Friday 4 December 2009

Savings Down The Plughole

When quite young my pocket money was six pence in old money or two and one half pence in new money. This may not seem much, but after my parents had paid their rent, food, coal and fuel costs, it did amount to ten per cent of what was left. So it was as much as I could hope for.

Since then there has been persistent inflation. We fought a war we could not afford, then needed inflation to effectively default on our national debt, with more to come in the course of trying to stay in the game as a world power. It took a long while to get it under control. But according to some observers now it is coming back.

For some of the population, it has already arrived, notably those in the lowest income ranges whose patterns of expenditure are not in keeping with those reconstructed price indexes largely based on a prosperous consuming debt driven culture. One characteristic of inflation is that it wipes out and deters savings. For those who rely on income from savings necessarily this will reduce their power to consume.

So whose expenditure is left to stoke up consumption and make up for the loss of saving, and what is happening? Some commentators are very worried. The diagram above was taken from “Britain’s Inflationary Debt Spiral As Bank Of England Keeps Expanding Quantitative Easing” by Nadeem Walayat in The Market Oracle dot co dot uk of 3 December.

By my calculation in a handful of years or less I will be lucky to have two and a half pence to spare to spend.


  1. I am at a loss as to why no one seems to care.

  2. The spinmeisters keep alluding to the threat of deflation. This is typical Labour/establishment doublspeak because once the QU money bomb hits the marketplace, inflation will soar.

    As if deflation were A. Bad. Thing. Deflation is the necessary correction of an over-inflated monetary system - which is necessary. Feeding the bubble only puts off the inevitable outcome which is goods being valued realistically.

    How long will they be able to keep this ball in the air? Martin Armstrong, Gerald Celente and Peter Schiff give us 18 months, by which time the dollar and the pound will implode and debt default incidences explode.

    The prospects for mortgage holders is grim indeed.