The Earnings vs. Cost of Living Crisis: A Perfect Storm

Although Gold underpins our economy, its a risky investment in my view. As the supply is so volatile a government sell off or deposits found can dis taught the market. Let alone the cost of holding gold. True capitalism is brilliant and obviously more profitable than hoarding gold but Britain's lost its way in the new world. With government ideologies of Labour interpreting the economy moving into a golden age of knowledge have taken us away from the basics of production. Now Tory give us a dangerous dose of austerity against the basics of the economic cycle.

I am so glad there is someone else with a realistic view of the state we are in on here.

I always tend to advocate gold as a safe investment. While it may not make money, it should keep its value. A lot of people cannot grasp the idea that the £20 notes in their wallet might not be able to buy anything quite soon.

Economic inequality - This starts at birth and requires measures taken to increase equal opportunities. What we need is an outright expansion of grammar schools, an education voucher system and for free schools (as great an idea as they are) to require a mandatory English bac and qualified teachers. Lets allow the poor but bright kids to have as good a start in life as anybody else. We also need to abolish the current housing allocation models for social housing which result in mass areas of deprivation.

House prices - Big problem but the answer here is simply to give tax breaks for developers who build within 3 years of buying land and in addition we should build more social housing.

Food prices cannot really be helped, personally i'd rather scrap CAP and focus on supporting fruit and vegetables

Transport costs - Remove all moderation of competition clauses from rail franchises and encourage open access operators to compete. Stop subsidizing unprofitable rural lines. Nothing we can do about cars really however the cost of electric cars are falling rapidly and the EU is rolling out charging stations en mass from 2020.

Energy and Water - Very tough, especially since we do have profiteering but at the same time actually about 80% of profit is reinvested. Statoil treatment is one option (partial nationalization - 45% stake but private management) however if VAT was abolished and the green levies payed for by spending cuts elsewhere and general taxation we'd lower prices by at least 10% and could cap rises.

Bar the minimum wage i pretty much oppose all you measures in their pure form.

Gold is only worth what somebody is willing to pay for it. The gold standard had significant flaws to it.

Savings controls - someone who has an unreasonably large amount of saving doesn't really need it, and it would be much better off in circulation... admittedly the banks do help a bit with this issue... but not as much as if the money had been spent and therefore redistributed into the pockets of many.

The IEA reckon that the CAP is most of the reason why our food prices are 117% of the global market price, while our farms are less productive than countries with lower rates of subsidy.

If their numbers are even close we could cut food prices back to pre-recession levels at a cost of -£3bn or so. Not too shabby.

CAP was set up to ensure that Europe could feed itself. Remember the horrors of food shortages during WW2 was still a recent memory to most. The French benefit the most from CAP as France is still surprisingly agriculture based. It's also a hot political potato in France so the French will never go for it.

I don't claim to be an expert on CAP but I'm sure I watched something about it many months ago. I'm sure a representative of the garners union pointed out that the result of the removal of CAP would result in increasing food prices as it would shut down a lot of farms.

The idea that it would increase food prices is based on a number of false assumptions.

Firstly, it assumes that the method of food production the CAP subsidises is the most efficient available. This is not true, as many EU farms have altered their practices with the aim of qualifying for subsidy (eg. splitting large fields into smaller ones, leaving unnecessary fallow land to get money aimed at encouraging crop rotation etc.).

Secondly, it assumes that the cost of the subsidies is not passed on to the customers (a hidden food cost as it were of roughly 77 euro per person per year),

Thirdly it assumes that there are no farms outside europe which would be able to export to the uk.

Finally it assumes that the more efficient farms which don't shut down (essentially, those that aren't currently government subsidy projects to support wealthy landowners) wouldn't expand to fill the gaps the closures leave in the market.

But this is all theory. Let's look at a case study. Australia, a country running subsidies at 4% of farm income (as opposed to the EU's 28%). Their food prices are at 86% of the EU level and their farms are 164% as productive (not sure how much of that is climate based, but I doubt it's a huge amount).

I am so glad there is someone else with a realistic view of the state we are in on here.

I always tend to advocate gold as a safe investment. While it may not make money, it should keep its value. A lot of people cannot grasp the idea that the £20 notes in their wallet might not be able to buy anything quite soon.

Gold didn't retain its value between 1980 and 2007...
www.news.bbc.co.uk/nol/shared/bsp/hi/image_maps/08/1205000000/1205149190/img/gold_price416x310.gif

Adjusting for inflation it still hasn't recovered...

Why do you think it holds its value? Its more than 20% down on its price two years ago (again, more after inflation considered)

It should hold its value because countries like China have been buying it in abundance. The value of our currency is based on nothing but words and is a major contributing factor to our economic woes.

Other countries will learn from our mistakes and will want to back their currency with something: probably gold.

That's speculation though isn't it.

Is whisky is a safe investment because the Chinese have been buying it in abundance?

No, so whats the difference?

If gold is so great then why did we (and everyone else) come off it?

Its just shiney heavy stuff with a negative yeild.

It's speculation because nobody can be sure how much gold China holds.

Whisky may well be a good investment, but I don't know. Given that whisky can spoil and bottles can smash, I don't think it's a good comparison.

Thanks for that. Can I just raise a few points though.( not in a confrontational manner either.)

Could it be said that Australian farms are more efficient as they're larger and benefit from economies of scales. European farms tend to be smaller and less industrial.

If you opened up imports more do you not run the risk of raising food prices in poorer parts of the world?

From a strategic point of view, should Europe not be taking the hit on slightly higher food prices to ensure that it maintains the capability to feed itself. Nobody knows what's around the corner on the global front and certain areas, a country, region, continent should attempt to be self sufficient. For example, we'd be cheaper buying outlet warships from abroad but a strategic decision. Has been made to maintain a degree of shipbuilding capability for the what if scenario.

It should hold its value because countries like China have been buying it in abundance. The value of our currency is based on nothing but words and is a major contributing factor to our economic woes.

Other countries will learn from our mistakes and will want to back their currency with something: probably gold.

It should hold its value because countries like China have been buying it in abundance. The value of our currency is based on nothing but words and is a major contributing factor to our economic woes.

Other countries will learn from our mistakes and will want to back their currency with something: probably gold.

There's eating, and then there's eating well. There's eating, and then there's heating. There's heating and then there's drinking/washing etc etc

This is part of the problem yes, but the squeeze is coming from both sides

It seems you do not fully comprehend how inflation is calculated, or factoring in the fact that wages aren't spent evenly in a manner reflective of a balanced CPI basket of goods at the bottom end of the earnings spectrum - necessities, subject to price rises as per the graphs, dominate their consumption patterns

Problem is the SMEs are the only ones really paying any corporation tax

I agree though, also business rates should be reduced as they're just contributing to the death/homogenisation of the high street

Unfortunately saving is needed as a pool for investment, and the long term sustainance of steady state rates of capital investment

Also, we still have excessive rates of debt e.g. 5:1 GDP in the UK (a lot higher than most other nations and both unsustainable and a source of instability)

Aye, the 'trickle down' effect from QE/nationalisation of select banks has been at best laughable, at worst, scandalous

I am so glad there is someone else with a realistic view of the state we are in on here.

I always tend to advocate gold as a safe investment. While it may not make money, it should keep its value. A lot of people cannot grasp the idea that the £20 notes in their wallet might not be able to buy anything quite soon.