On 15th October the limit on Contactless payments rose from £45 to £100. This in my view was more significant than the day we turned to a decimal currency, again on the 15th but in February 1971 or 50 years ago.
Then we saw the era of great inflation requiring the need to raise interest rates to near 20% and ushering in the pounding of the pound. It’s happening again the pound is being pounded and the over doubling of the contactless limit is that the pound is losing its value.
The current deficit of UK Government , the difference between income from taxes and revenues and expenditure is for next year going to be £390 billion and the Government need to borrow another £240 billion. Inflation of course reduces the debt value but next month interest rates will begin to rise.
The usual hedge against inflation is property yet higher interest rates will reduce affordability so much so that we can expect a flatlining in the market, probably for 10 years. Houses in that period will still be bought and sold but prices will not rise and for those needing to sell fall away.
Meantime you can see inflation at the petrol pump ( if there is any ), on the supermarket shelves ( if they have got the stock ) , in the restaurants where the starters are priced as main course and main course pricing removes desert ( good for those other pounds ). No youngster can afford a home unless the Bank of Mum and Dad open its doors ( average gift £58,000 ) from the £10 billion already given.
Voltaire famously told us that any fiat currency eventually reverts to the intrinsic value of zero. Fiat mean printing press for those who believed it to be a car. Meantime Bitcoin and other digital currencies priced in dollars will continue to rise only because of its limited supply. What my head can’t get around is how I can buy a pizza with Bitcoin or pay the Council tax. I know some days I can buy a Tesla and some days not but I need stability and Bitcoin doesn’t have that ( yet ).
If Voltaire was right we hit zero pound value in the next 10 years , the dollar will cease and we will need wheelbarrows. Ultimately any currency is barter, an exchange of values. I’m going to rely on Leonard Cohen ( again ) when In his song Everybody Knows he wrote :
‘ Everybody knows the poor stay poor and the rich stay rich that’s how it goes Everybody Knows ‘ In one of his other songs Future, he prophetically tells us that he’s seen the future and it is murder. I prefer to think of happier things like balloons but when I do I think of inflation. The pound is taking a pounding and will do until it drops, think Tyson Fury and you’ll see it. #money #inflation #pound
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