Bank of England has just announced
The pound has plummeted to its lowest level against the US dollar since 1985.
Sterling fell 0.64% to $1.145 on Wednesday afternoon - a level not seen in 37 years.
Money for a Rainy Day - Worthless Savings
A dollar or whatever form of currency you use doesn’t buy what it used to. Interesting short video here from the late Milton Friedman. Too bad couldn’t have a president who thinks like he does, but he makes too much sense. Everything today is tax and spend while robbing Peter to pay Paul.
Milton Friedman reveals the cause of inflation and how to end it. - Bing video
It’s due to market manipulation! It’s government negligence.
From old me to younger me - General chit chat - Forum - Banjo Ben Clark
People keep money in bank’s custody. Bank in turn invests in gold and land. If interest is not in line with value appreciation of assets like land and gold, there is issue! Is the system designed for bankers’ benefit? What prevents bankers from working with markets and governments to pull off a stunt like inflation??
I have a solution. When inflation fluctuate from normal, the currency printed should become a new “version”, for example, 1 dollar 2.0, and Banks should be made to pay the inflated amount in addition to the 1 dollar they owe to the people! (Normal inflation can be handled by interest rate.) So, I’m proposing currency versioning if feasible.
Anyways, this type of game should stop. Bottom line, money cannot be allowed to be stolen thus!
A non-solution is the ill-named inflation reduction act which does nothing more than spend more money. Such a program deceitfully takes money from one group and merely spreads it around in another direction. The talking point is that all the money to fund the program will come from the wealthy (which isn’t true) and then sell the public on the idea that the wealthy need to pay more and by doing so we will all benefit. In other words, the people behind the inflation reduction act is to tax our way into prosperity.
I heard about it from headlines but never paid attention to know what it is or how it worked. I think I can guess why they do what they do. They have based it (currency and all) on market instead of on asset. When the markets go down, they are supposed to go down. So, they try to pin on people. Now that this is exposed like never before, the inflation act must be a face-saving formula. They would like to revive the market and recover! And probably hence the act.
In other words, the currency value is based on your labor potential, market etc. (intangible assets), and not based on gold or silver (tangible assets). For a healthy currency, they ensure healthy labor, market etc. A determination of price for an item ensures how much you would work etc. That’s why they keep control and make you dependent on them in this type of economy. Imagine everybody earn in excess and don’t work, it is trouble for economy! To bring you back to work, they will pull all stunts!
But then a lot of labor is also waste. So, instead of doing wasted work, if the system allowed people do some labor (it should be transparent on why it is required) just to keep busy and ensured people minded their own business, all should be well and be back to normal.
(I think they should pay me for all this! 
)
@Michael_Mark, I doubt any of the inferences I make would be addressed or explained in an economics book! In other words, if it is open knowledge, why no one alerted when people’s pockets are picked thus!! Many economists might not know, some might like to keep it a secret.
You know John, I don’t think the administration is thinking as deeply about it as you are. But I am in agreement with you on their motive to keep people dependent on them.
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Hi Guy’s This was not intended as a political post. Just the reality of the cost of living. There was a time I earned great interest on my savings, back then I didn’t have a lot of savings. Over the years I’ve managed to put away a reasonable sum to help with living costs in my retirement. Alas the money I’ve saved doesn’t attract any interest. So I am glad I bought my banjo when I had some money put by, at least I have a retirement plan playing banjo. That at least keeps me joyful.
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Banjos last. Money doesn’t.
Reminds me of a piece of wisdom from Robert Heinlein in “Time Enough For Love.” It 's the story of Lazarus Long, the man who wouldn’t die. Over his many lifetimes he learned a few timeless truths. One was “Budget the luxuries first.”
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Now, Ray Dalio explains on the lines of what I shared but completely avoiding blaming in his article titled “It starts with inflation” dated today. Sounds this word has spread out to him! 
Mr. Dalio has been “spreading the word” on economics for a long time…His books and articles are quite educational.
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@Fiddle_wood, I have zero knowledge in economics. I have read zero books on economy. I think I have listened to only one of Dalio’s videos, maybe not fully. My arguments here were only on common sense basis and understanding of things on that basis. I suspect my thoughts have been shared to experts like him for validation, among other such reasons. I have seen such things happen with my views on Christianity and views on legal matters.
Below is what he has shared (09/13) after I had shared my thoughts here. You see he mentions and explains all the key points I shared - inflation, interest, market, economy, labor (employment) and the connection between all these! (There might be many post by many on these topics but I doubt any will encompass these points in one single article/message.) But I went and made some inferences about flaws or issues which he seems stopped short of mentioning/addressing.
I’ll summarize what I had shared in my next post later in the day.
Ray Dalio’s views on Inflation
It Starts With Inflation: How Inflation, Interest Rates, Markets, and Economic Growth Relate to Each Other and What That Means for What’s Ahead
In this post a) I will very briefly explain how I believe the economic machine that determines inflation, interest rates, market prices, and economic growth rates works, and b) work with you to apply current circumstances to that machine to come up with our expectations for the future.
How It Works
Over the long term, living standards rise because of people inventing ways to get more value out of a day’s work. We call this productivity. The ups and downs around that uptrend are mostly due to money and credit cycles that drive interest rates, other markets, economic growth, and inflation. All things being equal, when money and credit growth are strong, demand and economic growth are strong, unemployment declines, and all that produces higher inflation. When the opposite is true, the opposite happens. Most everyone agrees—most importantly the central bankers who determine the amount of money and credit available in reserve currency countries—that having the highest rate of economic growth and lowest unemployment rate possible is good as long as it doesn’t produce undesirable inflation. What rate of inflation is undesirable? It’s a rate that creates undesirable effects on productivity; most people agree and central banks agree that it’s about two percent for reasons that I won’t now digress into. So, most everyone and most central banks want strong growth and low unemployment on the one hand, and the desired inflation rate on the other. Since strong growth and low unemployment raise inflation, the central banks deal with the inflation-growth trade-off which leads them to pick the greater problem and change monetary policy to minimize it at the expense of the other. In other words, when inflation is high (above 2 percent), they tighten monetary policy and weaken the economy to bring it down. The higher the rate is above their target, the more they tighten.
With inflation well above what people and central banks want (e.g. today’s CPI report showed a monthly change in the core CPI of 0.6 percent, which equates to an annualized rate of 7.4 percent) and the unemployment rate low (3.7 percent), it’s obvious that inflation is the targeted problem, so it’s obvious that the central banks should tighten monetary policy. Everything will flow from that. Tell me what the inflation rate will be down the road without the central bank pushing interest rates and money and credit growth rates around and I can pretty much tell you what will happen.
So the process starts with inflation. Then it goes to interest rates, then to other markets, and then to the economy.
It starts with inflation . Since the price of anything is equal to the amount of money and credit spent on it divided by the quantity of it sold, the change in prices i.e., inflation is equal to the change in the amount of money and credit spent on goods and services divided by the change in the quantities of goods and services sold. This is primarily determined by the amount of money and credit and the level of interest rates that the central bank makes available, though it will also be influenced by the supplies of goods and services available e.g., supply disruptions.
Then it goes to interest rates. Central banks determine the amount of money and credit that is available to be spent. They do that by setting interest rates and buying and selling debt assets with money they print e.g., quantitative easing and quantitative tightening. Interest rates relative to inflation rates i.e., real interest rates have a big effect .
Then it goes to other markets . Interest rates rising relative to inflation causes prices of equities, equity-like markets, and most income-producing assets to go down because of a) the negative effects it has on incomes, b) the need for asset prices to go down to provide competitive returns i.e., “the present value effect”, and c) the fact that there is less money and credit available to buy those investment assets. Also, because investors know that these things happening will slow growth in earnings, that will also be reflected in the prices of investment assets, which affects the economy.
Then it goes to the economy. When central banks create low interest rates relative to inflation rates and when they make plenty of credit available, they encourage a) borrowing and spending and b) the selling of debt assets e.g., bonds by investors and the buying of inflation-hedge assets, which accelerates economic growth and raises inflation (especially when there is little ability for the quantity of goods and services to be increased). And, of course, the reverse is true i.e., when they make high interest rates relative to inflation and make the supply of money and credit tight, they have the reverse effect.
Where these things settle will be around the levels that are most tolerable, all things considered i.e., if one thing is intolerable e.g., too high inflation, too weak economic growth, etc. it will be targeted by central bankers to be changed, policies will be changed, and other things will change to bring that about. So, the process of figuring out what will happen is an iterative process, like solving a simultaneous equation optimizing for a few things that matter most.
Applying This to What’s Now Happening
Now, let’s look at what that means for inflation, interest rates, the markets, and the economy. By plugging in our estimates of the determinants, we can estimate the outcomes.
As explained, it starts with what the inflation rate will be . Pick your number based on what you can see ahead. Right now, the markets are discounting inflation over the next 10 years of 2.6 percent in the US. My guesstimate is that it will be around 4.5 percent to 5 percent long term, barring shocks (e.g., worsening economic wars in Europe and Asia, or more droughts and floods) and significantly higher with shocks. In the near term, I expect inflation will fall slightly as past shocks resolve for some items (e.g., energy) and then will trend back up towards 4.5 percent to 5 percent over the medium term. I won’t take you through how I arrived at that estimate (which I’m very uncertain about) because that would take too long. What’s your guesstimate? Write it down.
Next, we need to guesstimate what interest rates will be relative to inflation . Right now, the markets are discounting 1.0 percent for the next 10 years. That’s a relatively low real yield compared to what it has been over the long-term and a modestly high real rate given the recent past. What is your guesstimate? My guesstimate, based on the amount of debt assets and liabilities outstanding, what the debt service costs would be for debtors, and what the real returns would mean for creditors, is for a real interest rate of between zero and one percent because that would be relatively high, but tolerable, for debtors and relatively low, but tolerable, for creditors.
Put the inflation estimate and the real rate estimate together and you will have your projected bond yield. If you want to estimate the short rate, decide what you think the yield curve will look like. What’s your guesstimate? Mine is that the yield curve will be relatively flat until there is an unacceptable negative effect on the economy. Given my guesstimates about inflation and real yields, I come up with between 4.5 and 6 percent in both long and short rates. However, because I think that the higher end of this range would be intolerably bad for debtors, markets, and the economy, I’m guesstimating that the Fed will be easier than that (though 4.5 percent is probably too easy).
While interest rates and credit availability will be influenced by what I just mentioned, simultaneously there is the supply and demand effect on interest rates that results from how much borrowing and how much lending there is. For example, the US government is going to have to sell a lot of debt to fund the deficit (4-5 percent of GDP this year) and the Federal Reserve is also going to sell (and let roll off) a lot (~4 percent of GDP). So the question is where the demand to buy this big supply (8-9 percent of GDP) will come from, or how much will interest rates have to rise to reduce private sector credit demand to balance the supply and demand. What do you think? I think it looks like interest rates will have to rise a lot (toward the higher end of the 4.5 to 6 percent range) and a significant fall in private credit that will curtail spending. This will bring private sector credit growth down, which will bring private sector spending and, hence, the economy down with it.
Now, we can estimate what that rise in rates will mean for market prices and economic growth. The rise in interest rates will have two types of negative effects on asset prices: 1) the present value discount rate and 2) the decline in incomes produced by assets because of the weaker economy. We have to look at both. What are your estimates for these? I estimate that a rise in rates from where they are to about 4.5 percent will produce about a 20 percent negative impact on equity prices (on average, though greater for longer duration assets and less for shorter duration ones) based on the present value discount effect and about a 10 percent negative impact from declining incomes.
Now we can estimate what the fall in markets will mean for the economy i.e., the “wealth effect.” When people lose money, they become cautious, and lenders are more cautious in lending to them, so they spend less. My guesstimate that a significant economic contraction will be required, but it will take a while to happen because cash levels and wealth levels are now relatively high, so they can be used to support spending until they are drawn down. We are now seeing that happen. For example, while we are seeing a significant weakening in the interest rate and debt dependent sectors like housing, we are still seeing relatively strong consumption spending and employment.
The upshot is that it looks likely to me that the inflation rate will stay significantly above what people and the Fed want it to be (while the year-over-year inflation rate will fall), that interest rates will go up, that other markets will go down, and that the economy will be weaker than expected, and that is without consideration given to the worsening trends in internal and external conflicts and their effects.
OK I have summarized and added to my take, in a hopefully very easily understandable way!
Inflation and savings
From people perspective
People keep money in bank’s custody. Generally an interest rate is fixed with inflation in mind so when they receive their money back, they are not worse off. People can also allow their money to be locked up by bank for a certain period of time for better return. In no case, people cannot be worse off. Based on how long the banks get to keep people’s money, bank can decide to invest in gold, or in land, or in any other investments to profit out. Bank’s profit is not out from swindling people’s money (as they also charge fees for safekeeping of their money) but from the value add in investments in productive activities. All is fair so far. But if there should be a sudden spike in inflation, the savings money could lose value. Therefore it becomes the bounden duty of the government to keep the inflation under control. Unless that inflation is due to some force majeure (act of God, natural and not induced)!
So things involved here – people, bank, savings money, interest, investment in real asset (gold, land) or investment in speculative assets (stock etc), businesses, inflation, government, laws, regulations.
From system perspective
Currency value is based on labor potential, market etc (intangible assets), and not based on gold and silver (tangible assets). For a healthy currency, a healthy labor/market etc is a requisite. Imagine everybody works and earns in excess and does not work later on, obviously it is upsets the market and economy! People may not buy as much as they would like before. It’s people choice! In that case, who is supposed to go down? The market and the businesses! But they won’t. Instead, they transfer it on currency in circulation (and not only on the future currency), and thereby on people who have savings in currency! Hence my proposal for currency versioning to deal with it if that is feasible. Keep in mind, when currency is backed up by gold and silver, it has the same value as gold and silver. This market and economy loss is also transferred on people by price increase instead of it driving the businesses to go out of business! This transfer of burden on people is only possible, when control over essential commodities/things, and thus on the price, can be exercised and people be made dependent. In what way attempting to revive the market and economy at people’s expense when nature had no contribution to it! Foreseeing all this, what prevents banks to invest in gold and silver, and to profit out? Why can’t all these be staged as you simply profit out of people?!
The question
We have heard about bank robbery. Unless addressed, what robbery is this – bankers, businesses, or who else’s??
Wisdom of the years.
Speaking of wisdom…
Does anyone believe what I shared in my earlier post is gospel? I’ll show how.
This is what God told King Solomon when he endowed him with wisdom.
I Kings 3:12
Behold, I have done according to thy words: lo, I have given thee a wise and an understanding heart; so that there was none like thee before thee, neither after thee shall any arise like unto thee.
And what is this wisdom? One of that was savings for the rainy day!
Proverbs 30:24
24 There be four things which are little upon the earth, but they are exceeding wise:
25 The ants are a people not strong, yet they prepare their meat in the summer;Proverbs 6:6
6 Go to the ant, thou sluggard; consider her ways, and be wise:
7 Which having no guide, overseer, or ruler,
8 Provideth her meat in the summer, and gathereth her food in the harvest.
Now, is Solomon made less wise in this when a laborer’s savings can be touched this way and the laborer be made a fool?
Nope. God only establishes Solomon’s wise saying by means of the previous post. A greater wisdom is only in Christ!
Matthew 12:42
41 The men of Nineveh shall rise in judgment with this generation, and shall condemn it: because they repented at the preaching of Jonas; and, behold, a greater than Jonas is here.I Corinthians 1:30
30 But of him are ye in Christ Jesus, who of God is made unto us wisdom,…
And what is the good news?
Isaiah 44:25,26
25 That frustrateth the tokens of the liars, and maketh diviners mad; that turneth wise men backward, and maketh their knowledge foolish;
26 That confirmeth the word of his servant, and performeth the counsel of his messengers; that saith to Jerusalem, Thou shalt be inhabited; and to the cities of Judah, Ye shall be built, and I will raise up the decayed places thereof:
So, come to the new Jerusalem and hear him (and not the fake church/Jesus)!