The above graphs (source) are a very simple, almost crude analysis of why the quality of life in the UK has increased slower than real incomes.

Put simply, while incomes have been increasing faster than inflation, the spare income has been spent on housing and bill costs. We spend more and more of our income to pay for our housing, water and fuel, all things with price rises exceeding inflation levels for years.

Isn't it strange that the measure of inflation excludes fuel and housing costs when these are the two things where price rises are most felt?

There are those projects that started at the top of the market. Typically, they lack finance, and sales have been slow or non existent. Developers approach you with one main objective: getting some money to get the thing off the ground.

Other projects are a bit different. They are mainly sold, almost or completely built. Developers don't need the money to complete, but they need to sell out the last remaining units so they can move on.

Obviously the former ones are a real problem, especially in some countries where they form the majority.

There have been some positive signs from the market, but I find it hard to figure out what these projects will become and when they might start. Or at least, when they might be cancelled so the market can move on.

Today I am thinking about inflation.

2010 is upon us and the new VAT rate has hit the UK - at around 2.5% more than the previous one.

Companies have spent a horrible year firing people and tidying up their finances, with business being difficult.

If I get the psychology of a businessman right, this is what will happen:-

1. He will need to increase prices by 2.5% anyway,  just to pass on the VAT increase.
2. He is feeling business may be turning a corner and is by now tired of talking doom and gloom and saving money.
3. He will therefore try to "round up" the increase so the prices make sense and so he can pass on an inflation of 2-5% on his prices after over 12 months of recession.

Tada! Inflation of 5-7% is possible if customers will accept it.

Will they?

I don't think this is likely in a lot of products, but it might be especially on low value essentials like food, Internet connections, car repairs, etc.

I don't see the Bank of England raising interest rates until after the election. While the economy is doing better, any effects of interest rate changes take time to be felt, and the BoE will want to know what the economic plans of the next government will be before taking action.

I do therefore predict inflation kicking in certainly in the first half of 2010. Later, I expect it to become a talking point. After that I expect a new government to take some "tough" measures, which will dampen confidence (and inflation with it).

A striking finding was the presence of many Fractional Ownership developers and advisers in an event like this.

Not only were there new entrants to the Fractional market, but more importantly a number of larger players were there with a mixed marketing strategy incorporating whole ownership, fractionals, SIPPs etc. This direction of the market has been predicted for some time, as clients become more versed with the different ways they can invest in property and demand products that more closely match their requirements. But this year is the first time I see strong evidence of this trend across a large percentage of companies.

Fractional Ownership makes a lot of sense for developers and for end users alike:

For an end user, it allows buying only the amount of real estate that you are going to use, therefore reducing the cost of ownership. You wouldn't buy a car and leave it in your holiday destination idle for 11 months of the year, so why do this with a house? End users can also enjoy buying multiple fractions thus diversifying their property portfolio.

For a developer, it provides an additional revenue stream and access to a much wider market. A mixed marketing strategy will ensure people of different incomes and appetite for investment can invest in the same property. Developers will also enjoy a resort with higher occupancy rates throughout the year.

The model is popular in the USA and it seems to be coming of age across the world.

A new start for me from Friday as I will be leaving my employer after 4.5 years of service.

It's been a pleasure working here and I will miss the people I worked with and the people I met.

It raises some important questions. Unfortunately, it also tries to sell a certain political party in the process, which devalues the issue discussed to just mere politics.

But here's one:

The report [on reform of the benefits system, published today by the Centre for Social Justice] is laced with models and case studies. “Why”, it asks, “do those most in need of encouragement have the greatest penalty”? A young man working 25 hours a week in a part-time job will, they show, lose 84 per cent of his new wage in taxation and loss of benefits. A lone parent would lose 61 per cent. A low-income couple who choose to live together – such as for the purpose of bringing up children – will lose £1,350 a year by doing so. So the benefits system, as we currently have it, has failed. It keeps people from looking for work, because their marginal gain is frankly not worth it; and it institutionalises the breakdown of society, not just by removing incentives for individuals to be productive, but by encouraging that underclass of single parents that sociological surveys since Charles Murray have shown lead to poverty, criminality and underachievement by their children.

I often wonder the same.

Interestingly this government spends more on "TV Licenses for over 75s" than for "Promoting Business".

It also spends more on housing and "disability" benefits, than for schools.

In fact, I have been wondering about the recent turn of the market and how it may move from September for some time. Throughout Europe and the US, stock markets are up, consumer confidence is up, and property prices are turning. Most analysts are now talking of an economic recovery.

However, looking at fundamental issues, all one can see is indebted countries, indebted citizens, and no real evidence around of any meaningful production apart from services to be consumed within the country itself.

No one can really tell me what Europe and the US is planning to sell as a collective "Western World" to buy whatever is being imported from the Far East and Africa.

It won't be banking services, that's for sure.

It feels like the Greek model of development all over again. An economy that is constantly in deficit, with any production really only serving internal consumption, served by a deluded consumer base which is confident for no apparent reason.

It can't be sustainable. The question is just how quickly people will realise. It took years last time, and the make believe seems to have returned pretty quickly.

More recent figures, such as this graph, show that indeed something is changing. The question now is if this will be sustainable.

A lot will depend I think on GDP and unemployment figures in weeks and months to come. If people believe the worst is over, then this will mean some price stability or even growth...

Apparently, the BBC has painted a container with its branding and fitted it with a GPS tracker, mapping its route over an entire year and talking about global trade.

This started at a time when global trade was booming and the theme was how the box travelled full from Asia and empty back to it.

Things are taking their toll over time though, and the global recession hit (perhaps as a result of this trend).

The box has been left empty in a yard since April as the haulage company has no shipping orders to fulfill. The recession has reduced world trade significantly in recent months, worryingly so as the collapse in world trade following the 1929 crash brought about the depression that ensued.