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stagflation

71 replies

kerrypeeper · 12/04/2022 06:55

I keep reading that this is looking likely - "February GDP came in below expectations at 0.1%".

Is it likely & for those who have experienced it before what impact does it have? Is there anything one should be doing to lessen the impact or does stuff like saving not spending make it worse?

OP posts:
cakeorwine · 12/04/2022 10:33

Mortgage

late 14c., morgage, "a conveyance of property on condition as security for a loan or agreement," from Old French morgage (13c.), mort gaige, literally "dead pledge" (replaced in modern French by hypothèque), from mort "dead" (see mortal (adj.)) + gage "pledge" (see wage (n.)).

So called because the deal dies either when the debt is paid or when payment fails. Old French mort is from Vulgar Latin mortus "dead," from Latin mortuus, past participle of mori "to die" (from PIE root mer- "to rub away, harm," also "to die" and forming words referring to death and to beings subject to death). The -t- was restored in Modern English based on Latin.

And it seemeth, that the cause why it is called mortgage is, for that it is doubtful whether the feoffor will pay at the day limited such sum or not: and if he doth not pay, then the land which is put in pledge upon condition for the payment of the money, is taken from him for ever, and so dead to him upon condition, &c. And if he doth pay the money, then the pledge is dead as to the tenant, &c. [Coke upon Littleton, 1664]

DGRossetti · 12/04/2022 10:52

Time to bring back tontines I reckon.

I paid attention when I worked in financial software Grin

MrsSkylerWhite · 12/04/2022 10:54

kerrypeeper

So what will your repayments be when interest rates are about 7 % (as in the 1980s) or 15 % (1970s) ? Can you reduce debt now?

I can't see interest rates at 15%, everything would collapse“

Interest rates were nearing 15 % when I bought my first flat. Everything didn’t collapse, though it wasn’t easy for a lot of people.

Ohwellnevermindthen · 12/04/2022 10:58

@RancidOldHag

High inflation also erodes size of debt, of course
Yes government debt is conveniently getting reduced with inflation. More tax on inflated prices too.

Then interest rates will rise too for us eventually, so prices of goods high (let's face it, they don't tend to decrease in price once they have gone up) and high interest. Lovely double whammy there.

kerrypeeper · 12/04/2022 11:00

Interest rates were nearing 15 % when I bought my first flat. Everything didn’t collapse, though it wasn’t easy for a lot of people.

But why do you think what things were like in the past is applicable to now? wages are different, jobs are different, the economy is different, the proportion of private renters & social housing all different.

OP posts:
DGRossetti · 12/04/2022 11:06

Who remembers the thrill of interest rates going from 10% to 15% in a day in 1992 ?

Hrpuffnstuff1 · 12/04/2022 11:13

Ah but, my mortgage was only £135 back in the '90s, earnings were around £1200 per month.
Never seemed to be skint and was always out on the lash.

PierresPotato · 12/04/2022 11:16

On the subject of spending to support the economy: I try to do this by shopping local then UK small business mail order. Trying to tell the kids (teen plus young adults) to stop supporting Amazon.

Philandbill · 12/04/2022 11:20

@DGRossetti I do, I was a student then but had friends with children with mortgages and a couple nearly had the banks foreclose on them. Really very close to loosing their family homes.

Otherpeoplesteens · 12/04/2022 11:22

But why do you think what things were like in the past is applicable to now? wages are different, jobs are different, the economy is different, the proportion of private renters & social housing all different.

Actually, the big difference is that the monetarism pursued by, initially, Paul Volcker in the US and then the Thatcher government here, was in a macroeconomic environment of high inflation and high unemployment, which is why Keynesian supply-side economics had nothing to offer. Now, in macro terms, unemployment is not an issue - it's labour shortages that's driving prices up.

Whacking interest rates up is not going to make one iota of difference to inflation, and it will make increasing productivity through investment even harder, but it will cause stagnation.

Honestly, I see little scope for monetary policy having any appreciable effect here. I cannot see interest rates rising because it will have no effect on the problem.

The government's problem is that it has no head room for fiscal interventions either because we ran an enormous structural deficit in the Gordon Brown growth years which brought us to our knees, followed by Brexit and the pandemic which put bullets in the backs of our heads. There is an argument that 'helicopter' money, funded by even more QE, may provide short term relief to households but the risk would be devaluing sterling and locking in higher import costs for virtually everything we consume.

The one thing I can say with a great deal of certainty is that we're all going to be a lot poorer, to the point where we'll be at or below where we would have been had we not lived beyond our means for the last 20 years.

pucelleauxblanchesmains · 12/04/2022 11:29

Excited to read about how this is all people's fault for having "flat screen TVs" and "the latest iPhone"

Puzzledandpissedoff · 12/04/2022 11:38

Thinking "no government would" isn't really a political strategy

You're right, it's not - in fact it's little more than wishful thinking

Some of us were around during the last sky high interest rates, and while it's true house prices were lower that didn't really help given the wages at the time

And all of this is worth remembering when people crow about the house market being "red hot" around them ...

DGRossetti · 12/04/2022 11:41

@pucelleauxblanchesmains

Excited to read about how this is all people's fault for having "flat screen TVs" and "the latest iPhone"
About 10 years ago, we (Strategy and Planning) picked up on generation rent that were twigging they would never own a house, and had therefore (albeit without realising) re-evaluated their spending strategies. It was grim reading for certain areas of discretionary spending, and not a great take on social cohesion either.
Hrpuffnstuff1 · 12/04/2022 12:27

@Otherpeoplesteens

But why do you think what things were like in the past is applicable to now? wages are different, jobs are different, the economy is different, the proportion of private renters & social housing all different.

Actually, the big difference is that the monetarism pursued by, initially, Paul Volcker in the US and then the Thatcher government here, was in a macroeconomic environment of high inflation and high unemployment, which is why Keynesian supply-side economics had nothing to offer. Now, in macro terms, unemployment is not an issue - it's labour shortages that's driving prices up.

Whacking interest rates up is not going to make one iota of difference to inflation, and it will make increasing productivity through investment even harder, but it will cause stagnation.

Honestly, I see little scope for monetary policy having any appreciable effect here. I cannot see interest rates rising because it will have no effect on the problem.

The government's problem is that it has no head room for fiscal interventions either because we ran an enormous structural deficit in the Gordon Brown growth years which brought us to our knees, followed by Brexit and the pandemic which put bullets in the backs of our heads. There is an argument that 'helicopter' money, funded by even more QE, may provide short term relief to households but the risk would be devaluing sterling and locking in higher import costs for virtually everything we consume.

The one thing I can say with a great deal of certainty is that we're all going to be a lot poorer, to the point where we'll be at or below where we would have been had we not lived beyond our means for the last 20 years.

I agree with the QE, short term to steady the public nerves. Demand is high, and supply side-raw materials are sloshing around the global marketplace. People just need to relax, it will all settle. Prices I agree will be higher but so will income.
2bazookas · 12/04/2022 12:28

Back in the 1970s when mortgage rates and inflation started to escalate,, credit cards were unknown. After paying the mortgage every month, we had no choice but to live on whatever was left over.
We did whatever it took to stay within that budget.

If we wanted some singular purchase ( kids bike, furniture,) we either, saved up enough cash to pay upfront. Or, we shopped at jumble sales. Or, we just did without.

One way or another everybody bought and consumed and drank and heated the home far less than people take for granted today. I kept a written food budget of every item I bought, and made weekly menu plans based on it. Everything cooked from scratch.

DH and my top priorities were; paying the mortgage and family, (especially child) nutrition.

Our social entertainment was with family neighbours and friends, almost all home-made, free, and a lot of fun.

    I am pretty sure that's where we're all heading back to. My generation can do it  very easily and younger ones will have to learn how.
Hrpuffnstuff1 · 12/04/2022 12:36

@2bazookas

Back in the 1970s when mortgage rates and inflation started to escalate,, credit cards were unknown. After paying the mortgage every month, we had no choice but to live on whatever was left over. We did whatever it took to stay within that budget.

If we wanted some singular purchase ( kids bike, furniture,) we either, saved up enough cash to pay upfront. Or, we shopped at jumble sales. Or, we just did without.

One way or another everybody bought and consumed and drank and heated the home far less than people take for granted today. I kept a written food budget of every item I bought, and made weekly menu plans based on it. Everything cooked from scratch.

DH and my top priorities were; paying the mortgage and family, (especially child) nutrition.

Our social entertainment was with family neighbours and friends, almost all home-made, free, and a lot of fun.

    I am pretty sure that's where we're all heading back to. My generation can do it  very easily and younger ones will have to learn how.</div></div>

Well, the outcry on Twitter will be deafening. Grin

2bazookas · 12/04/2022 12:41

"All those people from the 70’s and 80’s fear a return to what they experienced."

No we don't. We learned the necessary survival skills and still have them. We're just pointing out to younger generations, what might be coming and the gigantic mental adjustment they are going to face. Because they are used to having debt, credit, and indulgent non-essentials.

XingMing · 12/04/2022 13:29

Being old, I saw the 70s recession in the UK, a 80s recession in the US and the 90s recession back in the UK again. First flat bought in 1987 and was in negative equity for almost 10 years; the mortgage varied between about £450 pm up to over £700, for a thankfully fairly brief time. I earned £19k pa, which rose over the period to £27k with career progress.

Money was often fairly tight, but life was a bit simpler too. I didn't eat out much, or have a mobile phone, or beauty treatments, or Sky/Netflix/Spotify subscriptions and holidays were usually shopping the last minute deals on Friday and leaving on Saturday, for a week somewhere cheap.

It wasn't all grim. And we did get used to it, because everyone you knew was in a similar boat so it wasn't like making comparisons with "influencers". The last week before payday each month was tight.

Forgothowmuchlhatehomeschoolin · 12/04/2022 13:44

@SilverDragonfly1

From the POV of someone who was a child/teen during that time, life was different. My family weren't considered poor and nor were the people around us. So in ordinary life; no yearly holidays, even in this country- if anyone at school went abroad for a holiday it was a source of gossip for the whole of their year before and afterward! One family car bought second hand. New toys at Christmas and birthdays only. No eating out at all and if you got take away it was a huge treat a few times a year. Very occasional days out during school holidays but mostly just playing at home. After school activities existed, but you'd only do one at a time rather than several each week.

It was a perfectly good, happy life, it just didn't include the expensive luxuries that have gradually come to be seen as basic essentials for many.

I second this.....children seem to have it all nowadays whereas we did nothing at weekends or holidays - had to find our own entertainment. Summer holidays was 2 weeks at Grandma's house with a cheap Brisltish Rail train ticket where kids travelled for a quid and even when we were there we didn't do an awful lot. Didn't know any different.
kerrypeeper · 12/04/2022 13:45

My generation can do it very easily and younger ones will have to learn how.

I'm not particularly young but I do hate the constant generalising. Plenty of young people live within their means & socialise at home with friends & family.

OP posts:
DGRossetti · 12/04/2022 13:57

Just remember, there's always someone worse off than you

www.independent.co.uk/news/uk/politics/mp-salary-james-heappey-minister-tory-b2056142.html

Tory MP who earns £106k a year says he’s worried about going into his overdraft every month

...

Clearly the tax rises haven't gone anywhere near far enough, if poor souls like James have to worry about finances, rather than running the fucking country. Rishi will have to raise them again in the Autumn just to keep MPs from starving.

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