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Talking of Rio Tinto, and going seriously off-topic for a moment, if you should ever find yourself just north of Sevilla and have time on your hands, a visit to the original Rio Tinto mining village is well worth it. The ORIGINAL Brits Abroad Ex-Pat community!
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Is that where they bottle the stuff????? Book me in for the trip please!
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Quite frankly m'dear, I don't give a damn!
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TJ222 - time for an update on the strike situation please. What's your take on what's been going on the last couple of days here?
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Quote Roberto - "TJ222 - time for an update on the strike situation please. What's your take on what's been going on the last couple of days here?"
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In the absence of TJ here is my take on the situation....
Nestle have reported a huge drop in the sale of Yorkie Bars. This is having a knock-on effect on the Swiss cookoo clock manufacturers and my bring down Credit Suisse and UBS.
With truck drivers no longer on the roads and considering an indefinate strike, Nestle will close their Yorkie Bar factory in Barcelona further damaging the Spanish economy.
Nestle Chocolate and Strawbery straws have been withdrawn also as Georgia is too busy to eat them!
We are all doomed unless Georgia resumes his copious intake of said straws and single handedly saves the Swiss banking system.
He would of course receive a commemorative cookoo clock in recognition of his imense efforts and free dental treatment at a Swiss clinic of his choice 
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In a nutshell -
I have been banging on about inflation until I feared people were bored of it, however now we see it really taking hold perhaps people will get the picture.
Governments around the world have been printing money for years, since the dollar and pound were removed from the gold standard. Today's currency has no backing, so govs are free to print as much as they want to. The problems really started when we in the west decided that we were too advanced to do anything productive and instead would let other nations do the hard work whilst we became a nation of shoppers and estate agents. Productive jobs went abroad whilst we created an illusion economy based on consumer spending backed by ever increasing house prices. By lowering interest rates and printing money, vast swathes of cheap cash flowed into property speculation and created jobs and wealth that was not really there. People spent it up like it was 1929.
It was only a matter of time before it all went horribly wrong and that time has arrived. Money supply growth in the UK and the US is now growing at 17%, so the money in your pocket is loseing 17% a year. Vastly more money is chaseing the same amount of finite goods eg oil, so is it any surprise that food and energy is riseing in price.
The banking crisis which was caused by reckless borrowing and lending has been fixed at the expense of inflation. Governments have simply printed up more money and given it to banks to stop them from failing. Unfortunately for us there is no free lunch, since we pick up the bill in inflation, not to mention in charges for mortgages etc.
So now the man in the street is feeling the effects as prices rise and his income stays the same. The governments produces cpi figures to prove there is no inflation, otherwise they would have to pay workers more and pensions and benefits would ahve to go up. They fill the nominal shopping basket with digital cameras and take out anything going up in price like food and energy.
At the very start of the thread I predicted mass strikes and protests as your average Joe realised he was falling further and further behind. Now its coming to pass, but this is not the real crisis, that comes later.
Remember the definition of inflation - not riseing prices, that is the result of inflation. The cause of inflation is gov. expanding the money supply, in the UK currently at 16% a year. So when you get 4% in the bank, your money is loseing 12% a year. House prices and oil never went up in price, your pounds just bought less of them. Understand this and you will get the problem.
As the recession takes hold the gov will be forced to print more and more money as legitimate tax receipts decline with declining economic activity. The bloated gov with their bloated pensions and benefits schemes for the "sick" will cause the problem to escalate as more money is printed to cover these bills. Tax increases on fuel will get increasingly hard to pass on, so the gov. will jsut print money instaed. Expect the infaltion problemto get much worse. Sterling is heading for a crisis as the city works out what is going on and foreigners dump pounds.
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Thanks TJ, very insightful as usual. I think I can grasp what you're saying - and it's pretty worrying stuff. So, just one more question really....
What the Hell should we do? It sounds like a lose lose situation. Property is obviously out of the question for now, and cash is no good either.
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I can only comment on the Note Issue in the UK. Bank notes are not printed to be given out to Banks to save them from failing, they are printed for the Banks to give to their customers over the counter or via an ATM.
Because most people get there notes from an ATM they have to be of a good quality to enable the machine to count them. Bank notes don't have a long life span so new one's have to be printed to replace the old ones which can no longer be used by the banks.
As to the amount of bank notes which are printed each year, it can be high one year and low another. It's something that takes a lot of planning as there are a number of factors to be taken into consideration.
The Bank of England would bale out a Bank with another method, they are not named the lender of last restort for nothing.
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http://www.finfacts.com/irelandbusinessnews/publish/article_1010945.shtml
This 12% money supply growth is in the ECB where we are told Trichet has inflation under check.
Printing money is a euphamism these days. Money is created by central banks at the stroke of a keypad, so much easier than printing paper.
Has noone ever wondered where the limitless supply of money came from during the boom years, just when rates were 2%
Exactly who was depositing savings at 2%. Under a proper system money available for borrowing shrinks dramatically when interest rates are lowered. Today = no problem its just created out of thin air.
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Has noone ever wondered where the limitless supply of money came from during the boom years, just when rates were 2% - Not really, like most people I'm more interested in my own budget although I did cringe when I heard people were being allowed to borrow 100%+ to purchase a property. My husband was advised to buy his first property in 1986/7 with a 100% mortgage, a month later the property was worth 95%. When I met him in 1991 it was worth 50%, I think he only lived in it for a year and then he had to move back home as all his salary was paying the mortgage 15%+. With his parents help and credit cards he was able to ride out the storm.
Don't forget this was also the time that people were investing in banks (BCCI and others who were offering excellant interest rates) Big upset when they went into receivership and investors found out they were only entitled to a guaranteed 75% of 20K and the rest would pay out later when funds allowed.
Exactly who was depositing savings at 2%. Most people save and also want to protect their savings so will go for the more secure option.
Under a proper system money available for borrowing shrinks dramatically when interest rates are lowered. Today = no problem its just created out of thin air. Is it, I thought this crisis came about because Banks were selling off their mortgage debt to speculators (can't remember the proper title), not sure if this is what happened in UK but definately in US. Banks were making mortgages easier to get as they weren't getting their fingers burnt.
I bought my first property in 1975 for 11,200. I was living in rented accommadation and I was really concerned about whether I would manage. Then I realised I would be paying the same for my own house as I was renting. Nine years later I moved and sold for 28,500. I laughed when the agent told me that if the sale fell through I should put it back on for 31k, today it's probably up for 200k+.
If anyone's interested in finding out more about note issue read this www.bankofengland.co.uk/banknotes/ statistics there make interesting reading, especially the mutilated notes section. It also explains about how notes are distributed around the country
Also found another item through google - scotland banknotes under threat in treasury shake-up - sorry didn't take note of the link but that also is interesting reading from another banks point of view.
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The number of bank notes and what happens to them is not nearly as important as the measure of broad money or M3. Afterall you don't genrally buy a house with cash.
The following article explains why money supply icludeing M3 is important and why we have inflation. Scroll down a bit and look at the chart of money supply growth. Its trully frightening.
http://seekingalpha.com/article/72116-m3-money-supply-and-inflation-got-gold
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Dont think the OLd Lady of Threadneedle Street is lender of last resort any more - if memory serves me correctly when Leeson broke Barings by his futures and options debacle the BOE took the stance that it would no longer fill that role. That is why there was quite heated debate over N Rock and what the consequences would be - only reason the Treasury baled it out was owing to its huge consumer base (borrowers and depositors) - possibly leading to a complete loss of faith in the UK retail banking system.
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The money supply is only a part of a greater problem.
Food prices are rising because the worlds largest consumers Russia, India and China are producing less. This is because they are going to work in factories instead of producing food for themselves. Consequently they are buying more food on the world markets forcing up the prices.
Oil, steel and gas prices are rocketing because those same countries are buying it to fuel those factories and their more affluent workers are buying cars instead of riding bicyles.
When almost 2/3rds of the worlds population stops producing food and begins to shop in our markets is there little wonder why these prices are going through the roof
Why are those three countries doing so well industrially??? Because the rest of the world are happy to purchase their cheap crappy products in the crazy notion they are saving a pound on a cheap plastic garden chair!!!!!
The only way out for the UK is to buy British products where you can. It may cost more in the short-term but it´s cheaper in the long-term because lunatic despot regimes will not be able to hold you to ransom if you are a mostly self sufficient country. It will mean our children have employment and the quality of life is improved. Look at the Norwegians, Swedish and Danes.
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Gillespie
You are spot on re goods in finite supply like food and energy. As you say these commodities are suffering the effects of two forces both pushing in the same direction. One is increases in the amount of money chaseing the same number of finite goods (inflation) and the second is a larger number of people chaseing the same amount of goods ie supply and demand.
However that fact that a 1950's pound ie sterling is now worth around 2p is indication of how powerful a force the expansion of money supply is. If people understood that its not the price of houses etc going up with inflationary forces, but the value of your pound or euro going down. In Spain had it been supply and demand forceing prices up, it would have been a riseing number of people chaseing a finite supply of houses. The supply of houses in Spain was anything but finite.
Unfortunately for us the supply of food and energy is strictly finite.
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Admire your sentiments Gillespie but seem to think that most industrial production is now out of fashion in the UK - not too many brands of washing machines, fridges, dishwashers, stereos (the list is endless) made in the UK these days (dont even mention cars) - even when there was an industrial Britain reliability and quality were hugely disappointing - Friday/Monday cars!! Seems that the UK is reaping what it has sewed over decades of reluctance by its industry to move with the times and keep up with its competitors.
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Smiley
Of course you are correct. The idea was that the UK was too "sophisticated" to do this sort of grubby work making real things, anyway as you say we wern't much good at it anyway. The idea was that we would concentrate on "higher" things like technology and marketing and design. The idea was that these services we provided should match in value to the goods we import. Unfortunatley the UK's trade deficit is testament to that fact that this never happened. In reality we became a nation of shoppers and estate agents. With the help of the central bank providing cheap money, capital was missallocated on a vast scale, spent on houseing and consumer goods, rather than on production or savings. The east meanwhile was doing the exact opposite, saving and producing as well as churning out millions up millions of educated graduates.
In our country if your industry went into decline, rather than take this as a chance to retrain to a higher skill, people went on the dole and then on the sick, where they wouldn't be bothered by someone asking them to work. The gov. convinced us that unemployment was low when infact the long term sickness benefit was three times the unemploment bill. During the good easy credit times money was there to pay these sick people. But as a country we became more and more obese, wallowing in phoney wealth whilst the productive half of the world got on with getting richer in a sustainable way.
As our currency declines stuff like oil will get more and more expensive to us, whilst remaining affordable to the east who's currencies are riseing. In a decade Chinese kids will come here with their backpacks and exclaim how cheap everything is as we serve them coffee. Just like stuff seemed incredibly cheap to us all those years ago when we first went to Spain and Asia and you could buy a coffee for 5p.
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And so the world goes round and round - someone speculated to me about 5 years ago that eventually the UK would become like a "gaol" for Europe - the US of Europe would send all the non workers and undesirables they did not want to the UK and the only people who worked there would be weekly commuters all living elsewhere in Europe - seemed a little far fetched and a bit 1984 but the way things are going I can start to see the credibility of such an idea - hope not but if it has little else to offer then I guess it could be so. Perhaps thats a theme for a movie - hmmm give that one some thought - Will Smith in the starring role - with his faithful dog by his side - deserted streets except at night when mayhem breaks loose.
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This is all very interesting, but I'm still not sure what I should do.
I understand that property is out. Seems the stock market is a no-no as well, and keeping pounds or euros in the bank sounds little better than keeping it under my matress. I know TJ extolls the virtues of gold and silver. The article said that an ounce of gold a thousand years ago would clothe a man in the finest suit, and today, an ounce of gold would do the same. But last time I checked, my local tailor only accepts cash or credit cards. And when did you last try paying for a coffee with a piece of gold? I need convincing. Please excuse my naivety (ignorance), but how exactly does this work?
I also follow the arguments about industry and food and fuel prices etc. etc., and that part of the UK's problem is that it no longer produces anything for itself. Does the same apply to Spain? I wasn't aware that Spain ever produced much in the way of industry apart from a few old FIATs made under licence. And what does Gillespie mean by "lunatic despot regimes will not be able to hold you to ransom if you are a mostly self sufficient country.....................Look at the Norwegians, Swedish and Danes". So, making (and buying) lots of boxy safe cars and flat pack furniture will save us from the Axis of Evil?
I'm sorry if I sound a bit sarcastic, I don't mean to be. It's just that I'm a bit bewildered by all this (very little brain, and long words bother me!) Just trying to make some sense of it all. From what I can make out, my best bet would be to move to China and buy a goldsmith business.
And bloody Hell, as for TJ's last remark about Chinese backpackers arriving in Europe soon, getting excited about "how cheap everything is as we serve them coffee. Just like stuff seemed incredibly cheap to us all those years ago when we first went to Spain and Asia" - all I can say is, I'm glad I don't have any daughters. 
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But last time I checked, my local tailor only accepts cash or credit cards. And when did you last try paying for a coffee with a piece of gold? I need convincing. Please excuse my naivety (ignorance), but how exactly does this work?
Actually Roberto in practice the reverse is true. There is a saying that " a man may not accept your currency (paper) everywhere you go, but he will always accept your gold"
You are actually mistaken about money, but then I accept that so was I before I research it. What we think of as money ie a Euro note is not really money atall, but rather a piece of paper that we accept has a certain amount of value. When paper notes and coins were devised they were a call on a certain quantity of gold or silver. A UK pound sterling wwas just that, a pound of sterling silver. If you wanted you could go into a bank and exchange it for real gold or silver on request. The bank or central bank had to keep vaults of gold all stacked in neat piles. Since people needed small amounts of change it was practical to use coins and notes as a proxy for gold and silver.
Since the currency was backed by gold, the dollar was deemed "good as gold" and the currecy held its value as a store of wealth as bnaks could only print notes and make coins if they actually had the metal to back it.
Obviously governments were not keen on the gold standard because they could not print money or overspend. If the public felt nervous about their paper notes they could at any time redeem them for gold.
As soon as the money system left the gold standard, govs were free to print money at will, the result being a little like leaving a fox in charge of the hen house.
Til today US navy pilots have in their survival kit gold soverigns. The thinking is that anywhere in the world they land, friendly or not, someone will always accept their gold.
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