Posted by Katherine

Today, the Bank of England announced interest rates have been cut to 1%, which has beat last-month’s record low of 1.5%.

The Bank of England’s Monetary Policy Committee (MPC) cut the official cost of borrowing as it struggles to find a strategy that works on the bleak economy.

Already, interest rates are at the lowest level in the Bank’s 315-year history.

Traditionally, interest rates are cut to make it cheaper to borrow – a move used to encourage spending. At first glance, then, an interest rate cut seems appropriate: the UK has officially entered into recession, unemployment is expected to hit two million  and the UK is expected to suffer the most from the global downturn.

However, there is no evidence to show that a further cut in interest rates will make borrowing cheaper or more accessible – and savers are already suffering from low returns on their money.

In fact, the only people who have benefited from the successive rate cuts are people with tracker or variable-rate mortgages. However, even some of these borrowers do not automatically receive reduced payments in line with the Bank of England rate. For many, their loans have hit the floor and will not drop any further.

And a further cut could put savers in a worse position. The Bank of England has already been urged to leave rates unchanged over fears for savers, who have seen their returns fall by 75% recently.

A further rate cut would also have bad consequences for sterling. Lowering interest rates devalues the currency, meaning that pensioners who live abroad and holiday makers will find it much more expensive than before.

Indeed, it’s difficult to find proponents of an interest rate cut; some economists predict that the Bank will continue to push rates to zero in order to raise the possibility of quantitative easing – creating money to improve liquidity in the banking system.

Whatever the Bank decides to do, it will be a gamble. What would you do in their position?

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Posted by Katherine

Today, the Bank of England announced that interest rates have been cut to 1.5% - the lowest interest rate in the Bank’s history.

UK interest rate hits record low

The move is sure to please the City, who wanted the Bank of England to slash interest rates 50 to 75 basis points today, though any cut would have made interest rates lower than any other time in the Bank of England’s 314-year history. For context, interest rates during the Great Depression only went as low as 2%.

Chancellor Alistair Darling told the Financial Times that as the rates crept towards 0%, “the operation of monetary policy has to be looked at [more closely]”. Darling also indicated that rates would not drop to zero – at least for this month.

How interest rates are shrinking

Many economists expect that interest rates will be cut in February as well, and will be delivered alongside government assurances that borrowing will stay low for a long time.

If interest rates fall too low, however, the Bank of England would lose its independence: if zero or near-zero interest rates fail to have the desired effect on the economy, the Bank would have to seek approval from the Treasury to print money to buy private and public sector assets. This would essentially force money into the economy, a process known as quantitative easing.

The danger with quantitative easing, of course, is that too much money would be forced in, switching the problem from deflation to inflation. Indeed, shadow chancellor George Osborne called comments about quantitative easing as a sign of desperation: “It can’t be ruled out as a last resort in the fight against deflation, but in the end printing money risks losing control of inflation,” he said.

Besides quantitative easing, the financial industry has asked the government to extend loan guarantees to get credit flowing back through the economy.

Furthermore, further tax cuts and government spending are now more likely to appear in the March Budget, though it remains to be seen whether even these measures would kick-start the economy or ease the fears of jittery banks.

Now that no one is arguing that the UK can avoid a recession anymore, the best that can be hoped for is that it doesn’t get worse: house prices have fallen 20% from their peak, car sales have dived and insolvent businesses are in the news every day. According to the PA, more than 75,000 people signed up for unemployment benefit in November alone.

Have you seen any benefits from the previous rate cuts? Have your say on our message boards

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Posted by Katherine

Today the Monetary Policy Committee at the Bank of England announced that interest rates have been cut to 2%.

The Bank of England announced interest rates have been cut to 2% today – the lowest seen since 1951 and the lowest level since the bank was founded.

Despite last month’s cut of two and a half percentage points, economic gloom has failed to be lifted. In fact, all economic data suggests that the recession will be prolonged and far-reaching.

Rising unemployment has caused consumer confidence to sink to its lowest ever levels, and repeated profit warnings and write-offs do nothing for business confidence.

Most economists expect a one point cut to 2%, the third cut in as many months. Such a cut would mark the steepest rate of decline in UK interest rate history, from the 5% prevailing in the summer and would match levels last seen in 1951.

However, the overnight swap index market was trading at levels suggesting an even bigger 1.5 point cut, matching that of last month and taking rates to never-before plumbed levels.

And so severe is the recessionary storm gripping the global economy, interest rates across the industrialised world are marching down to zero, according to MSN Money's investing expert Nick Louth.

How much do interest rates need to be cut to restore confidence? Have your say here.

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Technorati Tags: Interest rates,cost of borrowing,MPC,Bank of England 

In the end it was more of a "Budget" than a "pre-Budget" report - coming in at 54 minutes long and announcing major changes to UK tax, spending and benefits.

But what did the papers make of it all? MSN Money takes a look:

The Sun

The Sun devoted half the front page to Gordon Ramsay’s alleged affair and half to the pre-Budget report. “Up to arrears: Darling spree means ONE TRILLION debt,” screamed the headline. Inside, the pre-Budget report occupied five pages shared between the main paper and "Captain Crunch, the pull-out special". Overall the paper looked favourably on the pre-Budget report – specifically on the VAT tax cut and the 45% tax for high earners.

In its “Strings attached” feature, the paper explained how the nation would pay for the VAT holiday. “But the cut is only TEMPORARY. Booze, cigs and fuel will shoot up in cost in January 2010 when VAT goes back to 17.5%”.

The Sun’s business editor, meanwhile, explained that in the current economic crisis, Darling had no room to manoeuvre. “Prudence and stability went out of the window as Alistair Darling became the man of big, bold and decisive action,” Steve Hawkes said.

The Times

The cartoon on the front page of The Times sums up their take on the pre-Budget. It shows Brown and Darling dressed as traditional Labour supporters of the 1970s in their flat caps, boots and working clothes. Brown is using Darling as a flagpole and the flag is reminiscent of the hammer and sickle with a pound sign replacing the sickle. Could they be hinting that Labour have signalled a return to their red ways?

The focus is certainly on the effects on the “better-paid” in their analysis of Darling’s “Robin Hood-style Budget statement of breathtaking scope". The Times points out that 800,000 who earn more than £100,000 are being asked to “bear the brunt of deferred tax rises". To say The Times is not universally positive about the measures announced is an understatement. Pages four and five carry the headlines “Shot in the arm for economy may prove a shot in the dark” and “(Only) one thing is clear: it is worse than we thought".

The Daily Mail

The Daily Mail’s opinion on the PBR is unclear – it simultaneously commends the chancellor for extending a “helping hand to the poorest families” and attacks the policy for increasing tax on the UK’s high earners. It calls yesterday’s PBR a “crisis budget” and says New Labour has died. The National Insurance increase and new tax rate will “punish” both middle and high earners.  The Daily Mail has calculated that the NI increase will cost a family earning £40k an extra £550 a year in 2011.  There is some interesting analysis of the chancellor’s economic growth predictions and borrowing forecasts, with some scary looking graphs illustrating the government’s borrowing in 2009. Finally, the main editorial says that Brown and Darling have ignited a “fiscal nuclear weapon under Briton” and that we face many torrid months waiting to discover if they’ve saved the nation or bankrupted our children as well as ourselves.

The Daily Mirror

It’s really interesting that so many papers are saying the PBR announcements have come from Gordon Brown, yet it was clearly Alistair Darling who addressed Commons yesterday. He is the chancellor after all. The Daily Mirror says the PBR was a gamble for Gordon Brown: he’s staked his political career on a £20 billion gamble to save the UK from a crippling recession. Inside (after page 3’s “news” about Jude Law running into his ex-wife Sadie Frost at a function yesterday), the Mirror claims the PBR is a rescue package for “shoppers, OAPs and families” – pretty much everyone, then. The VAT cut – “A VAT lot of good” – means little as people don’t have any money to spend anyway. There’s a useful at-a-glance column showing the main changes and a brief mention of the difficulties that shops face in implementing the lower VAT rate.

The Daily Express

The Daily Express is almost as miserable as The Times. They reach similar conclusions, but in very different ways. There’s that phrase again: Robin Hood Budget. While The Times focuses on the better-paid, the Express carries the headline “Middle Britain Bashed”. Darling is responsible for “the biggest tax raid in living memory” as he clobbers the country with “swingeing” tax rises, bring Britain to the “brink of bankruptcy”. (They do like their alliteration at The Express.) Ah well, readers can always distract themselves by reading of how the Queen’s Russian teapot was “bugged” (see page seven).

The Daily Telegraph

The Telegraph, like the Express and unlike The Times, focuses on the middle class and how they face a “tax time bomb”. The time bomb is also stealthy however: the paper notes how “Labour again turns to favoured stealth tax”. The Telegraph devotes half a page each to the effects on motorists and long-haul holidaymakers, both of whom will be paying more. It waits till pages six and seven to spread some cheer, noting how struggling homeowners, families and the elderly will benefit, given the extra protection for those facing repossession, the rises in child benefit and the £60 “gift” for pensioners.

Its special report labels Darling the chancellor "with the worst economic forecasting record in history and the worst borrowing record since the Second World War". It does note that there is help for small businesses in the pre-Budget and also that it has been given a "Cautious approval from employers’ groups and unions".

The Guardian

The Guardian went big on the “£21bn tax gamble” and spread 15 pages of coverage between its front pages and a “What it means for you” special: “Alistair Darling yesterday gambled the government’s political future on a ‘spend now, pay later’ £21 billion package of tax cuts and spending increases designed to lift the economy out of recession by next summer.”

“Back to the 70s: high-stakes bet that redraws political battlefield” reads the headline on pages two and three: “Labour and the Tories have set out their stalls. Time – and the electorate – will tell who got it right and who got it wrong.”

The paper also ran a truth check on Darling’s key statements from yesterday. Perhaps most interesting was its audit of one of George Osborne’s rebuttals. “’It means a £20bn temporary giveaway, but £40bn in permanent higher taxes.’ This looks correct for 2009...what the tax takeaway really equates to is about £9bn of tax increases each year forever more.”

Another feature praised Vince Cable  for the way he predicted the credit crunch. “In November 2003 when interest rates stood at a 48-year low at 3.5% and no one was talking about the end of the longest boom in the UK’s history, Cable was on his feet in the Commons warning of the hangover.”

The paper’s special led with “After the gain comes the pain” – discussing the changes to taxes and noting that it’s “just like the 70s – without the 3-day week”.

The Independent

“Brown goes for broke” began the paper’s 22-page coverage of the pre-Budget report. First focusing on the possible effect of the speech on New Labour, the Independent claimed that the report was a thrown gauntlet for the next election. “The battle lines for the next general election were dramatically redrawn yesterday,” the paper said on the front page. The main angle was “Darling helps the poor – and the party”.

Page three was reserved for the paper’s first critical articles. “A monumental debt that takes us back to the 70s” and “Tax rise is a repudiation of New Labour” raised doubts that the chancellor’s plans were going to work at all. “Having got us into a jam by borrowing too much, the way out is to borrow yet more. This is a gamble of monumental scale, a bet on the world economy growing again by the second half of next year. This is a gamble of monumental scale, a bet on the world economy growing again by the second half of next year. If it does recover, then the chancellor may have succeeded in puffing up our own economy a bit during the downturn but the borrowing levels to achieve that are terrifying. If the world economy does not recover, the consequences don’t bear thinking about,” said Hamish McRae.

The Metro

“I owe, I owe, it’s off to work I go” began the Metro’s seven-page pre-Budget report coverage.

The paper explained who the rise in National Insurance “will wipe out tax cut gains”. The tax hike will “virtually wipe out the rebate millions of basic-rate taxpayers will gain from Mr. Darling’s announcement that personal allowances will be cut permanently for the abolition of the 10p tax rate,” the paper said.

The Financial Times

There are nine pages of coverage in the FT, plus most of the front page.  The lead story contains all the facts and figures from Darling’s pre-Budget report and a column dedicated to the main points.

There’s also a clanging teaser for a p10 comment piece on the front page: “If a 45% top rate of tax today, why not 50% tomorrow”. If that doesn’t get the City boys reading I’m not sure what will.  Chris Giles answers five key questions on the pre-Budget report including: how bad will the recession get, is the plan credible and how will the Treasury restore prudence. Darling’s changes to business and corporate tax should stem the tide of companies leaving the UK, the FT says.  VAT changes will be a “nightmare” for retailers and savings will be eclipsed by pre- and post-Christmas sales.

There’s a good summary of comment from business chiefs and economists. The FT has dug deep into the report and reveals that a string of public sector businesses, including the Royal Mint and the Met Office, could be sold. A review is currently underway into alternative business models for the businesses which have a government stake. Finally, George Parker had these optimistic words for the nation’s politicians:  “Alistair Darling … gave the impression that the next general election is one that no party in its right mind would want to win.”

The words the chancellor used in the pre-Budget report

Posted by Katherine

The Bank of England has stunned borrowers and lenders alike with an unprecedented cut to the base rate – from 4.5% to 3% - however there is no guarantee that banks will pass the cut onto borrowers.

In-depth analysis on the interest rate cut - and what it means for you

Pressure mounted on the Bank’s Monetary Policy Committee to act aggressively, with markets factoring in a 75 basis point cut. Today’s unprecedented rate cut returns interest rates to levels unseen since 1951.

The FTSE's response to the rate cut         

Do you think the rate cut will be enough to restore stability? Did you see any benefit since last month’s rate cuts? Have your say on the message board.

Official figures showed UK output shrunk by 0.5% between July and September - the first quarter of negative growth since 1992. An economy officially enters recession after two quarters of negative growth.

In addition, UK manufacturers have experienced the worst decline for nearly 28 years.

Because of the grim financial data, anything less than a 1% cut would be "too little, too late" to combat the economy's steep decline, forecasters at the Ernst & Young ITEM Club warned.
         

What it means for you
For people with variable rate, discount rates or tracker mortgages, a 1.5 cut in interest rates will save you £125.14 - more than £1,500 a year - on a £150,000 repayment mortgage with a 25-year term; £150.17 a month on a £180,000 mortgage and £208.57 a month on a £250,000 mortgage on the same terms.

Whether the banks pass on the rate cut, however, is a real concern.

As our columnist Nick Louth pointed out already, a rate cut is unlikely to make any difference to your bank balance, no matter what the rate shrinks to, mostly because the banks aren’t about to put consumer concerns ahead of profits.

After October’s decision, 30 banks failed to adjust their variable rates to reflect the cheaper cost of borrowing. Another 34 had not passed on the full cut. The only banks to pass on the full cut last time were Lloyds TSB, Halifax, the Woolwich and Royal Bank of Scotland.

In fact, Abbey even increased the cost of its variable rate mortgage this week in advance of today’s announcement.

Banks are claiming they can't afford to lower rates for customers, however this doesn't stack up. Libor - the rate banks use to lend to each other - has fallen by more than October's 0.5 point reduction. Before the BoE's surprise cut in October, Libor stood at 6.2% - it is now 5.7% some 0.5 points lower.

What's more, banks are starting to act to make sure that can still make money from people on tracker mortgages. Lenders, including Abbey, Nationwide and Halifax, increased the cost of tracker mortgages shortly before the Bank of England announcement, so the rate cut will have less impact, while others are changing their terms and conditions.

It’s also worth considering that if banks pass on savings, it’s likely to be savings from last month’s rate cut, not today’s.

Have you seen any benefit from last month's rate cut? Do you think November's rate cut will be enough to save the UK from recession? Have your say on the message board.

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Posted by James

Before the markets had time to digest the news that the US government might have saved AIG, let alone recover and pause to draw breath, the consolidation began again.

Rumours have broken this morning that Lloyds TSB and yesterday's biggest losers on the markets HBOS are in talks over a merger as a "land grab" from any bank with spare capital is looking more likely.

Because when prices collapse there isn't just pain for shareholders, pension funds and job losses – there is also opportunity to pick up a bargain.

Barclays has seized the opportunity and made a lunge for Lehman's best bits, Morgan Stanley is considering its options after seeing its profits fall and even Goldman Sachs – whose profits actually rose during the first phase of the credit crunch – reported lower profits.

As the news keeps coming we will keep you up to date with everything that's going on and what it means for you.

Check here for the latest.

Posted by Katherine

Chutzpah: noun: unbelievable gall; insolence; audacity.

It’s like listening to the cretin middle manager try to grasp a series of complex ideas and fail, only to blame his staff. It’s not his fault – he’s just too stupid. Only, he gets paid more and he really should know better before passing the buck to his underlings.

But that’s what cretin middle managers do best, and President George W Bush isn’t any better.  At a fundraiser last week, W gave his damning verdict of the recent banking crisis.

"There's no question about it. Wall Street got drunk. That's one of the reasons I asked you to turn off the TV cameras. He got drunk and now it's got a hangover. The question is how long will it sober up and not try to do all these fancy financial instruments."

Let’s take this down a notch, shall we? The man whose family dynasty and cronies got richer off of the deregulation of the markets, ripped the teeth out of watchdogs and celebrated obscene growth among the top 1% of American earners blames the system that got him there.

Or as one commenter on the Huffington Post said “Wall Street got drunk all right, and guess who supplied the booze?”

At least hangovers are something Bush is bound to understand – financial markets? Maybe not so much.

As for me, I’m looking forward to the global hangover in 181 days – the world will surely need a lie in after celebrating Bush’s last day in office.

See the video

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Posted by Katherine

There comes a point where money becomes so devalued, it’s simply not worth the mint producing more. This usually is the case with coins, where the metal within the coin becomes more valuable than its face value.

Rather than wasting money on making money, mints generally opt for a cheaper metal or consider taking the coin out of circulation.

An interesting side story to the inflation crisis in Zimbabwe is that the money is literally not worth the paper it’s printed on – in fact, it’s worth much less.

Giesecke & Devrient, the German company tendered to supply paper for Zimbabwe’s currency was ordered to cease delivery to the government after the political situation in the country worsened.

Now, Zimbabwe’s state-owned Fidelity Printers and Refiners is facing a severe shortage of paper. The country has responded to the shortage by printing fewer, but ever-higher notes:  this year, the country has had to start printing $50 billion notes.

With official figures on inflation at 2,200,000%, who knows how much higher the notes will go? And if there’s no paper to print on, will the police and government workers - who depend on the bank to churn out their salaries – finally turn against their employer?

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Posted by James

News broke this morning that Alliance & Leicester are in "advanced" takeover talks with Spain's Banco Santander.

On many levels, this is a logical deal. Santander already owns Abbey, another former building society trying to take on the so-called "Big Four" of Barclays, HSBC, NatWest/RBS and Lloyds TSB.

Both banks are doing this by offering some of the best mortgage and current account deals around – with A&L going head to head with Abbey on current accounts: one offering 8.5% credit interest and the other 8%.

On top of this, Alliance & Leicester is cheap.

In March 2006 A&L was trading at over 1,200 pence a share and a year ago its share price was still over 1,100 pence. By close of business Friday, this had dropped to under 230 pence. This valued the company at less than £1 billion and had seen the bank drop out of the FTSE 100. The news of the bid has seen the shares soar almost 50% - and it still seems a good deal.

The way the UK market has structured itself, with a series of regional building societies first expanding across the country and then becoming banks, means there are a lot of competitors on the UK high street.

Between July 1989 and December 2000 a string of the biggest building societies turned into banks. Abbey, Halifax, Cheltenham & Gloucester, Bristol and West, Birmingham Midshires and Woolwich were all then taken over by larger banks, while Northern Rock has been nationalised.

That leaves only Alliance & Leicester and Bradford & Bingley as still trading as independent banks. Following the credit crunch, and its effect on banking shares, both former building societies are attractive targets. Both have good reputations, a wide high street presence and loyal customers. Both have share prices a fraction of what they used to be and both are arguably struggling in today's marketplace.

A deal uniting Abbey and Alliance & Leicester would allow both to team up to take on the big banks and remove competition between the two. It could also produce savings through economies of scale.

But while making sense to the buyers, and being a relief for the government and regulators who believe larger banks are less likely to go to the wall, I find it a little disappointing.

One of the charms of the UK market was its historical quirks – Alliance & Leicester's history stretches back more than 150 years. The Leicester Permanent Building Society grew and developed and merged with the Alliance building society (which was the first UK lender to offer 35-year mortgages as well as annual fixed-rate savings bonds).

Girobank - which ran the UK's LINK and MATRIX cash machines – was bought by Alliance & Leicester building society before it turned into a bank. The privatised bank still runs many of the nation's cash machines. It was the first time a building society had bought a bank.

Even after Alliance & Leicester became a bank itself in 1997, it continued to innovate – launching the UK's first cashback credit card.

So while being bought by a larger bank might be good news for A&L's shareholders, it leaves me slightly cold. Institutions are often defined by their histories and internal cultures, A&L has a culture of innovation and customer focus, left over from its decades as a building society. Even now it features in many of the best-buy tables for mortgages, loans and current accounts.

While I hope such innovation and focus will remain, it will be a sad day for me if one of the UK's oldest and most distinctive financial brands disappears.

Will the loss of Alliance & Leicester be a sad day for British banking? Post a comment below

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Posted by Emily

Every year thousands of people around my age take a week, or maybe two, out of their normal, everyday routine to venture into a different world. This world is the world of work and as we step into new shoes and take on challenges and new experiences, many get lost in the whirlwind of it all and money seems to get lost down the drain.

This week I have discovered the true cost of work experience and how all those little extras have added up without my realising. From the new clothes to the cost of travel, it may not seem much, but is it worth it? Does work experience help you in the future at all?

Like most people, the first thing I did when I learned I was doing work experience was to rush straight to the shops to stock up on new clothes. Work experience is exciting but the cost of these clothes can lighten your purse before you know it. It’ so easy to walk out of a store with shirts, trousers and everything you could possibly need; even if you have already got it stuffed in the back of your wardrobe at home. This quickly adds up and you are left with a mountain of clothes you never really needed in the first place.

The next big hurdle to jump over is the cost of travel. My weekly ticket from a Kent terminal to London it costs £55. When you add this on top of everything else, work experience becomes very expensive.

Once you arrive at the office you find yourself having to pay for even more things. When lunchtime comes around, you have to pay for food which is not all that cheap. I've started to wonder how much this is all costing me.

On the other hand, there is a reason I'm doing this. As well as learning about the profession I'm interested in, work experience can give you a good reference for future employers. Of course, one other thing that work experience can achieve is learning what it’s really like to work in a company, with other people and this adventure teaches is a life experience that I would not be able to get otherwise.

Overall, the cost of spending a week in a job seems to be worthwhile as the benefits can have a large impact on your future career and the things you get to see and do during this time may be a once in a lifetime chance. In the short term it may seem like a lot of money to spend but when you think about the advantages it does not seem so much.  

* Emily is doing work experience at MSN this week. She's 16 years old and is waiting for her GCSE results. In September she plans to attend Dartford Grammar School for Boys in Kent where they have a mixed sixth form. She'll be studying the International Baccalaureate and after that hopes to go to university to study journalism. Emily has worked on a magazine in which 7 schools in my area work together to create a topical magazine for 11-16 year olds.

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Posted by James

An Englishman's home is his castle – the saying is close to 500 years old, but still rings true for millions.

And when you find yourself in troubled times, the normal practice for castle-dwellers is to pull up the drawbridge and sit out the problems until things get better.

True to form, the nation's homeowners are doing just that. With news out today showing a ninth consecutive month of house price falls, Britons are responding to market trouble by simply not moving.

Figures from the Bank of England (also out today) show that in May just 42,000 people took out loans to move house. That might seem a lot, but it is less than half the normal average, 28% fewer mortgages than the month before, 64% fewer than the same month last year and the lowest number since the Bank of England started counting mortgages this way in 1993.

Normally you can expect to see around 100,000 loans approved for people moving home each month with this number going up to 120,000 in the good times. But things haven't been good for a while.

The last time there were 100,000 people taking out loans to move home was in September 2007, since then the number has been steadily falling: 88,000 in October; 81,000 in November; 72,000 in December and so on until we hit 42,000 in May – the latest month we have figures for.

Roughly translated that means three times more people were moving home (or buying buy-to-let properties) a year ago. Now this is both good and bad news for house prices.

Firstly, it means (in all likelihood) most of the people moving house now have to move. Whether it's because they have a new job somewhere else in the country, have had children and need more room or more unpleasant reasons such as job loss, insolvency or divorce it means they are in a weak position to negotiate.

At the same time, all the people who might like to move - but don't need to – are staying put rather than sell in a falling market.

While forced sellers are always present, if there are fewer people moving overall then they will make up an increased percentage of the national averages.

And that tells us something interesting about house prices: the month-on-month falls in house prices reported are being based very few transactions largely conducted by people who are desperate to sell.

The rest of the homeowners, safe in their castles, are waiting out the current problems in the mortgage market until they can trade up or out with a healthy profit again.

While this is terrible news for estate agents, it means the overall property market may well be stronger than many people claim.

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Posted by Katherine

Even people who wouldn’t hesitate to buy expensive products can shirk at the thought of investment: a few threads of saffron or a memory card for a digital camera has immediate use, whereas investing seems complicated and risky.

But whether you choose to invest in your computer or commodities, the fact remains that certain investments are a way to beat long-term inflation and save on the overall cost of living. Think of it this way: if the rising cost of oil is affecting your finance, investing in oil could offset these price increases.

In the same way, if £1 becomes less valuable because of inflation, investing in gold ties your current money to the gold standard – a much more stable and valuable unit.

Still hesitant? Look at it this way: by weight, many of the things you own are either more valuable than gold or a significant percentage of it.

To illustrate the point, we put together a gallery to show what you may invest in for day-to-day living and compare it to the price by weight of gold.

To work out the conversions, I asked Jane Douglas, science whiz and editor of the tech and gadgets channel, for help:

"For the liquids, where we had already had a volume and a price, working out cost per cubic centimetre was straightforward: the first figure divided by the second.

"For the solids, we needed a density and a mass (easy for gold, water, paper, and polycarbonate plastic for CDs) to calculate a volume, to again divide by price.

"In the case of the memory card, the volume of was found by multiplying the dimensions of the card together."

Click on Jane Douglas and Maneeza Iqbal’s grid below for details. If you have any improvements, write in and let us know.

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Posted by James

It's the time of the month again for us to respond to your feedback. So here we go:

The state of the property market and the economy were on people's minds again this month.

"I'm sorry‚ but the articles on MSN Money are about nothing but bleakness and pessimism. All this about:  'Oh‚ we're all going to lose our money,' and 'our lives are getting worse,' does nothing but promote tension and unnecessary anxiety and worry," one user wrote.

"You may be anti-government‚ but you have done nothing but manifest that instead of inform people.  So please‚ enough with the rubbish advice about how we can save a few pennies‚ and how we are all heading for a disaster and the dark ages," they continued.

Another added: "I guess if you keep talking about disaster then it will eventually happen. The media always publish negative news that's their job! But I will keep going with my buy-to-lets and my 10% returns even today and I will let others gamble their money on shares which may I remind you is the highest risk investment you can make just ask the Northern Rock share holders."

At MSN Money we always try to reflect a balanced view – and have run articles questioning whether things are as bad as the headlines suggest.

However, when respected data shows many indicators are running at 15-year lows we have a duty to report it and look into the implications. Rest assured we will be at least as enthusiastic if things pick up.

Of course, some people love it when things start to go a bit wrong.

"How come no one is putting the blame where it should be? With the estate agents," wrote one user.

"They ‚ through greed put house prices up ‚ it's not like crops that increase because of rising fuel or wages. Estate agents make the market‚ so if it has now crashed around them good - let's hope all these leeches go under and the government get off their asses and bring in laws to regulate the so called business."

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Posted by James

House prices are falling, rents are rising and mortgages are impossible for first-time buyers.

Except none of this is true or, at least, it's not true for everyone.

Because no one is buying the whole market, no one is renting the whole market and there are still some people who can afford to buy.

Speaking to an estate agent this weekend he told me that while viewings used to stand at 80 a week, they are now down to 40.

That's a huge drop off, but still means prospective buyers are looking at 40 properties a week. Moreover, he explained there are incredibly few new instructions going onto the market (he had only had one in the last week, a three-bed town house). This means that competition for each property is still strong.

And while house prices are falling on average, some properties are still going for above their asking prices.

That's why people need to be very careful when looking at headlines about the property market in the press. Because the only thing that matters is if you can sell your property or afford to buy a new/first one.

The specific case of one house, in one street, being sold or bought by one buyer taking out a single mortgage from one lender can bear no relation to the general trends.

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Posted by Katherine

Perhaps I’m too bitter to judge the housing market impartially, but this recent PA story gave me pause for thought: apparently one young working household in four are priced out of the market.

“Around 28.3% of young working households in Great Britain cannot afford even the cheapest property in their local area, according to a report by Professor Steve Wilcox of the University of York,” said the story from PA.

So, nearly three in four young working households can afford to buy? Really? I didn’t know I was in the national minority – I thought that most new buyers were priced out of the over-valued property market.

Of course, the south-east is worse, where 41% cannot afford their own home, but even this figure seems low to me.

Anecdotally at least, most of my peers are nowhere near being able to afford their own home. “I would be able to afford a garage maybe – but I’m waiting for the market to crash,” said one of my colleagues, which is the normal response I hear amongst first-time buyers.

But cynicism aside, could it be the housing market is better than I thought it was? We'll be getting some writers to weigh in on this very matter later next week. 

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