Hawking is right to bet on his hypthesis

Prof Stephen Hawking is this morning trying to call in his bet on the inflation theory of the Universe.

This might seem trivial and frivolous, however its a useful strategy.

Perhaps the so called "climate scientists" should place bets with their funding and pensions on the temperature rise in the future. After all they are betting with our future and lives ( an inevitable economic opportunity cost of the billions upon billions of pounds involved are choices about who lives and dies - by the choice to destroy economic value with windmills rather than use it on cancer research for example ).

The lack of interest on the high street

As the Bank of England continues its policy of keeping inflation high, much higher than its official Target, you can't find an interest rate on the high street that will stop your money evaporating.

After all those with assets were always going to end up paying for Labour's debt splurge.

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High inflation is govt policy - just not official policy

One of the key lessons of the Wiki leaks episode is there are open secrets that everyone except the voters knows.

Here's an obvious one - higher inflation is a deliberate policy to reduce UK wage costs and inflate away debt. Reducing the wage costs will bring the recovery closer as we have to work harder for our iPhone and flat screen 3-D TVs and actually sell the rest of the world something in return.

Inflation is also they way governments default on some of our societies debts.

But it all requires the pretence that it isn't happening.

That's now stretching credulity to breaking point..

Personally I'm against this policy as the greatest mistake I see the Conservative part of the current government making is not levelling with the general population about our true condition. We have instead gone for triangulation and slight of hand - and when the time comes to say "trust us there is no alternative" the credibility will be missing and we may fail as Ted Heath did.

The government needs to make an honest case, not carry out a policy in the hope no one will notice.

See also Mark Field MP "Have the authorities decided that tackling inflation will be too painful?"
James Kirkup "Inflation, the BoE and the Coalition: something's got to give"
Fraser Nelson "The inflation crisis deepens"
Allister Heath "You can’t fool everyone all the time"

( All MSM - anyone have any not MSM blog posts on this ? )

Now all savers are losing money

As the Telegraph points out now UK inflation exceeds all interest rates on offer in the UK.

Money is being syphoned away from those with savings to those with debts.

This can't last.

Bank of England to print money to stoke inflation

Well that's what the headlines should say.

The extra £50billion to be printed will mostly be given to the government to pay public servants in inefficient, but Labour voting sectors, and put off pulling the government finances out of their tail spin till after the June elections and maybe further.

The money will be taken by stealth from all those of us who have the misfortune to have their wealth denominated in Stirling.

It will also postpone the point at which the government can no longer finance its own debt.

None of it the happy clappy glad Gordon Brown is prime minister news the BBC paints.

Do you think Gordon might nationalise your pension ?

If you think this is to far fetched - its happening in Argentina today, again.

I refer you back to my post in Jan this year where I tried to frighten you all with the prospect of Gordon Brown nationalising the banks - I suspect I didn't go far enough...

To quote from my post 8Jan08:

You can see the scene - Gordon Brown standing on the steps of No10 announcing he has just taken control of the banks in the national interest and that all our money is now guaranteed by the government ( something that it says on the bank notes anyway - and its a lie there also ) due to the current financial crisis. Some of the banks assets will be used to pay for the peoples services such as the NHS and police during the current crisis [really to pay public sector pensions] - but it will all be paid back, but just for the moment no one can withdraw more than £100/day from their bank. [ Do you think this is extreme ? Well its what happened in Argentina only a few years ago - remember Gordon Brown hasn't hesitated to spend £10Billion/year of future pensioners income fire hosing cash around an unreformed public sector ].

Its not that far off. If you think the cash restrictions won't come then I saw a serious article in the press yesterday forecasting the stock exchange having to be closed for weeks at a time to stabilise the system.

Teachers to get pay cut

Gordon the con-artist has set up the Aunt Sally of 2% for pay increases, but as we know inflation is at over 4% (real world RPI - not in Gordon's magic fairy land New Labour CPI).

So roughly the teachers are getting a 1.55% pay cut in real terms this year and potentially bigger cuts in the years to follow ( as they have to accept the risk of varying inflation rates over the three years.)

Now I can't really complain about cutting back the state sector - it certainly needs doing. But I'll just point out the cowardice, spin a deception used by Gordon Brown and the Labour government ( and faithfully reported by the -as ever pro-Labour- BBC as a good pay rise ).

Remember private sector pay rises are averaging 4%, and RPI inflation ( including things you actually have to pay for unlike CPI ) is 4% (link is live - so will be update RPI inflation reported as 4% for Dec 07).

Update: Looks like the teacher's can do the math - see here

Over in the real world inflation is taking off....

The government spins and deceives to tell you its CPI measure of inflation is correct. But over in the private sector no one is fooled. Average wage increases are now at 4% and rising, as off course is inflation. (Police officers take note ... ) What's up ?

1) Food prices.
2) Fuel ( watch out for the price increase in your mail box in the next few weeks ).
3) Oil - ie petrol and diesel.
4) Anything imported as the pound dives against the Euro and falls against the dollar.
5) Your (if your English) council tax - by 100% over 10 years.
6) Your mortgage.
7) Taxes ( Income tax by Stealth of course and calling it NI, and council tax )

Source: http://www.statistics.gov.uk/cci/nugget.asp?id=19 Inflation as to Nov 07

The only thing not heading skyward are house prices which thanks to Gordon Brown's policy of trying to run the economy on private debt and pension destruction is looking worse all the time.

You should also remember that currency is only paper - if you value your house say in Gold equivalent then the price has been dropping for some time.

Its time to get the economy back on the agenda.

It worries me that England is over reliant on financial services, whilst its great manufacturing companies disappear and perish. ( Did you morn the passing of ICI - the remnants of which have been taken over by Dutch firm Akzo-Nobel ? The Chemical Industry was one of the countries great strengths 15 years ago. )

How do you plan to pay the hard working Chinese and Indian workers for all the goods and services they provide. Did anyone get a Christmas present made in England for example ? What do we do that they actually want any more ?

We are even losing the ability to feed ourselves as the population increases due to Labour failing in its duty and farming in the UK is killed of by Labour's class war on the country side.

Things aren't what they used to be - and that rate of change is at least 4%/year and accelerating.

Time averged housing data

Man in a Shed was at a meeting of engineers last night, where the presenter explained how control engineers love things like tank inventories as the smooth out disturbances. However this comes at cost else where as the trend is to reduce inventories in process plant to reduce any risks associated with them.

This popped back into my mind when looking at house price data. The headlines from the BBC web site say that annual house price inflation has changed from 9.7% reported in Oct to 6.9% now, with this month seeing a fall of 0.8%.

Now lets pretend we believe the CPI inflation index which is at about 2.1% ( RPI - the measure we used to use before Gordon changed things recently is at 200% that rate at 4.2% !!! but I digress ). A monthly fall of 0.8% - if it happened in every month of the year would be equivalent to about a 7.3% drop in house prices, even taking credit for normal inflation ( about 0.17% per month at current rates for CPI ).

So it is possible to argue that house prices are falling at a rate equivalent of 7.3%/year if you just use this months data!

Now house prices changes do vary from month to month - sometimes jumping up, sometimes down. So this is just a mathematical exercise. But the point of this exercise is to point out how historic data is being used to calm fears and panic. It is only valid if we are in an identical situation to the previous 11 months - I suspect this is not the case.

Given that the bubble aspect of recent housing price rises it is likely to pop (especially once people perceive an end to the price inflation), with people no longer fearing the escalator of future house price rises making them make unwise borrowing arrangements at the same time as many people will see their mortgages renegotiated for rises of up to 3% it is not unreasonable to expect a further house price correction.

PS Its worth looking at the NSO's inflation figures and to wonder a bit about RPI and Gordon Brown decision to switch to his new method of calculating inflation CPI. MiaS thinks something is up - and its inflation.NSO's inflation figures at Oct 2007. The RPI is a closer guide to what life is costing you if you have a mortgage.

Update: Morgan Stanley's chief UK economist David Miles warned that prices will drop 10 per cent next year. Reports the Daily Mail on 4 Dec 07. - see told you.

Don't forget inflation

Inflation was 4.6% in Feb !

We have perhaps forgotten how inflation destroys peoples lives. My wife (the main regular wage earner in the family right now) pay rise was 2.5%.

I had to check this inflation rate before i could believe it. Interest rates must go up very soon and house prices - they may crash.

Perhaps this is the crash that Gordon Brown knows is coming. Labour may be broke and his poll rating dire, but he may still want to go to the country before all these chickens come home to roust.

Did anyone here "Tory boom and bust" on Wednesday ? ( I only caught the end of Brown's speech.)