the current British market i reckon is gonna collapse, as people due to the over-buying to rent is kinda causing the prices to be unnatural, and due to the natural balance of the economy, the prices will right themselves by first collapsing real low when everyone sees the prices going down but will then rebound up slowly. This is further exacerbated by the high interest rates which is going to create pressure on mortgage payers which will result in more houses coming onto the market.
Any ideas to add to these rather rambling ideas is welcome...you all know where the comments button is.
Thursday 24 May 2007
Thursday 17 May 2007
inflation and how to curb it
the fresh inflation fears as have been reported in the press recently, lead us to consider that the current methods of addressing inflation, namely increasing the interest rate, may need readdressing.
Before looking at alternative measures to curb inflation, lets look at the effects of inflation:
causes a rise in people spending.
this causes a rise in investment as people are afraid of losing purchasing power in savings, so turn it to real value.
causes increases in wages etc although this is generally not consistent with the inflation.
international trade will suffer as inflation pushes up prices, meaning people will look abroad for cheaper goods, meaning that the import>export.
Her Majesty's Government slyly slips in a few "stealth taxes" so as to disinflate the economy.
and costs will be incurred by businesses as they need to reprice regularly eg print new price tags.
so how to address inflation...well firstly lets understand that a little inflation is good as it allows a little growth, as well as making wages to rise, which generally speaking dont ever get bargained down. The popular way is to get the Central Bank such as the Fed Reserve or the Bank of England to hike up interest rates thus promoting savings and reducing the velocity of the money (how quickly it changes hand)and thus prices. This could have the adverse effect that as many people have debts, their expenditure increases with a interest rate rise, yet their cutting out of unnecessary items still doesnt meet the usurious rates, so the wages have upward pressure applied and this would fuel inflation itself.
Another option that i heard the Chinese recently use, was to raise the reserve money that banks have to have, which reduces money velocity and inflation and hence prices, yet doesnt raise the debts of the public or harm the balance of trade of the country.
the question for this post is: What other methods could be used to curb inflation?
Before looking at alternative measures to curb inflation, lets look at the effects of inflation:
causes a rise in people spending.
this causes a rise in investment as people are afraid of losing purchasing power in savings, so turn it to real value.
causes increases in wages etc although this is generally not consistent with the inflation.
international trade will suffer as inflation pushes up prices, meaning people will look abroad for cheaper goods, meaning that the import>export.
Her Majesty's Government slyly slips in a few "stealth taxes" so as to disinflate the economy.
and costs will be incurred by businesses as they need to reprice regularly eg print new price tags.
so how to address inflation...well firstly lets understand that a little inflation is good as it allows a little growth, as well as making wages to rise, which generally speaking dont ever get bargained down. The popular way is to get the Central Bank such as the Fed Reserve or the Bank of England to hike up interest rates thus promoting savings and reducing the velocity of the money (how quickly it changes hand)and thus prices. This could have the adverse effect that as many people have debts, their expenditure increases with a interest rate rise, yet their cutting out of unnecessary items still doesnt meet the usurious rates, so the wages have upward pressure applied and this would fuel inflation itself.
Another option that i heard the Chinese recently use, was to raise the reserve money that banks have to have, which reduces money velocity and inflation and hence prices, yet doesnt raise the debts of the public or harm the balance of trade of the country.
the question for this post is: What other methods could be used to curb inflation?
Saturday 12 May 2007
Supply and Demand
Once upon a time, in a land far far away, there lived a wookie in a hut. Now the wookie's parents had just died when we join him, so after many intricate, ethereal and suspiciously gothic ceremonies, to mark his parents passage into the great void, the Wookie, being the pragmatic individual he was settled down to look at his inheritance. His parents had left him a brilliant collection of hair from famous wookies from all aver the planet Endor. The wookie was happy.
Now Chewbacca, who had dropped by, in his typically forthright manner informed the wookie, henceforth known as Bob (as its easier to type), that he should sell this hair onwards and maybe keep only a little bit for himself as a momento to his parents, as what the hell was he going to do with a collection of bloody hair, "which was useless" he said. Now Chewbacca didn't know that hair for wookies, isnt grown, rather it is glued on, after obtaining it from any reasonable hairdressers, so after an offended looking Bob tartly informed him of this information, the reasonably chastened Chewbacca realised that due to the scarcity of humans, and thus hairdressers whos business needs humans, the hair was worth a bomb.
so the supply is limited, and demand is huge, hence the price is going to be astronomical...now Bob starts rolling in the big bucks, he has the whole merchandise going, hell at one point he was even going for wookie chieftain...but then a hair mine is discovered and suddenly, along with his own hair collection, Wookie market is flooded with new mined hair. The supply increases, the demand goes down, as wookies mania for new hair is satiated and people dont regard this as the "in-thing" or necessary anymore. No one buys the hairs anymore from Bob's shop, so Bob is forced to price down, and match his price to the relatively low current demand, and he starts selling at the most effective price.
The question is....what would happen if say for example if the mining firm collapsed due to some random tradegy at the mine, or better still, some shocking revelation about the owner, and keeping in mind that wookie demand for hair is relatively inelastic (meaning they dont give a damn about the price and pay whatever to get it) what would happen to the price, and how could Bob improve his business model further.
dicuss
Now Chewbacca, who had dropped by, in his typically forthright manner informed the wookie, henceforth known as Bob (as its easier to type), that he should sell this hair onwards and maybe keep only a little bit for himself as a momento to his parents, as what the hell was he going to do with a collection of bloody hair, "which was useless" he said. Now Chewbacca didn't know that hair for wookies, isnt grown, rather it is glued on, after obtaining it from any reasonable hairdressers, so after an offended looking Bob tartly informed him of this information, the reasonably chastened Chewbacca realised that due to the scarcity of humans, and thus hairdressers whos business needs humans, the hair was worth a bomb.
so the supply is limited, and demand is huge, hence the price is going to be astronomical...now Bob starts rolling in the big bucks, he has the whole merchandise going, hell at one point he was even going for wookie chieftain...but then a hair mine is discovered and suddenly, along with his own hair collection, Wookie market is flooded with new mined hair. The supply increases, the demand goes down, as wookies mania for new hair is satiated and people dont regard this as the "in-thing" or necessary anymore. No one buys the hairs anymore from Bob's shop, so Bob is forced to price down, and match his price to the relatively low current demand, and he starts selling at the most effective price.
The question is....what would happen if say for example if the mining firm collapsed due to some random tradegy at the mine, or better still, some shocking revelation about the owner, and keeping in mind that wookie demand for hair is relatively inelastic (meaning they dont give a damn about the price and pay whatever to get it) what would happen to the price, and how could Bob improve his business model further.
dicuss
Friday 11 May 2007
The Tripartite theory
Hi, for my first post I'm going to look at basically why the hell I'm not a millionaire. The reasons, once I started a period of deep introspection, are very simple, (and put a damper on my plans):
1. I do not work - and as suggested by Smith (the guy on the £20 note) compensation for labour is one of a tripartite of sources for income.
2. I do not own any property, hence I cannot rent (which they would pay to me for giving them the opportunity to use that land to make a profit) out to people and make money that way.
3. I do sell things...like last week I sold a cricket bat for £7 and making a huge profit on the way too, but not exactly Forbes standard you may agree.
So basically to become a millionaire for all you budding entrepreneurs, you have to either become VERY talented at a job, Buy up land and rent it out or start selling things for a profit.
for every post I'll pose a question for the reader to answer, so as to make this blog an excellent source of combined information and for me to gain in knowledge.
The question for this post is in this scenario...I own a huge farm , I rent it out benevolently to some serfs, who decide to stay at home and employ their kids to work...the kids go up in arms with this arrangement and rapidly gain wages to compensate for their industriousness. Now the serf sells the produce for a high enough price to cover the rent and labour and to still have profit remaining. Good so far...DISASTER strikes, the pitchfork has been broken upon a particularly nuggety rock...the serf pays for it...is this another section of money making, thus proving the tripartite theory of rent, profit and wages wrong, or is this a cunning way of asking the answer for a question I am not entirely sure about?
Discuss.
Hi, for my first post I'm going to look at basically why the hell I'm not a millionaire. The reasons, once I started a period of deep introspection, are very simple, (and put a damper on my plans):
1. I do not work - and as suggested by Smith (the guy on the £20 note) compensation for labour is one of a tripartite of sources for income.
2. I do not own any property, hence I cannot rent (which they would pay to me for giving them the opportunity to use that land to make a profit) out to people and make money that way.
3. I do sell things...like last week I sold a cricket bat for £7 and making a huge profit on the way too, but not exactly Forbes standard you may agree.
So basically to become a millionaire for all you budding entrepreneurs, you have to either become VERY talented at a job, Buy up land and rent it out or start selling things for a profit.
for every post I'll pose a question for the reader to answer, so as to make this blog an excellent source of combined information and for me to gain in knowledge.
The question for this post is in this scenario...I own a huge farm , I rent it out benevolently to some serfs, who decide to stay at home and employ their kids to work...the kids go up in arms with this arrangement and rapidly gain wages to compensate for their industriousness. Now the serf sells the produce for a high enough price to cover the rent and labour and to still have profit remaining. Good so far...DISASTER strikes, the pitchfork has been broken upon a particularly nuggety rock...the serf pays for it...is this another section of money making, thus proving the tripartite theory of rent, profit and wages wrong, or is this a cunning way of asking the answer for a question I am not entirely sure about?
Discuss.
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