How inflation works – How to protect yourself – How to Invest
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0:00 Intro
0:35 How Inflation Works
4:48 The Cure
8:22 How to Protect Yourself
8:55 Cash
9:23 Mortgages
10:31 Investments
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Where is inflation affecting you the most?
Inflation is an increase in the money supply. To reduce inflation – restrict the money supply & reduce the printing of money.
This !!!! https://youtu.be/NicE0-N9ux0
Your inflation numbers are ‘one size fits all’ bullshit.
Let me elaborate.
Let’s actually consider the bottom 50% of the population as a sector.
Their inflation is likely running at 30% to 50%. Most of their income goes on rent / mortgage (if they actually have one), food and fuel / energy.
Their purchases are not from Waitrose, they likely do ALL:- Iceland, Savers, Poundland, Aldi/Lidl and bigger supermarket for bits they can’t get elsewhere.
You are obviously a well paid graduate / freelancer or wage slave earner.
You’ve spent some 25 years not living down with the subsistence level, per when you were a student.
Let’s have you rethink this outside of easy reach default lazy thinking.
Time for far, far stronger UK unions and workers on boards of business per Germany.
Odd how you ignore fact OPEC refuses to increase supply of oil and gas to West. It isn’t simply war in Ukraine. Odd how you ignore if other producers, African based for example, also choose to limit or not increase supplies to counter Putin’s Russian abnormal market restrictions. This whole economic drama is a man made construct not due to actual shortages of resource.
Yet again the same nonsense about high energy prices affected by the "war in Ukraine ".If this was the case energy companies profits would be falling but they are skyrocketing. This is simply profiteering by a cartel rigging a dysfunctional market and our corrupt politicians unwilling to do anything about it.
best investment – Unionize.
@James Shack – Great video as always.
I have more of a general question about pensions and the 25% tax-free lump sum. IF an employer pays a large single lump-sum payment into my personal pension whic is tax-free for me e.g. £50k, and say that takes the value of the pension immediatley from £200k to £250k – is the 25% tax free lump sum now calculated on the £250k if I crystalised that the nextg day?… or does it have to be there for one tax-year (or more) to qualify as part of the 25%?
Q: What if you have 2 pensions with different providers (one SIPP and one with a "tradtional" pension-provider in one of their manged funds) – is the 25% calculated on each one i.e. the TOTAL of the two funds, or only on ONE of them?… as in essence it would be two separate payments.
Q: Re: Inflation – Do you agree that for anyone aged 55+, given the stock-market conditions and inflation at circa 10% (which could easily continue for the next 2-3 years)… the chances of them "wisely" investing in a SIPP to outperform inflation at this stage in life, the fund value could actually decline in the next 2-3 years, NOT increase and thus moving at least some of the money to safer investments (or investing in your own home) may be wise (via crystalisation)?
Thanks again.
I've said it many times. Higher wages are the only inflation central banks care about.
LOL no, inflation is more like 20% + gas 80% food 10-40%, energy / utility bills in America 10 – 40% in Europe 20 – 100% even more in some cases.. and it's not the 'war in Ukraine' it's the idiot policies of western governments telling us we have to cut back to hurt the environment slightly less. the printing of 6 trillion dollars by the fed in the last 2 years! this is the single biggest driver.
government intervention in the economy, shutting down businesses or telling them they can't operate for either the viirus, or the climate, or otherwise screws up the economy. stop voting for the trash that sin washington or other governments who want to control your life and screw everything up. vote for freedom and individual liberty if you vote at all.
The problem of inflation is caused by currency not being backed by gold, silver or other precious metals. Governments and banks can create money on a computer or simply print cash, if you make something near infinite then in has almost no value. An example is plastic in the oceans. If waste plastic has no value it will be a problem, however if a company can make money from recycled ocean plastic products then this can fix the problem what had zero value then has a value. Governments need to restrict the supply of currency, thereby keeping its value..
The covid furlough scheme would have caused inflation, but the oil and gas prices have made it even worse.
Do you intend for this to be capitalist propaganda? If so, fair enough, you're free to make that kind of content. If not, you might want to question some of your economic assumptions. The fact you don't mention the role of profit in your analysis of how inflation works is quite ridiculous from a left wing point of view. Why should workers pay for the cost of inflation? Clearly, the people with the most capital are best placed to bear that cost. Therefore, the answer isn't lower wages (in real terms) as you suggest, but lower profits for the capitalist class. A windfall tax would be a start, but perhaps you could read Piketty to see how wealth taxes could work to address inequality more generally. Piketty is not a socialist, what he proposes is still within a capitalist framework, in case that's something you'd be worried about.
It was a good video, one thing I struggle with is the fact that in the west we are heading to a cashless society. So what would be the best thing to invest in, a cashless society.
There are many wealthy people now selling property and now only rent. Why is this? Also if you look at the the top wealthiest they are heavily investing in gold silver and copper
So why is it that counties like Switzerland, Norway, Sweden, Singapore and others enjoy a higher quality of living in comparison to UK citizens and yet they don't seem to be suffering from being a high wage economy? Same goes for Australia, generally pay is higher in a lot of industries and people have more buying power. Would also say the same for the US, higher GDP per capita than the UK, American's can generally afford bigger homes and more material possessions relative to a UK citizen. Plus all peoples take home pay is being eroded by higher council tax and higher national insurance, with no choice on how much we pay.
So in practice the theory you are posing about higher wages being bad for the economy doesn't hold up in these particular examples, plus its a worry of someone who's title is the head of the bank of England, so i don't think its someone with a good perspective on the cost of living.
The idea that the UK has fair equity amongst working people and wealth is spread even somewhat proportionally is just a fantasy. What's more worrying, is wealth being concentrated in the hands of fewer and fewer people, that's probably what is most dangerous for our economy.
After a decade of stagnant wages demand is down but inflation has not decreased as cheap money (debt) has allowed people to pay more. Now we have another perfect storm being created with higher interest rates and higher prices both down to inflation so people have only one option, increase wages. People spending power is still below what it was in 2008 so even if workers get high pay increases they won’t have the same purchasing power of over a decade ago. Wages are chasing prices not the other way round. 60% of the current inflation is caused by excessive profits.
Not sure, if the rich get richer then more and more rich will buy high priced goods which then keeps goods at a high value and then keep them there..
Great video James, very interesting and threw up some points I’d not even considered.
Inflation is being caused by an exogenous shock in energy prices, and the reflex action is to raise interest rates to dampen demand as real income collapses – it's like applying leaches to a patient with anaemia – putting the economy in a tailspin. As the surgeon explained: the operation was a complete success; unfortunately the patient died. Yes, it may seem mad'.
A complex subject explained with erudite simplicity. Excellent.
To save you 15 minutes. Stay useful with your skills. Know that UK Property held or increased in value during past periods of inflation.
This was exactly everything I was looking for and you explained it perfectly in one video. Thank you!
Also in the 70s going to uni didn't cost 9k, it cost nothing (in the UK)
It's only people who live in a fantasy world that have convinced themselves of the wage-price spiral idea (in these specific times). The inflation we're seeing now is not related to high demand, in fact the opposite is true – people have lost a huge level of purchasing power and need pay rises to bring demand back to normal levels. Wage rises are not going to increase demand beyond normal at all.
The inflation we see is due to reasons like excessive profits, pandemic recovery hiccups on the supply side (manufacturing and shipping issues), high energy prices, and all this made worse by the recent war. None of this will be addressed by making people starve/freeze to death.
You're money can't lose value if you don't have any.
People want big pay rises because of high energy prices etc, although like you say, most of the energy increase is temporary. I bet they won't take a pay cut when prices fall. Many workers are greedy, just like the executives & CEOs.
The wage price spiral is a myth at this point. Even in the 80s when people started using the term the real world impacts of such a system was debatable. Many said that increasing wages didn't nessesarily increases prices in a spiral in the long term if done correctly. It was mainly the conservative side of the political spectrum that hung onto this idea. You also need to consider the fact that wages are so below prices that simply keeping wages in line with inflation is the bare minimum at this point. Wages over the last 10 years in the UK have not kept up with prices so even if we weren't in this situation there would be a real need to increase wages.
The problem is that the demand for heating in homes over winter will not go down when it becomes unaffordable. A person's consumption of food will only go down so much based on affordability. So when the inflation spike is high enough, the wages has to go up and the runaway inflation risks have to be there.
spend less stop buying everything under the sun. Start saving have an emergency fund and dont get into debt up to your gills. Its pretty basic economics
when the price of oil went down did anybody notice that things cost less ? me nither because it didnt and never does .