economonkey

With all the coverage of the temporary suspension of stamp duty (and if you’re currently marketing your house at £200k, get ready for offers below £175k), another jewel in the disjointed mish-mash of government announcements has been ignored by many commentators.
The Beeb caught it, though: “Other measures aimed at boosting the housing market include […]

I am writing to enquire whether you have any vacancies on your strategic board for someone of my talents. I realise that it is a little unorthodox to apply ‘on spec’ for such a high-ranking position within your organisation, but I believe I have the necessary skills to further increase the profits and assets of Big Bank Plc. In this letter I will attempt to demonstrate my knowledge of the challenges and opportunities in our marketplace.

1) Who are our customers?

I understand that our most lucrative customers are those with the least awareness of financial matters; indeed, the less numerate they are, the better. Rather like the dear old PM, in fact.

If they don’t know the difference between APR and AER, if they fail to read the small print in their credit contracts - not that it matters, as I’m sure I have the necessary legal skills to make such text impenetrable - and if their limited attention is grabbed by an ‘introductory’ rate, then they are exactly the kind of people we need to target.

I think that if we closely follow that other highly successful model of commerce - drug dealing - we won’t go far wrong in attracting and retaining the right customer base.

2) How do we get people to take on more debt?

When people talk about ‘inflation’, they implicitly mean one of two types: price inflation or wage inflation. In simple terms, price inflation is an increase in the cost of the things people buy, such as food, furniture, fuel and so on. Wage inflation is what happens when salaries go up across the board, regardless of the type of market sector or level of job.

One type of inflation can lead into the other, with higher prices leading to demands for higher wages to compensate, then strikes, capitulation, an increase in prices to cover higher payroll costs, and around again, in what’s termed a wage-price spiral, a type of positive feedback loop.

There are various indices that measure price inflation. The UK government used to target RPI (the Retail Prices Index), aiming to keep it below 2.5%: at the time of writing it’s a whisker over 4%. But in more recent times the target has been CPI (the Consumer Prices Index), also known as the Cheap Plastic Index or Chinese Products Index by cynics, because it excludes housing costs and places quite a high emphasis on consumer electronics. Some people complain that ‘real’ price inflation is anywhere between 5% and 10%, depending on who you are and what you buy: you can check your own at www.statistics.gov.uk/pic/