It is Obvious

Chris Rick has got altogether too much to say

Archive for January, 2015

Am I getting bigger?

Posted by chrisrick13 on January 29, 2015

It is obvious: I’m an economist

There is amazement and amusement in the non-biased reporters that I read that inflation way above target in the UK was ignored and now that inflation is below target there is much action (or at least talk of action) to do something about it.

Inflation means that debts can be defaulted by making the money that they are denominated in, if not worthless, then worth a lot less.  Who cares?  As a saver I jolly well do!

What can I do about it?  I can try and earn a lot more so that I can keep adding to my savings.  This reminds me of a hamster in a wheel.  I can invest in risky stuff and hope that my investments are the ones that don’t go bust.  I can say ‘sod it’ to saving and have a good time now.  If the UK economy fails, as it likely will, there is little difference in the plight of someone with some money and someone with no money.

So the worry that economists have that when there is disinflation (the rate or inflation is decreasing) or deflation (things are getting cheaper) then people delay purchases, is not correct.  If it happens then a spiral is nicely reinforced.  People lose jobs and deflation accelerates.  However you only have to turn to my wife, and perhaps more people than you might care to consider, to see what really happens:

“I saved £X when I bought Y £Z!”
“You could have saved £Z+£X by not buying Y”
“But I might not have any money tomorrow.”

So it is that there is this natural tendency to delay purchases until the tipping point comes.  Then the entity sees that even if the price drops close to zero there might be no money in the purse to buy it.  So get one now.

I also see people buying assets that they can use now for pleasure or convenience and might barter with later.

If we assume that people are rational then there will come a point where with falling prices people still buy.  This is the point of loss of hope for us all.  The entity that is the UK population is perhaps a better predictor than any economist.

But there are plenty of things that you cannot delay buying until the price drops.  Food is one I can think of.  Perhaps we should all aim to put as much weight on as we can while food is cheap and then go on diets when prices go up.  There is a good way of saving, put a few stone on – you can ‘eat’ it later.  Still there are some things that you can rely on that won’t contribute to disinflation or deflation: energy prices.

I’ve noticed that payday loans with interest rates on the thousands of percent are not on tv anything like as much as they were before I went away.  I hope someone does a study to see what is actually happening.  How are those people mis-guided enough to take out those loans faring?  Are they just not buying stuff?

I see that Amigo are offering loans up to £5,000.  Their interest rates are about 47%.  Seems quite reasonable when you have been looking at payday loans with interest rates in the thousands until you note that it is still nearly 100 times more than the base rate.  There is another catch.  Someone else (with a very good credit record) has to guarantee the loan.  So Amigo will lend money with a huge interest rate at absolutely no risk.

It is obvious: I’m an economist.  No I’m not.  At least I behave like one.


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There I go again

Posted by chrisrick13 on January 29, 2015

It is obvious: I hope I die

I am not writing as much as a I used to, not least because I am repeating myself.  Is that it?  My whole philosophy of life expressed in a few hundred blogs?

One of my repeats has been to invest in yourself.  I always thought of that in terms of jobs and the skills you have.  It is still true.  However it is now wider.  The money to care for the elderly in this country is 20% less than it was just a few years ago.  I  hope they adjusted the numbers I have seen for inflation.  That leads me to wonder at how right they given the range of options available for inflation rates when calculating current value.

My belief in high velocity of death is ever more confirmed.  If there is still plenty left in you but you cannot manage your life on your own then the outlook is poor.  Big families all living in the same village used to handle it.  That model exists no more.  I remember my father moved us 20 miles from his home town to work.  We got on a train every Saturday to go back and visit all the relatives.  Does that happen now?

The problem is money.  We have spent a lot of money we did not have and in some sense it has to be repaid.  There is less money available to fund all the things we rely on in this society.  We will either do it voluntarily or be forced into it.  Think of the Prime Minister (PM) telling us that he is going to cut funding to the NHS or the police or refuse clearance, or social services for the disabled and old, or welfare.  Even think of him telling us that roads were no longer going to be mended, immigration services were going to be cut, armed forces reduced, food hygiene inspectors sacked, train safety inspectors removed.

One way or another that is what is going to happen.  It is amusing to watch MPs arguing, which I have just done, while Great Britain burns.  Baby-boomers retiring in large numbers make the problem worse.  Trouble is they are not dying a couple of years later.  A huge burden rests on our children: old people to look after and debts to pay off that they ran up!

So invest in yourself has a greater spread than I first thought.  Try and work until you drop with good skills somewhere.  At least after a first retirement you might be able to find work that you enjoy doing.  Look after your body to minimise the time you need help.  Set yourself a nice long horizon and plan for it.  If you do, chances are you will end up there.

The big imbalance I see coming is people like myself.  No mortgage and some savings.  I want to keep working to pay for flights to Oz and USA once a year.  I don’t need much and it is not essential stuff.  Soon if anyone employs me there will be no NI contributions to be made.  So I’ll work at a job that a younger person absolutely needs to feed a family, pay a mortgage and pay-off student loans and I’ll do it for a lot less money.  At the moment employers don’t really see it, but they will.

It is obvious: I hope I die before I get old (P. Townshend)

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You can’t make this up

Posted by chrisrick13 on January 26, 2015

It is obvious: keep a straight face when you say things

Just read that Jeroen Dijsselbloem, who heads the eurozone finance ministers’ group, said Greece must “stick to the rules”.

One of the eurozone rules is that you must keep your budget deficit to less than 3% of GDP each year.  I can think of only one country that is doing that at the moment – Greece!

France has never obeyed this rule since it was introduced!  So why should Greece obey any of the rules?  It is certainly one ahead of everyone else!

It is obvious: keep a straight face when you say things and a lot of people will believe you.

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Posted by chrisrick13 on January 26, 2015

It is obvious: what’s a Greek urn?

Trigger event?  I don’t think so.  The trigger for a trigger perhaps.

If you go back just a few years you will see that the predictions of those imposing austerity on Greece are…interesting.  There will now be economic growth, reduction of debt and falling unemployment already well below 10%.

Given the level of accuracy of those predictions you might think that when they say that Greece leaving the Euro will be a disaster it is almost a command to get out!

Any negotiation with Greece about its debt is not about Greece.  It is about Italy, Spain, Portugal and Ireland.  Whatever Greece gets the others will demand.  Greece can easily be handled on its own.  Not the others.

So there will be a convoluted dance over coming weeks and months.  Then one day someone will crash it all.  I think that the Germans are the favourites and they could well be out the Euro before anyone else.

So, what should you do?  I think cash is king at the moment.  You can watch assets collapse and then get into them before inflation really moves off.  Trouble is you have to keep the cash somewhere.  Banks are not good entities to have any dealings with other than to owe them money.  If you have a house then chances are you will have one on the other side of the reset.  Not so sure about having two.  Build some networks.  Get to know people who you can trust and pull together with.  Get to know your neighbours.  Make sure your kitchen is fully stocked.  Make some preparation to supply your own electricity just for internet, PCs and central heating.

When will it happen?  For the UK expect a rapid unwind after the election.  However the Euro could well be done before then.

It is obvious: what’s a Greek urn?  Bu**er all.

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Babe its cold outside

Posted by chrisrick13 on January 24, 2015

It is obvious: you can fool enough people to make it worthwhile all the time

Back from Oz at 34°C to Heathrow at -1°C a week ago.  Body still in a different time zone.

So at 06:00 on Monday I had done breakfast and an hour of work.  I sat in front of BBC 24hr news tv with my third coffee.  The ticker along the bottom of the screen shouted at me that British Gas had reduced prices by 5%.  This went on as I surfed in and out for about 3 hours.  The only news was that British Gas had reduced its prices.  At every summary the presenter said the same thing.

It was a shame that nobody got BG on to the programme and asked why a more than 50% drop in the price of oil (and gas) prompted only a 5% drop in price.

Then while this ticker came on someone in the BBC made a mistake and interviewed Martin Lewis.  He pointed out the first flaw in  the ‘information’ the BBC were giving.  The price does not drop for another month.  This means that the month with the biggest consumption of gas will still be done at the old price while most people think they have a reduction.

Then he pointed out that the average dual-fuel bill was £1280 and this would take it down to £1240…in a month’s time.  You could take it down to £960 today simply by switching to Ovo or one of several other providers.  You could get over 20% reduction in your bills today by switching.

Why does anyone take their gas from BG?

It is obvious: you can fool enough people to make it worthwhile all the time if the media are compliant and paid off.

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