09 May 2006

Time to Save

It looks like in the next two days the Bank of England will once again raise interest rates in the UK. Good news for savers, bad news for debtors.

Its pretty good news for me, I have a bit tucked away and an increased interest rate will help hike the income from my ISA, for the economy in general though I think this will increase the number of bankrupcies by a staggering amount, personal and business.

Given the current situation in the UK, where the average age of leaving home is mid 20's and average age of buying a first house is mid 30's I think its fairly obvious that wages are well due for a hike. The probelm we currently face is that the government 'massages' the figures, making inflation look a lot lower than it really is, this means that though in real terms the cost of living is rising, as some experts believe, between 10%-18% (Mainly due to the huge increase in rental and property costs) wages only went up by 2.8%

Of course if wages go up property and rental prices will rise, creating an inflation spiral (never a good thing) Unfortunately we are already, nearly all british and american citizens live beyond their means thanks to cheap credit. Hate to say this but the americans are worse off, spending 3% more than they earn, though the british arnt far behind, saving jsut more than they are spending, I think the governments ISA scheme has a lot to do with this as it has encouraged many people to save when they previously would have thought their money better spent elsewhere.

Due to the above factors I think both England and the US will suffer corrective depressions, bringing what people buy back into line with what they can afford

1 comment:

Anonymous said...

Yeah depressions coming, buy gold and other commodities!