Barclays warn of coming 'Inflation Storm'

WTF?_2

It's an interesting perspective but if prices are rocketing for everything that I buy then I don't really care whether there's credit deflation or not. I want to either get paid more money to compensate or for prices to be kept under control.

dopester

tradetime wrote: »

Well that should be entertaining for HPC crowd if indeed it is the future, when they finally get the crash they so desperately wanted, it's all to no avail, houses will still be as far out of reach as ever, the only difference is, so will most other things. Such is deflation, as said before. "be careful what you wish for......"

I don't get it? Deflation, for those with the money (assuming their savings aren't with the weakest banks) puts them in a much stronger position.

It will make house prices crash even harder and give anyone with liquidity much better purchasing power for their money for property. Heavy deflation will make banks even more loathe to lend though except for very good credit risks.

dopester

!!!!!!? wrote: »

It's an interesting perspective but if prices are rocketing for everything that I buy then I don't really care whether there's credit deflation or not. I want to either get paid more money to compensate or for prices to be kept under control.

You're unlikely to have many employers gagging to pay you more, either in private or public sectors - with a few exceptions. Many will have to take a pay cut. Funny article I read couple of weeks ago about them pressing the bosses for a pay rise, only to be told that actually the company had to let half of them go. This isn't fantasy - it's back to the real world now.

posh*spice

dopester wrote: »

This isn't fantasy - it's back to the real world now.

http://www.usatoday.com/news/nation/2008-06-30-four-day_N.htm

"Most state workers in Utah shifting to 4-day week" - Back to the 70's More leisure time!

WTF?_2

dopester wrote: »

You're unlikely to have many employers gagging to pay you more, either in private or public sectors - with a few exceptions. Many will have to take a pay cut. Funny article I read couple of weeks ago about them pressing the bosses for a pay rise, only to be told that actually the company had to let half of them go. This isn't fantasy - it's back to the real world now.

Yes, but is it going to bring down prices of the essentials? If the answer is 'no' then I consider that I'm personally suffering the debilitating effects typically associated with inflation. Whether or not monetary inflation is present is neither here nor there.

dopester

!!!!!!? wrote: »

Yes, but is it going to bring down prices of the essentials? If the answer is 'no' then I consider that I'm personally suffering the debilitating effects typically associated with inflation. Whether or not monetary inflation is present is neither here nor there.

And what will you do about it?

Work harder? Channel your creativity in to some venture to earn you more money in the downturn? Take a second job?

Or expect fancy cushy pay-rises above the market rate from employers and governments that can't afford to pay it? If you're not grateful for the job and the pay someone else will be - and with huge competition in most business sectors now (from other companies both in the local market and around the world, it's harder to hold employers to ransom by striking) - except for a few fixed industries. Deflation and depressions aren't so nice.

Those black and white pics of US people looking glum and destitute in the early 30s was because they had to live that way.

WTF?_2

dopester wrote: »

And what will you do about it?

Work harder? Channel your creativity in to some venture to earn you more money in the downturn? Take a second job?

Or expect fancy cushy pay-rises above the market rate from employers and governments that can't afford to pay it? If you're not grateful for the job and the pay someone else will be - and with huge competition in most business sectors now (from other companies both in the local market and around the world, it's harder to hold employers to ransom by striking) - except for a few fixed industries. Deflation and depressions aren't so nice.

Those black and white pics of US people looking glum and destitute in the early 30s was because they had to live that way.

Well, since I don't have any debt but do have loads of savings I won't be too upset by 'deflation'.

But as I said, if the prices of everyday stuff that I need to buy is increasing all the time then that's not deflation to me......

And no, I don't expect anything as a matter of course. ie. I'm realistic enough to know that I'm not going to get more because prices are shooting up.

dopester

!!!!!!? wrote: »

Well, since I don't have any debt but do have loads of savings I won't be too upset by 'deflation'.

But as I said, if the prices of everyday stuff that I need to buy is increasing all the time then that's not deflation to me......

And no, I don't expect anything as a matter of course. ie. I'm realistic enough to know that I'm not going to get more because prices are shooting up.

Consume less? Increase your efficiency? Although these make a deflationary spiral worse in itself.

I'm in the same situation as you. This inflation period doesn't particular worry me because I see it more than made up for in the future fall of asset prices and the future stronger spending power of my money, as credit becomes even more expensive.

WTF?_2

dopester wrote: »

Consume less? Increase your efficiency? Although these make a deflationary spiral worse in itself.

I'm in the same situation as you. This inflation period doesn't particular worry me because I see it more than made up for in the future fall of asset prices and the future stronger spending power of my money, as credit becomes even more expensive.

Actually, I'm thinking of loosening the purse strings. If the current fall in house prices continues as I think it will (and I keep my job of course) then my savings for a house go a lot further. Hence, I feel I can afford to splash out a bit.

tradetime

dopester wrote: »

I don't get it? Deflation, for those with the money (assuming their savings aren't with the weakest banks) puts them in a much stronger position.

It will make house prices crash even harder and give anyone with liquidity much better purchasing power for their money for property. Heavy deflation will make banks even more loathe to lend though except for very good credit risks.

Well that's true in theory, but given the wreckless lending that has led us to this point the banks stand in the front line. Given the spread of globalisation, as we have already seen our banks have been left reeling from the US housing calamity, that's before ours even starts, but wait, whilst they're starting to take the opening salvos from our own homegrown housing train wreck it's worth considering that the US pain is far from over, there's a lot more where that came from. That doesn't even start to consider the £billions in unsecured debt via short term loans and credit cards. How much of this are the banks exposed to, I have no idea.

So first off, wouldbe buyers are going to have to play russian roulette with their savings to put them in the "safest banks" If you know which ones those are please tell me because I have no idea.

I know, I know, there's the FSCS, but if you think about it, this was a compensation scheme designed on the premise of protecting against the highly unlikely. How reliable is that in the face of the very likely. no-one ever foresaw the current level of systemic crisis.

Then if we go into a deflationary recession we are likely looking at anything upto 30% unemployment, variable by area of course. (During the Great Depression it hit 70% in the north east, though that was largely due to the concentration of ship building in that area.)
Then don't forget, it's not only the price of goods and services that fall during deflation, it's also the price of wages, they fall the fastest, so things don't appear to get that much cheaper as you're not earning what you are now, if indeed you're earning at all. I could be wrong, but I don't think you'll find any evidence of a glut of house buying during any previous deflationary recessions.