Wednesday, 16 April 2014

Picking Up The Bills

It was the duty day of the week today, the one where we have to do the shopping.  Looking at the bill my personal financial adviser aka fund manager aka forensic accountant concluded that it was a bad day at the office.

Inflation is said to be reduced and experts are going into panic at the perils of low inflation for the future of the economy but on the car park we were wondering why the cost of our routine purchasing is now so high and rising rapidly.

Looking at the media there are a raft of stories about sharp rises in property values, how rents are rocketing and all the things people claim they can no longer afford.  For those with cars to repair or care for costs are also well up.

The short answer is that the indexes are now restricted in scope and no longer reflect the broad sweep of expenditures.  As soon as the full reality of the obligations and needs of life are looked at then we do have inflation and it is not checked and it is doing the usual damage to the economy.

A reason why so many complain or have real concerns is that so many are living at the margins.  Effects of this are less voluntary "saving" and when straying across the margins the accumulation of increasing debt and interest liabilities.

Savings is a word with many meanings.  It might be long term aimed at a future pension.  It might be intended for future consumption.  But it might be needed either for essential replacements or future bills.  Sooner or later this or that will need repairs, new parts or stop working.

Low interest rates may do wonders for some people notably those in the businesses of borrowing big but for the kind of savings that are in effect future required expenditure many people are fighting a losing battle as prices rise inexorably and these days often more than income.

Because of the intensity of present consumption allied to the rapidity and uncertainty of money flows it is not balanced but delicately poised for many possible shifts and in directions we do not expect or plan for.

So don't believe a word of what they say.

1 comment:

  1. "we were wondering why the cost of our routine purchasing is now so high and rising rapidly."

    Our general housekeeping spend, mostly food, has risen by about 5% since last year yet CPI inflation is only 1.6%.