It really isn't that simple.

Let's put it another way.

If interest rates had gone up 1% instead, would you have classed yourself as reckless?

I very much doubt it.

And that's the key here. To define only those who took risk as prudent (as you have tried to do here), you have to make out those who didn't splash out were reckless.

To do that, you have to say some pretty damning things about how our economy is set up....or, realise you are talking claptrap.

The extreme scenario here of 0.5% interest rates is nothing to do with being reckless or prudent. It's an one off event. An event no one planned for. An event some have really benefitted from and one some have been seriously effected by.

HAMISH_MCTAVISH

chucknorris wrote: »

I would have said people who got themselves into a good position when buying/investing were rewarded by a surprisingly much larger fall in the base rate than could have been anticipated and also for a very long period too, which is still ongoing.

Which was prudent.

Whereas those who failed to see the possibility of base rates falling and relied on savings accounts at higher interest rates were imprudent.

The definition is clear.

Dev can't change the definition just because he doesn't like it.

ILW

I would tend to think that "prudence" probably needs to be redefined.
It now appears that it is a case of take a gamble by borrrowing barely affordable amounts of money, and if enough people do it then the authorities will work out a way of getting them off the hook and at the same time hammering people who did (what used to be considered) the right thing of putting something away for emergencies or old age. Appears it is now best to just blow the lot as others will be forced to pick up the tab.

HAMISH_MCTAVISH

Graham_Devon wrote: »

To define only those who took risk as prudent (as you have tried to do here), you have to make out those who didn't splash out were reckless. .

Nope.

Leaving money in a savings account exposes you to the risk of interest rates falling.

Buying a house with a mortgage exposes you to the risk of interest rates rising.

Putting money into shares or bonds exposes you to the risk of losing some or all of your investment.

Prudence is not the complete avoidance of risk.

It is by definition using reason, shrewdness, skill and good judgement to correctly anticipate those risks, and/or manage your financial affairs to minimise those risks, including the risk of interest rates falling in the event of a recession.

If you took out a huge mortgage on a house and the rates shot up beyond that which you could manage, then you were by definition imprudent.

Just as if you left all your money in a savings account and rates plummeted to 0.5%, you were by definition equally imprudent.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Which was prudent.

Whereas those who failed to see the possibility of base rates falling and relied on savings accounts at higher interest rates were imprudent.

The definition is clear.

Dev can't change the definition just because he doesn't like it.

If taking on large amounts of debt - large enough to be substantially rewarded should base rates fall 5% - is suddenly your definition of "prudence"...

....and not taking on large amount of debts just incase base rates fall is reckless....

.....well.....we'll never see eye to eye Hamish. Your view is just completely alien to me. It is though (andyou'll hate this) the utter definition of debt junkie.

You are talking about RISK. You keep saying "RISK" to clarify what you mean. That's the problem....you have to keep saying risk.

You are trying to re-define prudence as risk.

HAMISH_MCTAVISH

ILW wrote: »

I would tend to think that "prudence" probably needs to be redefined..

It's had the same definition for the last 500 years or more.

Why does it now need to be redefined?

The problem is not in the definition, but rather with those who think it means something that it doesn't, and never has.

chucknorris

ILW wrote: »

I would tend to think that "prudence" probably needs to be redefined.
It now appears that it is a case of take a gamble by borrrowing barely affordable amounts of money, and if enough people do it then the authorities will work out a way of getting them off the hook and at the same time hammering people who did (what used to be considered) the right thing of putting something away for emergencies or old age. Appears it is now best to just blow the lot as others will be forced to pick up the tab.

It is hard to get anywhere in life without taking risks, those risks could be calculated which I believe can be prudent to do so. Gambling to me implies taking risks with far less/or even no consideration of the possible outcomes. You don't seem to distingiush between taking risks and gambling. Attitude to risk is probably the main factor differentiating bears and bulls.

But I don't think it is even as simple as that, I think timing plays a major part too, in a recession or even better at the bottom (now IMHO) I think it pays to be bullish. In boom times however I think it is a time to start thinking about your exposure to risk as the downside is larger and the upside smaller.

EDIT: But then there is a different type of timing, where you are in life rather than the economic cycle, for example if you consider yourself successful and content, why take on more risk and risk losing what you have (if it was your long term goal to get to that point in the first place).

HAMISH_MCTAVISH

Graham_Devon wrote: »

You are talking about RISK. You keep saying "RISK" to clarify what you mean. That's the problem....you have to keep saying risk.

You are trying to re-define prudence as risk.

Prudence is all about correctly managing risk.

The complete avoidance of all risk is impossible.

And mismanaging risk is imprudent.

Surely simple enough for you to understand?

ILW

So is saving now considered imprudent?

Would you say a sixty year old putting their life savings into a basic savings account is being imprudent?

Or should it be be put into risky investments with a chance of losing the lot.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Prudence is all about correctly managing risk.

The complete avoidance of all risk is impossible.

And mismanaging risk is imprudent.

Surely simple enough for you to understand?

As I said, I understand YOUR definition.

But as I said, your definition leaves the huge hole that defines that anyone who didn't take large amounts of debt (and shock horror, saved some money) as reckless. (Reckless being the opposite of prudence).

It's a nonsense.

Saving is now reckless. Getting into high debts (the higher the better as the more you'll be rewarded if it all goes wrong) is prudent.

You'll call me a muddler in a minute simply to avoid everything said as you dig your debt junkie hole!