Stock market value evaporation.

Errr...., maybe into the accounts of those who can sell out at the right time, and buy back cheaply later....

BIG BEN wrote:

It goes to the people who sold their shares before the crash.

All this liquidity was created out of nothing, and it returns to being nothing.

No doubt, booms and busts such as this helps transfer wealth / tangible-assets to those that had advance warning, or did enough research.

There is risk in any financial decision.

Having your wealth tied up in cash in a bank-account is far from zero-risk.

Do you honestly believe inflation is 2%?

If inflation is 10% and they're paying 5%. Your losing 5% of your wealth a year.

"The Truth" wrote

No, it'd be only 4.5% per year.

Very good. You deserve some sort of maths prize.

Tim doesn't do ordinary maths.

If 100 pounds will be worth 90 pounds next year, but meanwhile it earns

5 pounds which will be worth 4.50, you will be (10-4.5)=5.5 worse off - 5.5%

"Troy Steadman" wrote

If you're trying to say that 90 pounds 'now' will buy the same as 100 pounds will next year, then that would be

11.1% inflation. But the OP said "if inflation is 10%"...

10% inflation means your 100 pounds will be worth 90.909...% of the new selling price ( i.e.100 div 110 )

With interest, you'll have 105 div 110 - so you're 4.5454...% short.

Of course, if you register for VATin the meantime, you'll be loads better off :-))))

You guys seem to be fairly expert to these kinds of numbers, but even youse are getting different answers. What hope do the general public have of grasping these concepts!!??

wrote

It's quite simple really!

wrote

Not really -- it's just Troy getting it wrong as usual!

Lets see comprehensive details of how the ONS has got the calculations wrong then.

It's your word against theirs at the moment and I value theirs significantly more than I value yours.

Daytona

Because inflation slowly but surely erodes the real value of your money, it's like boiling a frog. Growth of broad money supply in the UK is running in the region of 13% annualised according to the latest M4 data from the Bank of England. So even allowing for growth in GDP and your 5.10% (gross!) the value of your money has eroded by 6% over the past year, in terms of purchasing power for housing or gold, its value has eroded even further.

Money is a medium of exchange and a rather poor store of value over the longterm, your savings are quite simply inflated away "into thin air" as they keep pouring water into the whiskey bottle.

Which figure though? RPI is 3%. I take no notice of the CPI because it excludes most housing costs (not just mortgage costs like RPIX), which makes it a pretty useless measure.

The value relative to what? The value relative to the "basket of goods" used in RPI calculations has eroded 3%. The fact that there is more money than there was doesn't mean the value of money has eroded in the exact same proportion.

And in terms of purchasing power of telecom services, computers, DVD recorders etc the value of money has appreciated over the last year.

And the value of the bottle varies with other factors, not just the concentration.

Of course if one is in debt, that's good news.

Be careful not to confuse basic progress and economies of scale with monetary deflation.

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We can print money but we cannot print commodities like oil, all that extra liquidity chasing a constrained supply has an effect.

You cannot just dismiss the effects of run away growth in broad money.

Well quite, but our friend Big Ben is on the flipside, his savings are backing the fractional reserve for all those loans.

The point is that basic progress, plus other factors, counteract some of the effect of the money supply increasing.

Of course it has an effect. But it's not the only effect.

Your implication was that the money supply increasing results in a corresponding decrease in the value of money. That logic would say that as we have more houses than

10 years ago, the value of houses must have fallen since 1996!

Obviously supply is a factor, but it's not the only factor. The only sensible way to measure the value of money is to compare it to the value of other things. Which is what the various measures of inflation like the RPI do.

lol