A glance at my post and the replies tells me that I was not getting my point across too well.
Still, it's my belief that the idea that inflation and interest rates are the two main factors needed to stabilise an economy is as antiquated and wrong as believing that leaches cure fever.!!!! Really, who believes that?
OK, I'm not an economist, banker, senior politician or civil servant. Neither have any sort of degree or title (other than Mrs) and have not participated in any education since leaving school. My qualifications to what I say are based on common sense; my opionions formed from observation.
So I would like to have another go at explaining my 15% figure which cannot be proven by any standard calculation and relates to no index currently available.
Our current system of calculation has worked well because their has been an increasing supply of raw materials and energy to fuel growth. As we now approach the top of the hill. As we begin to tip over the edge the old crude system of calcuation will be shot to pieces.
We have deceived ourselves, allowed whomever to convince us to load up with debt, buying goods and services along with necessities in the belief that we can afford it (well everyone else is doing it) and that inflation will solve the problem. Well, you can only blow things up if you have energy and although there will be plenty of energy in the future it will not be available to everyone.
The debt we have created is not going to dissapear, even if you go bankrupt it will rattle along into another part of the system. When interest rates rise there are alot of losers. Interest rates will not create a stable economy which ever way they shift. If they go up they will take out alot of people, if they go down they will encourage people to borrow more.
The real issue is how much income does each individual have and can they afford to live now.
In 2005 it was estimated that the average student leaving uni had debts of ?13,500. Approximately 50% of all kids now go to university, so 50% of kids now start work with a massive disadvantage. Their debts may be interest free whilst still studying but as soon as they leave start attracting interest which, in my view, is a type of inflation because it directly takes away from the amount of money available to that person to spend on real things, like eating, accommodation, travel to work, tax, heating and light etc.
Children going on to university represents a huge drain on societies resources unless that education is going to be of benefit. Increasingly these days it is not and therefore represents inflation or, more understandably a decrease in the standard of living.
All debt represents both deferred decrease in standard of living also an immediate decrease in standard of living to the person who is buying the debt although it may make you feel good at that time as you drive around in a new hybrid car, enjoy nice clothes, insulate your house (saving yourself some fuel bills) etc.
The spin off is that someone, somewhere gets an income off your purchase, raw materials get turned into finished product, food gets produced and money goes round the system again.
If people rarely borrowed money (true for times in the past) then raising interest rates on borrowrd money would be very sensible and would be another big deterrent for people to get in debt. Raising interest rates in that case would help people to live within their means. This in turn would be a stabilising factor on the economy.
However, we are now more in debt than at any time in history. Raising interest rates from 4 to 5% increases the interest on money borrowed by 25%. This is an obvious decrease in the standard of living (which is a much more honest way at looking at costs than taking about rpi, inflation or what ever other antiquated way we have at explaining things).
We have also had a huge proliferation of bits of paper and figures on computer screens (I mean money) since 2000, hanging in around 12% a year (I think).
Houses in the UK have increased in price at about 15% pa.
Mortgage debt has proliferated from around 458 billion in January 1999 to 975 billion in Jan 2006.
http://www.fool.co.uk/news/foolseyeview ... 60323c.htm
Cost of non essestial items and consumer goods has gone down over the same period which in turn has created a feel good and must have factor encouraging people to get more personal debt.
Proliferation of personal debt is out of control way over 15% pa
http://news.bbc.co.uk/nol/shared/spl/hi ... _stats.xls
So that's my feel for it. It would give a better indication of state of health if we didn't use rpi and interest rates in the belief that they would stabilise our economy. The solutions, as we all more intuitively know are more more complicated and far reaching than traipsing out simple formulas and easy talking imply.
When I glibly plucked the figure of 15% out of the ether it was intuiative based on what I've seen and what I've read. If 15% was used to indicate our financial state of health there is a chance that we would think more clearly about what we need now. Again, dream on.
15% doesn't represent the inflation headline but more of the truth, that our standard of living is being corroded at an alarming rate, much being hiden by lies, deception, ignorance, debt (the financial equivilent of head firmly shoved in the sand) and the continued belief that GDP, RPI and interest rates is the panecea. Personally, I think they are all more like placebos. Lets not be conned.
Good one. Now we have over a billion ? of unsecured debt and a similar amount of mortgage debt they're putting the rates up. 
