[David Slater]

I thought the whole point of working for yourself was to go beyond everybody else stuck in the rat race.

Sure you have to be aware of the current business climate, but you don’t have to react like the majority. There should be more to you than reacting and being pushed from pillar to post by just what is in the news.

Point to remember when you get large changes in the economy; it will go hand in hand with what is called transference of wealth. Put simply people with money will lose it and some who never had any will get it.

The money is still there it hasn’t disappeared, although the way some people talk you would have thought it had vanished.

 

Ewan,

The money HAS "just vanished".. if it was merely a transfer of wealth then thats all well and good and quite a natural part of a capitalist society (we buy and sell things usually for a profit).

But this is the problem we have today -

If you had bought a house 12 months ago for 200k in all likelyhood it is now worth 10%-15% less with further falls predicted. This money hasnt been "transferred" to someone else. It has quite literally disappeared!

If you had bought Northern Rock shares, the money hasnt been transferred to another person, it has literally gone!...never to be seen again.


Normally, being cash rich in this sort of environment is the best policy. But not so today! If you're lucky you'll return 6 or 7% in a decent deposit account....but gas has risen 35% and electricity 9% and food by 24% and petrol (well, I think we all know whats happened there!). So even your savings are being eroded by inflation. Your cash savings are literally disappearing before your very eyes.

For an extreme example think of Germany (post war) and Zimbabwe today with hyper inflation.

Unless wages rise by 10 - 15% this year, we are all poorer than we were this time last year....and I dont see the government offering more than 2-3% to most of their workers! So in effect almost all public sector workers have had a pay cut.

It doesnt really matter if you have cash or assets. Your 'wealth' is eroding very quickly.
If you have customers who are cash rich (pensioners) they are getting poorer each day and if you have customers who are asset rich (landlords, builders, management companies) they too are getting poorer each day.

Asset Rich customers also have another serious problem beyond their asset being worth less - the cost of servicing their debt has risen dramatically. Mortage rates have been climbing steadily over the last 24 months with no sign that they will  come down. Again, their 'wealth' is quite literally vanishing just servicing the debt.

That my friend, is why they are calling it a Perfect Storm.


Not a very happy picture if you ask me.

[Tosh]

David,

If all that was 'your own words', good post mate. 

None of it was new to me (ahem!), but it was concise and sounds logical; easy to read too.

If I were this site's owner, I'd send you a bent squeegy channel for the 'post of the month' competition.

------------------------------------

So when do you think we'll come out of this current financial crisis?  I've read somewhere, I think it was Hello Magazine, that it'll take till the UK Olympics take place in 2012!

[David Slater]

David,

If all that was 'your own words', good post mate. 

None of it was new to me (ahem!), but it was concise and sounds logical; easy to read too.

If I were this site's owner, I'd send you a bent squeegy channel for the 'post of the month' competition.

------------------------------------

So when do you think we'll come out of this current financial crisis?  I've read somewhere, I think it was Hello Magazine, that it'll take till the UK Olympics take place in 2012!

Thank you Tosh,

Yep, they are all my own ramblings.

A swanky new Autobrush would be a nice prize   

[David Slater]

I thought the whole point of working for yourself was to go beyond everybody else stuck in the rat race.

Sure you have to be aware of the current business climate, but you don’t have to react like the majority. There should be more to you than reacting and being pushed from pillar to post by just what is in the news.

Point to remember when you get large changes in the economy; it will go hand in hand with what is called transference of wealth. Put simply people with money will lose it and some who never had any will get it.

The money is still there it hasn’t disappeared, although the way some people talk you would have thought it had vanished.

 

Ewan,

The money HAS "just vanished".. if it was merely a transfer of wealth then thats all well and good and quite a natural part of a capitalist society (we buy and sell things usually for a profit).

But this is the problem we have today -

If you had bought a house 12 months ago for 200k in all likelyhood it is now worth 10%-15% less with further falls predicted. This money hasnt been "transferred" to someone else. It has quite literally disappeared!

If you had bought Northern Rock shares, the money hasnt been transferred to another person, it has literally gone!...never to be seen again.


Normally, being cash rich in this sort of environment is the best policy. But not so today! If you're lucky you'll return 6 or 7% in a decent deposit account....but gas has risen 35% and electricity 9% and food by 24% and petrol (well, I think we all know whats happened there!). So even your savings are being eroded by inflation. Your cash savings are literally disappearing before your very eyes.

For an extreme example think of Germany (post war) and Zimbabwe today with hyper inflation.

Unless wages rise by 10 - 15% this year, we are all poorer than we were this time last year....and I dont see the government offering more than 2-3% to most of their workers! So in effect almost all public sector workers have had a pay cut.

It doesnt really matter if you have cash or assets. Your 'wealth' is eroding very quickly.
If you have customers who are cash rich (pensioners) they are getting poorer each day and if you have customers who are asset rich (landlords, builders, management companies) they too are getting poorer each day.

Asset Rich customers also have another serious problem beyond their asset being worth less - the cost of servicing their debt has risen dramatically. Mortage rates have been climbing steadily over the last 24 months with no sign that they will  come down. Again, their 'wealth' is quite literally vanishing just servicing the debt.

That my friend, is why they are calling it a Perfect Storm.


Not a very happy picture if you ask me.

Money doesn’t just vanish as you say it does, a house is not money you are talking about valuation, as with shares. Its people confusing the two, as always. Money and valuation are to very different things.

I don’t think you should be comparing the UK current situation which is not as bad as people are making out. With post war Germany and Zimbabwe, which is a very ridiculous thing to do?

According to you everybody is getting poorer and yet you go on to talk about relative small changes in the economy regarding the inflation with individual examples which themselves don’t give the full picture. By your examples the economy is in deflation.

As for the Perfect Storm I saw the film it is very good. I don’t know where you picked that up in this context probably the media again behaving like a drama queen. Then people like you running around like Chicken Little saying the sky is falling.

If you could comprehend how wealthy this country is your view will change, and maybe you will start to look at the real issue.

 

I'm not quite sue what you mean by the real issue?

The phrase 'Perfect Storm' was around long before the film! Its just a short way of explaining a whole series of seemingly unconnected events which conspire to bring about an even bigger problem.

Money can and does 'just vanish'...lets say you had £5 in 1950 do you think you could buy the same amount of goods/services today for that £5 as you could back then? Of course not. Unless you invested your money into something which gave you a return equal to or above inflation then to all intents and purposes your money has vanished (or should I say, your buying power has vanished).

You may still physically hold that £5 note in your hand but your 'wealth' has indeed vanished over time with inflation.

Zimbabwe and Germany were (as I explained) two very extreme examples of hyper inflation. The UK is not experiencing hyper inflation but its is experiencing inflation well above the official figure of 2.7%...and I think we'd all agree on that!

No, I dont think a few small changes have brought about deflation. We are experiencing stagflation which I feel will lead us to an inflationary enviroment. INFLATION is the killer!

You need to understand first and foremost that Fiat money is just a way of transferring goods/services from one person to another.....we could use beans or leaves or coconuts!!

I dont post my 'feelings' or 'opinions' on this subject. I post the facts that I see before me every single day. If I saw my petrol, gas, electric, food, mortgage or council tax payments going down then I would talk about that. I dont. I see them rising and I dont see wages rising to meet them. So yes, to all intents and purposes you are working for LESS today than you were this time last year.

Its a very complex subject which isnt easy to explain in a few short posts.

Try googling -

Fiat Money
Inflation
Stagflation
Gold Standard
....the list goes on

There some very good lectures and discussions on youtube which are worth a look as well.







 

[avesovum]

Well Dave,

I understood that perfectly.

Good post for the non financial savy to read.

[David Slater]

Well Dave,

I understood that perfectly.

Good post for the non financial savy to read.

Thank you avesovum,

I dont pretend to understand how it all works but I do have a basic understanding of how it moves around the globe and how it can rise and fall for seemingly no reason! Its a fascinating subject once you get into it.

I'm trying to keep it very light without getting bogged down in too much technical analysis....which is heavy going and VERY boring!

I just hope one or two people will go searching the web for more information.

Knowledge is Power as they say!

[ftp]

Well done David, i don't know about the perfect storm but that was the perfect post!
I can't believe how daft some people are not being able to see what's going on and not understanding basic maths. Anyway, i must go now because i'm going to print loads of money to help the economy - might even pass it on to the people who havn't got any.  :

[avesovum]

David Slater, You don’t know the real issue, like most people, so that’s not unusual.

It doesn’t vanish, its called inflation a word you keep using but don’t understand.
Inflation devalues money, again this misunderstanding about money and valuation.

You may not understand this but you must have inflation! The alternatives are worse.

You might understand this one money is an idea!

Stop confusing money and valuation and you will get clarity.


As for working for less today than I was last year, I don’t think so, for some maybe but I have a better understanding as to what I am doing. How else are you going to get ahead?

Keep googling and understanding, most wont and it will give you an edge over the rest and you will have an accurate understanding of what’s going on in business while the rest get there info from hearsay and the media. Or to put it another way, the rest get the info from Joe Bloggs or from journalists, hardly the best people don’t you agree!

 

Well Ewan,

I think Dave did a good job explaining it in Layman terms meaning "One of the people, in distinction from the clergy; one of the laity; sometimes, a man not belonging to some particular profession, in distinction from those who do." and it still looks like people can't grasp it.

Never Mind I sympathise.

[David Slater]

David Slater, You don’t know the real issue, like most people, so that’s not unusual.

It doesn’t vanish, its called inflation a word you keep using but don’t understand.
Inflation devalues money, again this misunderstanding about money and valuation.

You may not understand this but you must have inflation! The alternatives are worse.

You might understand this one money is an idea!

Stop confusing money and valuation and you will get clarity.

As for working for less today than I was last year, I don’t think so, for some maybe but I have a better understanding as to what I am doing. How else are you going to get ahead?

Keep googling and understanding, most wont and it will give you an edge over the rest and you will have an accurate understanding of what’s going on in business while the rest get there info from hearsay and the media. Or to put it another way, the rest get the info from Joe Bloggs or from journalists, hardly the best people don’t you agree!

 

Oh my word!!!

Ewan...No! no! no! no!

We DONT want inflation. Every Chancellor spends countless hours lying in bed at night pooping his pants trying with all his might to GET RID of inflation and banish it from the economy.

Gordon Brown and his 'Golden Rule' of borrowing less than 40% of GDP should show you that. He has had praise heaped on him for keeping inflation pegged at less that 2% for nearly 10 years. That was a GOOD thing....what wasnt so good was the off balance sheet PFI PPP deals which falsely kept the real debt burden off the books! (thats coming back to haunt him now!).

Inflation is a self feeding cancer. It helps nobody. It achieves nothing. It devalues savings and thus devalues your 'wealth'.

I'll try and explain -

Lets say:

In 1950 a pint of milk cost 7p and the milkman was paid £1 per hour.
INFLATION rears it ugly head and the farmer needs 12p because his cattle feed supplier has raised his prices beacause of bad weather or a strike....so the dairy need to sell their milk at 20p

Now the milkman needs a pay rise...because he needs to buy milk as well for his family.

So the dairy pay him £2 an hour.

Question -

Who is better off now a pint of milk is 25p instead of 7p ?

Question -

If you had savings in the bank (your savings dont get a payrise remember!)...are your savings worth more or less than they were yesterday?

Growth is good. Inflation is BAD

 
 

[Moderator David@stives]

The money hasnt vanished if you bought an house for £200'000, 12 months ago the person who you bought it off has got your money.

The same with the Northern Rock shares the person you bought them off has got your money.

[David Slater]

The money hasnt vanished if you bought an house for £200'000, 12 months ago the person who you bought it off has got your money.

The same with the Northern Rock shares the person you bought them off has got your money.

The 'Greater Fool' as they call it.

Well, surely you must realise that just like pass the parcel....eventually there will be a 'greater fool' who is left nursing the loss.

It doesnt matter which party it is - if you sold your house then good for you! but the person who bought that house is now nursing a loss.

Someone, somewhere is now holding a pile of useless bits of paper with the words 'Northern Rock shares' written on them which they paid 'real' money for and which are now worthless.

They could have bought a loaf of bread or a car with that 'real' money but they cannot exchange the Northern Rock share certificate for anything can they?

In my book, thats a loss.

[gary999]

great post by david slater.

we can all argue whose right or wrong about whats going on
but the reality is the pound in mine and my customers pocket
isnt going as far as it did last year or even six months ago

thats what concerns me and know doubt my customers!

[Moderator David@stives]

 might have a worthless house worth £200k but does it matter it is quite affordable and i have to live somewhere.

If you look back in History house prices long term ALWAYS go up.

At the moment I welcome a fall in the propert market, just makes my next move a bit more affordable

Share prices come in and out of favour , but overall the stock market is a long term winner.

[Glyn H]

This is the time when millionaires and billionaires are going to be made
buying property at  cheaper prices and selling when the prices rise again as they always have done.

This has been the busiest window and gutter cleaning month we have had for years - probably because people have decided not to sell but to make good the property they are in.
I heard the same from a fencing contractor who has never been as busy!

The media only reports on negatives never on positives - the newspapers and news reports sell us fear of what might/could happen. Its just got worse and worse creating a  fear of terrorism,global warming,inflation,immigration

[Moderator David@stives]

I have had a record month every month for the last 6 months.

Where is this doom and gloom  ?

[Clive McDonald]

Right at this very moment a group of slanty eyed rascals are sat around on great sack fulls of banknotes eating egg foo yung  shouting greater fool are you Ewan!!!

When you go on holiday you can't move for rich russians elbowing you of the way at the allinc food troughs. We are the new poor people. We've either sold or given away our knowledge, have no energy or mineral resources, and are fast becoming a nation whose leading industries are window cleaning and landscape gardening. Neither of which produce wealth :

[bluez]

Im no economist but surely moderate inflation, well controled by central banks and interest rate changes, and consistant gentle growth in gdp and a surplus of exports over imports is economic utopia.

You can play semantics but the facts are that if I need cash tomorrow my nett worth has been deminished in both actual terms and theoretical terms and my ability to borrow has been harmed.

Translation: cash is king
 

[Clive McDonald]

Well at least I do my bit for the country, I'm right in there with the ruskies elbow to elbow- did you see they kicked the BP boss out?That'll be another asset they sieze.

A lot of good posts on this topic but you can't even grasp the wealth creation concept.

[paulscotney]

The only time the economy went wrong for more than a 10 year period was when the black death occurred and that was quite a few centuries ago.

[peter holley]

iv just bought a house  and its gone down in value.... do i care? no! why should i its worth more than the money, its my home where i intend to live for many years.....also i still have equity. on my last house i also had it go down in value after i bought it, did it matter ? no , as i lived there for years and i sold it for 3x its original purchase price ;
what matters to me is that i can keep my buisness growing by finding customers that can pay me...
i am not worse off than i was this time last year,,,,, yes, my bills are higher , but my wage has increased more than inflation....

i keep positive and strive to increase and move forward