Britain stuck with high inflation, meagre growth..

[Mich the Tester]

The likelihood of that happening is however, far lower than the likelihood that your money in the bank will be greatly diminished by the current level of QE.

There are enormous uncertainties in this reasoning. You think you can predict consumer spending patterns. For the last 30 years or so, lots of people spent lots of money on houses. But that's a short period of human history that doesn't reflect spending patterns over a longer period of time. Before that people spent more on food, but then food got much cheaper. Food may well be about to get much more expensive. Here in NL we have relatively low unemployment, the economy is sort of bumping along, one quarter is bad, the other is good and banks are lending to people who want to buy houses. Trouble is, people don't want to commit to big mortgages and there isn't any demand for houses; there are demographic shifts that can explain some of that, but also attitudes.

In a small and very unscientific survey, just look at the people I work with. They're all between 25 and 45, earning twice average income or more, and what do they talk about doing with their money? Travelling, eating out, going to concerts or the theatre and buying gadgets. Around the dinner table, nobody says he wants a big house, in fact most say they don't care as long as they have a decent place to live. Now OK, this is a bunch of nerds, but they're well paid nerds, and in the past people in this income group and age group sat around discussing house prices. My parents spent their money on big smart houses, possibly because they'd grown up in small, cramped, cold and crappy houses. People who make money spend it on buying what they missed in their youth. Having grown up fairly comfortably, I and the people around me don't really have any dreams of 'moving up the property ladder'. I've got a house, it's fine and I'm not missing put on anything in that aspect of life, so i don't need or even want a bigger or more expensive house. I'd rather spend my money on experiences; I'd like to visit friends in Ethiopia and travel around there. I'd like to go to the Concertgebouw more often than I do. I'd like to go to Japan. My only material desire is a new track bike. All those things cost money, and that's money I won't be spending on a house. Believe it or not, there may be many more people with the same attitude; maybe I'm not wierd. That's a frightening thought.

[Robinho]

It is not an enormous uncertainty. Even if the demand for houses does fall, it is not going to counter the ridiculous amount of money that is being printed.

[Mich the Tester]

It is not an enormous uncertainty. Even if the demand for houses does fall, it is not going to counter the ridiculous amount of money that is being printed.

Well, I see your logic that printing money leads to inflation, and possibly that will happen. BUT, what articles will become more expensive is another matter. If food and fuel prices rise fast, then their share of household expenditure rises, leaving less for spending on a mortgage or rent. I think significant rises in the cost of food and fuel are also a realistic scenario, certainly as realistic as money supply driven inflation.

[Robinho]

Relative prices might change but are very unlikely to change dramatically.

[Mich the Tester]

Relative prices might changes but are very unlikely to change dramatically.

That's a big prediction.

War in the middle east could cause a huge spike in oil prices. A couple of poor harvests in the US or Europe could cause a huge spike in food prices, as could continued desertification in Africa, increases in domestic demand for meat in developing countries which lead to less land being used for veg, increased use of land for bio-fuels, reduction in farming activity in some places due to urbanisation, a big volcano causing cold winters for a few years and reduced harvests; there are more uncertainties than you would like to imagine. Some of them are caused by long term trends, others by short term events; all can affect household spending patterns quite dramatically in a very short time.

[EternalOptimist]

my own, personal price inflation has remained very low, mostly due to luck. For that reason, I am not too fussed about QE

[Ketchup]

This recession is actually needed in order to make Britain great again.

IMHO (i am by no means an economist), a lot of Britains problems are caused by the lazy lower classes. The welfare bill of this once-fine country is over 6% of GDP, the lazy lower classes are happier to sponge off the state than work for an honest living.

There are a large amounts of immigrants in this country who will work cheaply to do the jobs that were previously done by the working-class British public. A stat that i find highlights this is - a cash-in-hand cleaning job in london pays more than that of a judge in India. The supply of immigrants willing to do these jobs has driven the offered wages down, making claiming benefits a much more attractive option. A lot of these migrant workers then save their money and then send it home, this money leaving the economy is severely damaging as people spending their wages is what keeps the economy growing and is cylcical, money spent in the economy stays in the economy, buying a meal in the restaurant pays the wages of the restaurant staff, cleaners, delivery drivers, food suppliers, who in turn go and spend their money in another restaurant and the money keeps flowing. Now take out the cleaners and waiting staff who are immigrants, they dont spend their money in the country and take it home with them, the ytake the maximum they can back to India with them (believe it is 9k), this is more than they can hope to earn in 10 years in India, their neighbors see how much they have earned and decide to come over. I think we can all see where this ends up.

In order to fix the economy, we need to send the immigrants back home and force the benefit scroungers back to work, and if they wont work, make them work for their benefits.

[Mich the Tester]

my own, personal price inflation has remained very low, mostly due to luck. For that reason, I am not too fussed about QE

Do you mean to say you're a happy person that doesn't really worry about the 'value' of your house?

[Mich the Tester]

THE OPIATES OF THE MIDDLE CLASSES
Nassim Nicholas Taleb [9.25.05]

As a practitioner of science, I am opposed to teaching religious ideas in schools. But, it seems to me somewhat misplaced energy — more of a fight for principles than for any bottom line. As an empirical skeptic, I would like to introduce a dimension to the debates: relevance, consequence, and our ability to correct a situation — in other words the impact on our daily lives.

My portrait of the perfect fool of randomness is as follows: he does not believe in religion, providing entirely rational reasons for such disbelief. He opposes scientific method to superstition and blind faith. But alas, human skepticism appears to be quite domain-specific and relegated to the classroom. Somehow the skepticism of my fool undergoes a severe atrophy outside of these intellectual debates

1) He believes in the stock market because he is told to do so. — automatically allocating a portion of his retirement money. And he does not realize that the manager of his mutual fund does not fare better than chance — actually a bit worse, after the (generous) fees. Nor does he realize that markets are far more random and far riskier that he is being made to believe by the high priests of the brokerage industry.

He disbelieves the bishops (on grounds of scientific method), but replaces him with the security analyst. He listens to the projections by security analysts and "experts"— not checking their past accuracy and track record. Had he checked them he would have discovered that these are no better than random — often worse.

2) He believes in the government's ability to "forecast" economic variables, oil prices, GNP growth, or inflation. Economics provide very complicated equations — but our historical track record in predicting is pitiful. It does not take long to verify these claims; simple empiricism would suffice. Yet we have confident forecasts of social security deficits by both sides (democrats and republicans) twenty and thirty years ahead! This Scandal of Prediction (which I capitalize) is far more severe than religion, simply because it determines policy making. Last time I checked no religious figure was consulted for long-term business and economic projections.

3) He believes in the "skills" of the chairmen of large corporations and pays them huge bonuses for their "performance". He forgets that theirs are the least observable contributions. This skills attribution is flimsy at best — there is no account of the possible role of luck in his success.

4) His scientific integrity makes him reject religion but he believes the economist because "economic science" has the word "science" in it.

5) He believes in the news media providing an accurate representation of the risks in the world. They don't. By what I call the narrative fallacy, the media distorts our mental map of the world by feeding us what can be made into a story that can be squeezed into our minds. For instance (preventable) cancer, not terrorism remains the greatest danger. The number of persons killed by hurricanes, while consequential, is dwarfed by that of the thousands of isolated daily victims dying in hospital beds. These are not story-worthy, implying; the absence of attention on the part of the press maps into disproportionately reduced resources allocated to their welfare. The difference between actual, actuarially defined risks and the perception of dangers is enormous — and, sadly, growing with the globalization and the media, and our increased vulnerability to visual stimuli.

Now I am not arguing that one should ignore the side effects of religion — given the accounts of past intolerance. But it was in these columns that Richard Dawkins, echoing the great Peter Medawar, recommended bright students to find something worthwhile "to be smart about". Likewise, I suggest exerting our skepticism "where it matters". Why? Because, alas, cognitively, our resource to doubt is rather limited.

We humans are naturally gullible — disbelieving requires an extraordinary expenditure of energy. It is a limited resource. I suggest ranking the skepticism by its consequences on our lives. True, the dangers of organized religion used to be there — but they have been gradually replaced with considerably ruthless and unintrospective social-science ideology.

Religion gives many people solace. On a personal note I have to admit that I feel more elevated in cathedrals than in stock markets — be it only on aesthetic grounds. If I were going to be gullible about a subject, I would rather pick one that is the least harmful to my future — and one that is rewarding to my thirst for aesthetics.

It is high time to worry about the opiates of the middle class.

[cailin maith]

I am begining to suspect that you are trying to wreck CM's fine thread

CM lost interest ages ago when someone mentioned Jack Bauer ..... oh, that was me was't it

Seriously though I have been reading it, although not really understanding everything.

I'd much rather live in a comfy home and have lots of nice holidays and trips than a fecking big mansion and no cash to do anything.