The Rising Cost of Living

4th April 2022

I have just had my direct debit increased for electricity and gas from £103 per month to £248 per month! More than double.

I have phoned my supplier and it seems there is nothing I can do about this. There are no cheaper deals elsewhere and if I choose to fix my tarrif the cheapest deals start at over £300 per month.

They have justified the increase in my direct debit by saying I need to build up a credit for my estimated usage over the next year.

I figure that they are taking into account that gas and electricity prices will increase further before the coming winter time.

The current inflation rate in the UK is officially 6.2% but in reality it is much more than this for many.

The steep price rises in fuel is bound to feed through into higher prices for goods and services as businesses need to raise prices to cover their operating costs.

All this at a time when the UK government and most governments around the world have spent billions on mitigating the economic impact of lockdowns due to the covid pandemic by effectively paying the wages of millions of people while they stayed at home to 'slow the spread' of Covid-19.

Central banks have printed more and more money, a process known as 'quantitive easing' to try to stimulate the economy, and governments have borrowed colossal sums of money which will need to be paid back!

Inflation makes it easier for governments to pay back this debt, as prices rise VAT revenues increase, fuel price at petrol forecourts have risen over 50% in the last year, so the recent 5p per litre 'tax cut' in fuel duty just about offsets the increase in VAT revenue that the government have gained from the rising cost of fuel.

Higher inflation also reduces the real value of debt, bondholders on fixed interest rates see a fall in the real value of their bonds which in turn makes it eaiser for governments to pay back them back.

But people get poorer, many people this winter here in the UK will really struggle with the cost of living this winter.

This cost of living crisis was bad enough before the war in Ukraine started. Putin has weaponised the gas supply and threatened to 'cut off supply' to europe if he is not paid in rubles.

Germany has outlined contingency plans to 'ration' the supply of gas to businesses in order to prioritise households.

There is talk of food shortages too. Ukraine is a major supplier of wheat, barley and maize, particuarly to north Africa.

Production has understandably been severely disrupted due to the awful war taking place and exporting the crops is much more difficult because Ukraine cannot be exported via the Black Sea ports of Odesa and Mykolaiv, only a fraction of crops can now be exported via Poland and Romania.

Sanctions against Russia will impact not only Russia, but the rest of the world too as countries look for new sources of gas supply and goods and services.

Could we see double digit inflation here in the UK before the end of the year?

Cryptocurrencies have proved quite resilient throughout this unprecedented economic crisis.

Maybe its a good time to build up some crypto reserves as a good hedge against the rising cost of living.

Maybe we won't see hyperinflation here in the UK but with all the crazy stuff going on right now it would be foolish to say 'It could never happen'

I hope we can all make it through this crisis, I feel for the people all suffering due to the war I find it hard to believe this is happening.

A new cold war will be a dangerous thing for the whole world.

The Russian people will suffer as a result of this conflict as well.

Whats so sad is that innocent people suffer so much. This world is in turmoil and it is tragic.

The future is uncertain, that is for certain!

Thank you for reading, if you would like to read my other articles you can do so here.

https://read.cash/@onlymythoughts

Article is my own

Pictures courtesy of Pixabay