RE: 20 years on? Gold +525%, Housing +78% (UK), Medical +67% etc25 Apr 2021 16:49
Hi Mr Gnome
Anyone who does a weekly shop knows that inflation - CPI and RPI - is higher than the quoted figures. Studies in the USA suggest it is anywhere between 5 - 10% and is probably that in the UK. There are also all kinds of fiddles such as shrinkflation. At one time, a girl would only need one Mars bar to make her put on weight and now it's nearer two. Leave well alone, say I! I won't even go near the unemployment figures question.
Your link included so much data that I couldn't possibly answer everything here. There are many pros and cons to having a fixed currency exchange rate but I am in favour of floating rates. Being on a gold standard back in the 19th Century was fine because the internal adjustments necessary to maintain parity with gold were easier to accomplish. Those adjustments were almost invariably to wages. So the landowner or manufacturer largely was OK, but the workers had to suffer. Most didn't have a vote and there weren't any unions, so who cares? It's much different today, of course. Even our Harold baulked at fighting the unions in 1967 when Britain devalued. It didn't affect the pound in your pocket though - laugh, laugh.
A country's exchange rate is, in my opinion, the most important safety valve for its economy. When Britain joined the ERM in the early 1990s, it lost over a third of a million jobs during a six month period because the rate was too high. You'd think that would have been a lesson in why not to join the Euro. Oh no, we had some idiots all for it - Blair, Ashdown, Hestletine etc. We now look at the southern EuroZone states and say 'we told you so'. The likes of Greece has had its economy trashed and only gets by from fiscal transfers given by Germany, Holland and Finland, in the main - the kindness of strangers. The Euro is worse than the gold standard - at least you can come off gold. Come off the Euro and you have all your debt to pay back to the strong Germans and Americans in a near worthless currency.
Floating rates are subject to manipulation but they do adjust quickly. Obviously the net affect of that adjustment is the same as a devaluation but at least no people seem to riot on the streets - politicians love a hidden fix.
We also had the removal of capital controls in the 1980s under Thatcher and that has increased the money supply and velocity. Foreign capital has flooded in - and sterling has moved out - which has meant more investment, higher productivity and an increase in GDP. The graph shows before 1971, all those factors were more subdued.
Gold itself can be considered fiat - shock, horror. When the going gets tough, gold gets ditched. The First World War would certainly have been over by Christmas if sterling hadn't been floated - the combatants would simply have run out of money.
The big problem is how to stop governments from borrowing so much money. If you can answer that one, you're a better woman than I GD.
Regards
Aoife
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