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bluemoon

How real is the possibility of hypernflation in the UK?

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Things seem to be taking a turn for the worse these days. Sure, everyone has heard of the GBP decline surrounding Brexit. Speaking as someone who doesn't give a flying monkeys about the act of Brexit itself either way, I see the possibility that a post Brexit UK could go balls up, or maybe the EU itself is sinks even with the UK still connected.

Either way, the GBP is weakening. But it's not just Brexit, whatever your politics, the UK is an increasingly socialist country and that along with the divided atmosphere in the UK these days, might just lead to the conclusion of other failed socialist economies.

Apart from all that, we're doing great! But what do you think of the possibility of hyperinflation in the UK?

EDIT: I'm seeing some comments about Brexit. While I did mention Brexit prominently, it wasn't to say that Brexit itself could be a cause of hyperinflation, but a mismanagement of it might be one of the ways the UK could hit it.

Other causes could be any or a combination of:

  1. An EU collapse with our deal still closely tied to it.
  2. The increasing move towards socialism in the UK in recent decades (and as mentioned by others, a Corbyn government looking very possible)
  3. Our level of debt
Edited by bluemoon

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I'm not sure about hyperinflation but things could get bad. The potential big problem as I see it for the UK is not getting a good enough deal for businesses to stay here. If you start seeing business leaving en-masse the financial repercussions of that will be hard to recover from. I have trouble seeing how the EU will hang on over the next few decades. I first thought that after the initial Greece financial crisis and I think it even more now that you are seeing the rise of far right parties in one EU country after another. In many ways I thought Brexit could be a good thing as I figured it would give the UK the chance to create ties outside of the EU which would give it strength if the EU fell apart. Unfortunately I never counted on the complete incompetency of the current government. At the moment it is really hard to guess what the long term will look like for the UK as so much of it depends on how the next few months go. If they can create a good enough deal that keeps business here and people employed than any temporary Brexit hit will be weathered and the country will be free to move forward with international trade and new partnerships that should see the country do well. If they can't get that deal and business leaves en-masse...   dark times will follow.

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There is tremendous hype and fear about Brexit.
The EU political experiment is dying with other countries waiting in the wings to see how we end up before possibly leaving also.
Let's not forget the vast sums of money we spend supporting the EU to the benefit mainly of other countries that are getting new roads and bridges built at our expense not to mention the French farmers.
Trade doesn't stop and tariffs are what the EU or we decide to set - most under WT rules are zero anyhow.
Once the German car manufacturers, Spanish fruit growers, Italian Prosecco producers and French Farmers realise we will not cave in to Brussels ( we hope ) things will rapidly change and we will definitely be much better once the dust settles. There is also the big question of who will fund the EU once the UK ( second largest net contributor ) leaves and the other countries have to make up the short fall. That never seems to get mentioned on the Brussels Broadcasting Corporation news.

As for currencies, everything is down to the temporary and probably artificial strength of the US dollar under Trump.
Like shiny metals I genuinely believe currencies are manipulated by the big banks who trade every second to squeeze as many billions out of the system as they can.
Trades are done using fancy algorithms rather than serious economics and the changes are fitted by the media against some other event as if that event was a factor.
Total BS in many instances but it sounds good at the time.
 

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There have always been times of economic strengt and downfall. Thinking that it won't happen again is something only the fairies and naïve students with a socialist way of economic thinking believe ( "but socialism will work this time dammit!"). The question is not if but when, it could be next year or take another 5 decades. Since avarage national debt is even large now than in 2008, do the math ;)

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Have to say there's two very flawed points in the OP. First, GBP is currently rising, albeit from yearly lows, though they are considerably higher than lows of 2017.  Secondly we are funding NHS and Police have plenty of funding, they just arent increasing the funding as much as some would like, so falling behind in real terms.  More importantly, government not spending is not inflationary.

Unless Labour get into power and follow through on £500bn open cheque on spending, there is little on the horizon to create strong inflation, even then hyperinflation would take a few years to appear, once all that excess worked its way through the economy.   So the possibility is real, though remote and distant. 

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I suggest you remove TV from your life and don’t concern yourself with fud.

fud is how news organisations make their money.  I deleted tv from my life about 6 years ago - it’s surprising what a difference it’s made to my health and well-being.

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Mark Carnage is staying at the BOE until 2020 now, when he should have been swanning off home. But as much as I would be happy to see it with him in charge, hyperinflation is not likely.

You will get plenty of heads up if that starts, the government will announce more spending it can't afford, or will begin printing to pay down the debt (listen out for more QE). Another sign is when Mark Carney will not raise interest rates when the rest of the world is raising theirs, or better yet, if he lowers interest rates and announces QE. Following the Brexit vote he did that, I expect he will do the same in March now that he is staying. Those are all good signs the £ is going in the trash faster than the others.

The UK is and has always been in the position of power in regards to leaving the EU. There is a massive hole in EU finances when we leave, and the UK leaving without a deal is a disaster for them. I hope to see it. Most likely you will the Euro collapse rather than the pound imo. 

 

 

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What about the possibility of interest rates going up to encourage a flow of money into the UK, together with a sufficiently large reduction in corporation tax to make the UK a tax haven in Europe? As soon as I heard of the brexit referendum I thought this might happen. 

I’ve heard McDonalds are already moving their head off to the UK from the US. What do they know that we don’t?

https://uk.finance.yahoo.com/news/mcdonalds-move-uk-sparks-fears-post-brexit-tax-avoidance-090612177.html?guccounter=1

Worth fixing your interest rates just in case. Yes you pay more than a discounted rate but you can fix for 7-10 years and limit your upside on this major expenditure

 

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Since this is a PMs forum, I always quite surprised to hear people talking negatively about Brexit. Presumably, if you buy PMs you know a thing or two about how the financial system works and by extension how economics works, and how the Euro is in a seriously precarious position. The risk of high inflation is real for GBP because we printed a load of money after 2008, but hyperinflation risk is minimal. We stopped printing money a few years ago here, but the ECB only just started tapering their asset purchase program. Moreover, there is a real risk of Italy removing itself from the eurozone, whereas no part of the UK is seriously considering dumping the £.

If you think the chances of the UK going to the wall because of Brexit are high then you have been seriously mislead by MSM. Look at the fundementals. Everything points to Euro weakness. We are in a position of enormous strenght, but out leaders have been cucked beyond belief.

Also as an aside, the media in this country like to talk down the £, without realising that 75% of the moves recently are down to dollar strength. Almost every currency has declined 5-10% on the dollar in the last 5 months.

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My opinion for what it is worth is...

Forget Brexit as a Risk for PM prices. A no deal would benefit PMs as the pound got hammered. 

The real inflation risk is a Labour govt and their profligate spending. 

In Venezuela (Mr Corbyns model for socialism) the government is now urging citizens to buy gold certificates because of 1,000,000 - yes one million percent inflation. 

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10 hours ago, StackerNoob said:

Since this is a PMs forum, I always quite surprised to hear people talking negatively about Brexit. Presumably, if you buy PMs you know a thing or two about how the financial system works and by extension how economics works, and how the Euro is in a seriously precarious position. The risk of high inflation is real for GBP because we printed a load of money after 2008, but hyperinflation risk is minimal. We stopped printing money a few years ago here, but the ECB only just started tapering their asset purchase program. Moreover, there is a real risk of Italy removing itself from the eurozone, whereas no part of the UK is seriously considering dumping the £.

If you think the chances of the UK going to the wall because of Brexit are high then you have been seriously mislead by MSM. Look at the fundementals. Everything points to Euro weakness. We are in a position of enormous strenght, but out leaders have been cucked beyond belief.

Also as an aside, the media in this country like to talk down the £, without realising that 75% of the moves recently are down to dollar strength. Almost every currency has declined 5-10% on the dollar in the last 5 months.

☝️Makes sense to me! 

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50 minutes ago, dicker said:

My opinion for what it is worth is...

Forget Brexit as a Risk for PM prices. A no deal would benefit PMs as the pound got hammered. 

The real inflation risk is a Labour govt and their profligate spending. 

In Venezuela (Mr Corbyns model for socialism) the government is now urging citizens to buy gold certificates because of 1,000,000 - yes one million percent inflation. 

I disagree with the effect on the £, I think its being overplayed myself. But I do agree with you re: the Corbyn risk. 

In fact, I'm working on quite an involved video on the venezuelan hyperinflation as we speak. I hope to have it published in the next week or two.

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11 hours ago, StackerNoob said:

The risk of high inflation is real for GBP because we printed a load of money after 2008, but hyperinflation risk is minimal. We stopped printing money a few years ago here, but the ECB only just started tapering their asset purchase program.

 

the risk of hyperinflation is not about how much currency

you have already printed in the past, it's about how much

currency you are printing now and in the future to help

stabilise the trades using your currency. whilst previous

printing might affect it, it's the current loss of faith in the

bolivar/venezuelan economy that has caused the

hyperinflation.

infrastructure helps make a defence against hyperinflation.

developed economies are less likely to get to that point. my

guess is we won't get there. if the £ weakens versus other

trading currencies as it did after the brexit vote, I expect

more of the same to happen ie reduced spending(especially

on imports) and more british products and services

replacing them. maybe high inflation, but not the crippling

hyperinflation. the £ is backed by the british economy and

infrastructure so will be worth something even with 3-5%

drop in gdp per year.

 

HH

Edited by HawkHybrid

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I still have not heard what the EU are planning to do about the massive hole in its finances when the UK leaves in March. Raise taxes in Germany and France? Make the Eastern Europeans pick up the tab? Cuts across the board? Either way the EU is finished when the UK leaves.

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1 hour ago, KDave said:

I still have not heard what the EU are planning to do about the massive hole in its finances when the UK leaves in March. Raise taxes in Germany and France? Make the Eastern Europeans pick up the tab? Cuts across the board? Either way the EU is finished when the UK leaves.

The obvious plan is that the UK or at least its funds do not leave.  How they politically mangle that outcome its going to be interesting.

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1 hour ago, KDave said:

I still have not heard what the EU are planning to do about the massive hole in its finances when the UK leaves in March. Raise taxes in Germany and France? Make the Eastern Europeans pick up the tab? Cuts across the board? Either way the EU is finished when the UK leaves.

They’ll probably start a war with Russia and drag everyone else who’s neutral into it (sounds familiar).

Had we done an immediate shock, hard-Brexit soon after the referendum; I would have thought the euro would have dropped instead and panic in the Eurozone would have ensued instead of all the fear being pushed by our media and giving Europe tim to think of ways to bully us around. We should have ripped off the plaster quickly!

Either way there’s going to be chaos, the EU will make sure of it and after speaking to some of my remainer friends recently, they say they are sick of what the EU have been doing and would vote to leave in any 2nd referendum. I thought that was very interesting. They are also sick of it on the news every day for the last 2 years, wearing everyone down.

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It's clear now that the politicians here have been buying time for Europe. The extension to the deadline was for that purpose, the chequers treason may's plan was an attempt to keep us in by changing the names of things, but nothing in substance because the reality is if we leave hard Brexit it would be a disaster for the EU, economically catastrophic. Not so much for us. 

The best thing for the UK to do now is to get the EU shill May out of office, chin off her chequers sell out, and hard Brexit. Let junker pick up the pieces and explain to the rest of the EU why he failed to give us the concessions we asked for three years ago, and why he now needs to raise taxes across the board, or implement cuts. Then it's just a case of betting on who will leave the EU next. 

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12 hours ago, KDave said:

I still have not heard what the EU are planning to do about the massive hole in its finances when the UK leaves in March. Raise taxes in Germany and France? Make the Eastern Europeans pick up the tab? Cuts across the board? Either way the EU is finished when the UK leaves.

They will just borrow...and pass the burden onto our children.  Governments don’t make tough decisions 

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Our current national finances are not great, but they are not terrible either. 90% debt/GDP is high but lower than many other developed countries.

However, the UK is massively leveraged to banking in a way that arguably no other country is. Our economy very little of note except financial services. So in a sovereign debt crisis we will be crippled worse than most others.

I think the Dominoes tend to go over in order of size. We would likely see a few other economies collapse before our own, and the warning signs would be there. 

 

 

 

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