theRatandMouse - London's property blog

An interesting piece in the bearish MoneyWeek, this time about how the onetime debtors' panacea - inflation - isn't going to help anyone out this time around.

Inflation may erode the real value of the debt in theory. But it can't reduce the monthly burden of the debt unless wages are rising too.

This morning's statement of intent by the new government makes it pretty clear... don't expect public sector wages to leap up any time soon; do expect the newly unemployed public sector refugees to seek work from the private sector, thus keeping wages down, there, too.

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Not convinced:

Public sector wages are likely to be held low, but the public sector only employs around 15-20% (full-time equivalent) of the workforce. Private sector wage increases are often linked to inflation in a basket-of-goods sense.

Author of MoneyWeek article would have done better to explain this and to investigate/highlight the difference between wage-inflation and basket-of-goods inflation.