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Finance Friday | The economy

Money - Seeing the future

I read earlier this week that the British National Debt is 7.9 trillion pounds. This is according to the Taxpayers Alliance. This amounts to £300,000 for every household in the country. I think by exaggerating they make all the rest of their arguments seem unbelievable too. You could argue that the government needs to invest several millions of pounds in order to pay those ridiculously high pensions they have promised all the judges and top civil servants. You could also argue that they can be paid out of future revenues. The Taxpayers Alliance would argue the former to convince us that the nation is severely indebted and make their cause sound plausible.

The system is ridiculous, some people are paid far too much money. They also want gold plated pensions on top of that. This mostly applies in the public sector and we hear words like ‘issues’ and politically correct speak. They love their acronyms and are terrified to use any words that someone might find offensive. We’re not even allowed to go senile these days, it has to be Alzheimer’s. Senile is much easier to spell. I watched a TV programme about housing last night and that politically correct speak seems to have spread nationwide. Do they go on courses to learn it?

The economic crisis in the UK is far from over. At the moment, for many, the UK is a safe haven for their money. That is helping keep the value of the pound high against the dollar, but that could change as the US economy recovers. A change in the exchange rates between the pound and other currencies could result in other problems. The UK would then have to increase interest rates to realistic levels to support the value of the pound. The alternative would be higher import prices, particularly for oil. It’s not just our currency that’s seen as a safe haven, but also government bonds and shares in blue chip companies. What will happen to the price of those bonds in the markets when interest rates rise? The shares in blue chip companies won’t be so popular either and we could see dramatic price falls. This recession is far from over.

I think we have to hope for the best, but be thrifty and frugal and expect the worst. I am expecting higher petrol prices and they have risen a lot already, about 50% in the past 4 years. We can also expect food prices to continue to rise. The recovery could send some share prices up spectacularly though as the loss makers suddenly turn profitable. The nationalised banks make a good under lying profit, but have suffered from past mistakes. They could see their share prices soar. We shall see…

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2 responses

  1. You make an interesting case for buying shares in banks: though I can’t see many folk
    running out to invest in Lloyds or RBS.

    I recently saw a programme on the profit made by betting shop chains and have been
    wondering if their shares would be a good investment.


    17, August 2012 at 1:34 pm

    • Hi Mac,

      I wouldn’t invest in betting shops. I think Premier foods is a good investment now. They have sold a few businesses and are in better shape. The price like most companies has dropped a lot over the past month. Still higher than the 4p I paid, but still a lot lower than they were. I am sometimes tempted by overseas companies, but I see the pound dropping in value at some time in the future. The big blue chip companies, I wouldn’t touch right now. I considered Associated British Foods when they were under £10 and they have been considered a safe bet. They aren’t producing a great yield though and so long term they’re now a big risk. We haven’t had an economy in this state since WWII and so we have to see what happens! We survived the war though and Germany did quite well in the end…

      17, August 2012 at 2:18 pm

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