h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Think about it.
Was it wage demands that caused inflation ?
There was a time when with a salary of £1000 a year you were well up the ladder.
A million really was a fortune.
A farthing was still legal tender.
"One of each" was one pennyworth of chips with one pennyworth of fish and that was old £.s.d money.
Why did the bankers tell children and old people to save a pound for a year and get a pound and a tanner back ?
Surely that has to be inflation automatically built into the system.

Saving a pound and getting more back is called paying interest. Effectively you're giving the bank your money for it to invest (lend, buy shares/stocks/bonds, whatever) It has nothing to do with inflation. Inflation has to do with rising prices and rising wages.

When I was a kid (a long time ago!) my Mum used to say that when it came to saving, the first £1000 was the hardest. Then it became the first £10,000. Now, with low interest rates, saving anything seems pointless.

Yes, yes, it's far more trouble than it's worth. Fortunately for you I am in a position to take it off you hands through the 'Radox The Green money disposal programme'. Simply give all your money to me and you'll never have to worry about it again.

The wise are investing their money in alcohol.

Yeah...If I had all the money I've ever spent on alcohol - I'd spend it on alcohol.

If you save £1000 in a savings account at 0% interest rate, next year, you still have £1000 more than you would have had, had you not saved it.

Saving is still worth it surely.

Nuh-uh. The *value* of the money would be £1000 - (1000 x Inflation Rate). You'll get less for your grand.

Saving is always worth it, even if interest rates from banks/building soiieties drop to 0% its still worth it. To think otherwise is to be foolish and individually adopt the attitute which llobally helped lead to the current money mess the global economy is in.
The alternative to not saving is living hand-to-mouth, to coin a phrase, money comes in and is stright out, no money is aaved.
The first unpredicted thing to happen your up shit creak wthout a paddel: Whatever that might be, loosing your job, washing machine breaking down, just needing to have some cash to do a bit of unexpected travel, whatever...
Personally I know tat if, today, the washing machine, tumble dryer, PC, and roof on the house all broke I could just walk out of my house and go buy all of these new for cash. If I coudln't.... what,?; A loan? hardly easy at the moment and no matter how low interst rates may fall, you can bet you'll still be charged interest on that kind of loan,... Stick it on the credit card, excellent idea, most of those or at least a lot still seem to run at %17 interst rathes no matter where and where the base rate is...

Having said which, I was somewaht* reliant until recently on the monthly interest paid out by my Building society on my main savings account, which is now, of course down to double rahter than tripple figures each month; Though with the current goings on financially I'm now havng to have a seiorus look at if its soon to be more logically to turn that money into a rentable income from a flat/house, as the drop in interest rates has seemingly in parts of the country at lest, been happening alongside some fairly dramatic house price reductions, though IMO at where I'm looking they've not fallen as far as they might quite yet...

As soon as money becomes a problem, it's more trouble than it's worth, IMO.

It's a tool, a means to an end (i.e. I do a job for someone else, they pay me in a symbolic fashion -money-, which I can covert into something I do want or need. It's just a glorified barter system). As soon as it becomes an end in itself, it's all back to front, inside out, the priorities are screwed and it's more trouble than it's worth.

>> You'll get less for your grand. <<

Only true whilst inflation is positive.

One of the dangers of the current situation, and one which the monetary authorities are desperate to avoid, is deflation. This happened in Japan in the 1990s and is referred to commonly as "The Lost decade"; although saying that, they're not out of the woods yet and it's fast turning into "The Lost Two Decades".

RF

>>Only true whilst inflation is positive.

Indeed. The problem with deflation is that everyone stops spending in the expectation that everything will be cheaper later on.

Hand to mouth is a way of life for a great many people though 2legs.

"The survey found that 36% of people asked would run out of money within 11 days if they found themselves jobless because they had savings of less than £500." http://news.bbc.co.uk/1/hi/business/7524214.stm

I suspect that figure would change depending on what day of the month they did the survey.

The old adage of being "2-3 pay cheques from the gutter" doesn't apply for most people any more. The change in working practices associated with an end to the "job for life" culture mean that many people have interruptions to their earning cycle caused by job changes, redundancies, re-training, further education etc. Stable working patterns and therefore saving patterns are a thing of the past.

Further, many people have had to divert the proportion of their wages that once would have gone to savings into private pension plans. This money only becomes accessible when they retire. Others live under the illusion that owning their home is a form of savings, thinking they can turn it into liquid assets in times of crisis. The housing crash has put paid to that.

The value of savings in economic and practical terms has fallen. The emphasis switched to availability of credit. At one point I had unused credit cards and overdraft facilities approaching six figures. In an emergency, these would have been my first port of call. But these too have been reduced or withdrawn for many people.

IMO, the economy is in a very precarious position at the moment. It wouldn't take much for millions of people to be facing a serious financial crisis.

Indeed, the hand-to-mouth is far too common, even in so-called developed countrys/economies like the UK, as is the being X pay checks from being absolutely broke. Though to be honnest it is mainly peoples own faults for this. Anyone stuid enough to have believed the credit could go on and on indefinately, and kept rushing out buying new things they didn't have the money for, well if they pay the price of loosing their home for their stupidity, maybe they'll learn by it.
I got made redundant/laid off/contrct not renewed in November, I'd been working since the previous Sep/Oct in that job. Before tax salary £12K I saved £7K that year. :- ADmitidly I had some other income at th etime; namely still the interest from my previous savings whilst interest rates were half-decent. And I've managed in the last thirty-two years to amount zero pounds of debts with the exception of my student loans. Its just a question of being sensible and not behaving like spoilt kids and believing that people have some kind of devine right to go out and pay £££ on pointless crap they don't need.

>>Its just a question of being sensible and not behaving like spoilt kids and believing that people have some kind of devine right to go out and pay £££ on pointless crap they don't need.


But that's just the pernicious myth that politicians use as a cop-out, isn't it: 'People have only themselves to blame if they borrow too much.'?

Except that most borrowing is in the form of mortgage borrowing. Individuals don't have much control over house price inflation. But everyone needs somewhere to live.

Morgages are indeed on fo the biggest loans, that individuals will take out, but of fiiends I know its often those other, unsecured, and useually very high interest rate loans, for the second car on HP, the unsecured bank loan for a new kitchen etc., etc., that crippled their finances eventually.
I've been looking at mortgages myself recently and Atlhough they say its hard for first time buyers, the rates are looking pretty damn low these days on the variable and trackers...

I'm not sure that's an accurate depiction 2legs, although it's certainly an important feature. Loan sharks were a feature of life in the 1930s: credit was easily obtainable, but at a price.

I'd like to find an updated version of this - http://www3.interscience.wiley.com/cgi-bin/fulltext/120048910/PDFSTART an analysis of the average length of unemployment for the average worker. It's well out of date ow, but it showed an increase in the average unemployment length from 5 weeks to twenty weeks in the period from the early sixties to the late seventies. And this in the so-called "golden age of capitalism". I strongly suspect that periods of economic inactivity will have increased over the last twenty years.

When periods of income are broken, it makes it harder to save. This in itself may have fuelled the rise in easy credit. Another aspect of society that has changed has been the nature of work itself. From large, centralised manufacturing centres to diffused service sector jobs. These require more expense from workers in terms of transport costs - for many a car is actually a necessity,not a luxury. Without credit it would be very difficult to have sufficient cash to buy a car in time to take a job.

While I sort of agree with you, 2legs, there is grey area where circumstances dont allow for any cumulation of capital in the first place.

I own a TV because I got given one (left over when someone else bought a new TV, I saved it from the skip), I own a computer because I got given one (only useful thing my dad ever did for me was buy my brothers old laptop for me cos he needed an upgrade to a mac for uni), my three-piece suite was given to me and my coffee table I bought at Sofa Project around six years ago and did up myself, it was a mess. The only thing I've got that I have bought for any amount of money is my car, I've had it 5 years and it needs plenty of work. I've had to pay rent and council tax from the age of 16 on an apprentice's wage and I've never had the chance to build up savings. I manage, but it's tight. Was before the 'credit crunch' and it's no different now.

I'm not moaning, I'm just building a portrait of the circumstances which might stop a person building up any sort of savings for a rainy day. When having somewhere to live, transport (necessary for me) and feeding oneself with a pretty low level of luxury spend on top is all you can do, when you dont go out buying new equipment, new toys and gadgets and so on, you can hardly be accused of spending frivolously, of over-spending, of living beyond your means because you believe the system wont go bust... Not everyone was flying high on credit wings...

True, I'm oversimplyfing an awful lot... and at both 'ends' they're extremes of circumstances,;- family with kids, morgage, and really low wages, up to the other end, with one 'friend of the family' I know, children, not* living with him, though he does to some* extent support them, no belongings asides a few clothes and a clapped out second-hand car, and £40,000 personal unsecured debts... It just seems that somewhere in the middle must b ea a better position to aim for if circumstances allow

Nobody has a right to luxury, but many act like they do.

Personally, I've never bought anything that I didn't have the money saved up for. Anything else simply feels too risky. The exception will probably be if and when I buy a house (meaning paying off a mortgage instead of rent) or possibly start my own business (meaning an increased likelihood of income).

Apot on Mal

I was just remiended actually of a friends children, both 'adults' now really, both working, but both living at home, for free, and both with no concept whatsoever of how to spend, save, and manage money. Between them they hmust have a dozen or more watches, all £100 plus type affirrs.... why? It relaly is baffling, and they're not like antique watches or anything yet, they're constatnly borrowing money off friends and family etc... Mind, in that case i think family and friends ar epartly at fault casue I'd certianly not lend em a penny whilst thhey're in the mindset that there's nothign wrong with gettin paid at teh end of teh month, and then going out and blowing the lot on a new wardrobe of clothes they dont' even need

Actually I think a lot of people liek that arn't even one or two pay packets from being broke, more like ahalf a pay packet as they must just owe about half their monthly earnings at any one given point to family and friends