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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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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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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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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 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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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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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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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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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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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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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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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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"Get your facts first, then you can distort them as you please"
Mark Twain
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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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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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Mark Twain
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Wadday mean WILL do - he HAS done!
Glad I will still have my tinto money.
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Quite frankly m'dear, I don't give a damn!
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Spot on Gillespie,that is exactly what Lawson did when he robbed the poor and I dare say Brown will do the same. 
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If you're going through hell keep on going, you might get out before the devil even knows you're there.
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50 billion pounds made available to UK banks just in-case they need a cheap (pay back when you can) loan.
It´s taxpayers money yet UK tax payers can´t get a mortgage, so who is benefitting from this handout that no-other business can benefit from.
The answer is quite simple........How many MPs and ex MPs and ex PMs are board members, directors and advisors to the High Street Banks?
So they are assured their 2 days per month part time 100,000 a year gravy train is secure at least!!!
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When you consider that the banks are introducing Rights Issues to shareholders it would indicate to me that credit crunch is far from over. They are not using their normal streams for raising finance (i.e. borrowing it in the markets) as it is either too costly or they are already at credit limits imposed by the other financial institutions or they havent got it to lend either. Generally adds up to a lack of liquidity which indicates that pessimism still prevails. Clearly they have decided it is more cost effective to go to their shareholders to raise liquidity by issuing more stock in exchange for drinking vouchers - sorry money to lend to borrowers. Whether this initiative will give them the liquidity to restore faith to a shell shocked market is debatable and in my opinion the fundamentals are still not indicating road to recovery but there does seem to be a more optimistic mood - not so much here in Spain but then we tend to lag about a year behind anyway - then again the general populace here are probably not overly bothered as their philosophy tends more towards whether they have enough in their pockets for another glass of Tinto.
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