What would you do with your savings if inflation really kicked in?

vmp

Assuming you couldn't buy a property and didn't want to make the most of it and go out and buy, say, an expensive car.

What would you do to try and preserve the value of your savings? Any particular investments/trades you might make?

Do you think the government might do anything to help (say, increase interest rates dramatically or reintroduce NS&I's index linked savings certificates)? Or would it be "mission accomplished" and Bollinger all round in the City for all the years of money printing we've had?

Glen_Clark

vmp wrote: »

if inflation really kicked in?

it already has! - 20% inflation in London house prices, but housing inflation is simply ignored in favour of Blu Ray Disc players etc
The advice. as always, is to diversify amongst a range of asset classes and territories so your portfolio can withstand everything the politicians can throw at it

kidmugsy

A spot of precious metals might not go amiss e.g. sovereigns in a safety deposit.

Replace your car by a 18-month old one still with five-and-a half years of warranty in place. (That assumes that your present car is a bit of a banger, as befits an MSE-er.)

Do now any building work you've been considering for your house.

jabba42

I think deflation is going to be the problem now. The ECB is throwing everything it can and still there is no inflation. Inflation would come if no one trusted the sovereigns anymore as you have seen in Argentina, Venezuela quite recently. So until there is a big scare that one of the big countries is bankrupt it is a death spiral of deflation, I suspect property will start to go down now too as someone mentioned above, but the crooks in power never include that in any stats.

SailorSam

It's a big decision, i don't want to make a mistake and do the wrong thing. So i've just been checking and adding up exactly what i've got and i've decided to splash out and treat myself.
I'm going to buy a packet of Polo

IronWolf

My safety net cash would probably just take the hit. My longer term cash is in index linked accounts for another couple of years so hopefully would be ok.

Most of my wealth is in stocks though, with some foreign currency exposure so would benefit from a weaker pound.

Best place to be imo in a period of high inflation is stocks in a strong foreign currency.

Gram_Parsons

SailorSam wrote: »

I'm going to buy a packet of Polo

Only one in a packet now?! :eek:

Thrugelmir

jabba42 wrote: »

I think deflation is going to be the problem now.

Strong case that growth will stagnate in the Western world. As an ageing population and high debt levels constrain economies ability to grow.

Nor have we seen the last of the bank fines. That may well bring some well known names to their knees. Contracting bank balance sheet will do little to aid the wider economy.

jabba42

http://www.telegraph.co.uk/finance/economics/11129108/Mass-default-looms-as-world-sinks-beneath-a-sea-of-debt.html good piece on deflation today.

I spoke to a friend in Finland today who sells tin for roofs, says there is a slump in housing there now as it all go to overvalued too, pretty much all of Scandie is in the same boat.

The UK is only doing well because of house price inflation, BTL ers and the government schemes to get people in more debt. Poor !!!!!!s who have bought in London in the last 6 months are going to get castrated.

The question should be where do you put your money in DEflation, not inflation. Things will get cheaper, no one will buy thinking things are going down more. The best place to be in deflation is in cash, probably under the mattress

Glen_Clark

jabba42 wrote: »

http://www.telegraph.co.uk/finance/economics/11129108/Mass-default-looms-as-world-sinks-beneath-a-sea-of-debt.html good piece on deflation today.

I spoke to a friend in Finland today who sells tin for roofs, says there is a slump in housing there now as it all go to overvalued too, pretty much all of Scandie is in the same boat.

The UK is only doing well because of house price inflation, BTL ers and the government schemes to get people in more debt. Poor !!!!!!s who have bought in London in the last 6 months are going to get castrated.

The question should be where do you put your money in DEflation, not inflation. Things will get cheaper, no one will buy thinking things are going down more. The best place to be in deflation is in cash, probably under the mattress

When has Britain ever had deflation? The real cost of living only goes one way.
As for debt the article ignores the fundamental point. There is nothing wrong with debt if it is financing productive investment. When its financing consumption, as in Britain, is the time to worry.

lalman

I have to agree with Jabba42 - I have been thinking about this question a lot in recent years and I think deflationary winds are definitely in the air.

1. Slow down in china will lead to excess supply of raw materials - leading to decrease in prices across the board.
2. Europe is a mess even though as Jabba says they are throwing everything they can at the problem of a Japanese deflationary trap.
3. Aging population... I know as I get older I will be saving a larger proportion of my salary, thus leading to lower aggregate demand and deflation in raw materials/ products.
4. General technological advances should cause deflation as efficiency should drive lower costs if not in a monopolistic type market.
5. Reduction of credit - the west seems to be addicted to it but eventually there will come a point where we wont be able to borrow anymore and the credit bubble will either burst or contract... reducing aggregate demand further.
6. Increase interest rates - USA and UK look like we are closer to increases in interest rates even though inflation in both countries are sub 2%. Economics 101 - interest rates are used to control inflation... (and to erode debt levels).

My last point is why the situation we are in is so dangerous - we have deflation in Spain and Italy where debt levels are out of control anyway.... they have to inflate there debts away otherwise the real value of them will just increase... and is even worse in a deflationary environment.

So yes I am more worried about deflation but I have a balanced portfolio...