Wednesday, Jan 17, 2007
Ho Ho Ho Ha Ha Ha: Interest rate cut in Aug 2005 was a MISTAKE
Inflation leap turns screw on MPC: Torygraph Online:::
The bears are gathering: First Edmund Conway and now Ambrose Evans-Pritchard. This short piece by Evans-Pritchard reports the mistakes of the past and suggests the MPC now has its work cut out. "The MPC is a highly competent body that has delivered low inflation for almost a decade, but it now has work to do to maintain that record." The piece also shows have different sectors of the population are facing vastly different inflation rates (but strangely, none of them are near the CPI - why is that then?). The article also states inflation will rise for the next 24 months if wages increases occur.
Bring it on ...
Posted by talking rot @ 07:31 PM (141 views) Add Comment
16 Comments
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1. sirgoogle said...
Very nice article on inflation - and cites different baskets for different groups of people.
The frightening thing for the Govt is the effective inflation rate for the pensioners (9%).
Also revealing is the rate for young professionals (potential or actual FTBs) who experience a rate lower than the CPI and RPI - which probably means that they feel that they can borrow more than they should. What is sad is that when these couples decide to become a family they will experience much higher inflation as well as the lossof the all important second wage.
2. Dohousescrashinthewoods said...
Given the source, bashing Labour's economic record would seem obvious, but it reads as quite relaxed. I guess they didn't need to try too hard..
3. sovietuk said...
"The MPC is walking a tightrope. With household debt reaching 165pc of disposable income, a rise in rates to 6pc now is the same as 11pc in the early 1990s"
The fun is only just beginning
4. denzil said...
Nice one TR!
Nail on the head and all that stuff.
The stupidity in thinking that just because we have had a few years of low inflation and cheap money that it will last forever is simply incredible.
The terrifying thing is that the future of many households is based on cheap money and when IR's return to their normal levels the whole bubble is going to burst in spectacular fashion.
5. japanese uncle said...
Only if the MPC's agenda is genuinely to control inflation, which it is not, really.
Specutacular collapse of the houing bubble will be explained by the failure of the MPC which has, as always, their defence of "incompetence" ,saying "We did our best, sorry mate." which is a complete and utter rubbish. If you monitor their move closely enough, you can easily see all events were carefully desingned manupilation of the economy, from the boosting of the bubble and and its coming to an end.
Exactly the same as what was done by the BoJ two dacades ago.
6. Mjchum said...
denzil,
Don't know how long you've lived in WSM, but if you can remember the last crash, the effect there was just incredible. Sold Flat 'A' in 1990 for £42,500. Bought it back 1995 £20,000. Sold Flat 'B' 1990 for £34,500. Bought it back in 1994 for £17,500.
There being no real economy in North Somerset that I can think of and therefore little possibility of wage inflation, when the era of cheap money finally comes to an end, I would suggest price falls of around 50-60% from peak.
It happened before . . .
7. paul said...
"Lombard Street Research said the MPC had come close to "losing control" over the housing bubble over recent months as the growth of unsecured lending reached 11.4pc, but now risked going too far the other way."
So, first the MPC made the rope, then the MPC jumped up on the stool, then the MPC put the noose around their next, and now the MPC is feeling "a bit faint".
Well, pity the poor MPC, eh?
8. Smithy said...
Why only pick out the bits that give bad news or good news in some cases. How about this:-
Economic Secretary Ed Balls said the December rise was a short-term spike that would soon pass. "Independent forecasters expect inflation to come back to 2pc over the next six months as oil prices have come down, and energy prices and food prices as well," he said.
IR come down as quick as they go up, Christmas and this time of year always give worry to consumer spending. May will come and everything will be rosie in the Garden again
9. Jolo said...
If the RPI rate is at 4.4% a rate to which i'm lead to belive is what workers will base around their pay rise's. How can the govenment bring this rate down? is that controlled be interest rates also?
10. denzil said...
Is it just me or does anybody else feel a tad of sympathy for Mervyn King?
He (King) voted against a cut in base rates Aug 05 and was ignored by other members of the MPC who swayed the decision. Now, the selection criteria for the MPC (i.e Gordon Brown chooses who joins the MPC) has been questioned by both Mervyn King and the media but there is a good quorum of Gordon's chums who unless they were completely honest (which of course they are) could potentially make a decision with a bias towards keeping Gordon sweet.
In addition to the above the MPC decision is based on stats and current inflation rates etc which as we all know are grossly underestimated. If the MPC are fed "conveniently skewed" data then they can only make their decisions based on the data they are fed, i.e shit in shit out.
Also the suitability of the MPC members to the role should be considered. Rachel Lomax recently commented that the MPC should meet once a quarter when the quarterly inflation report is released instead of monthly. If that was sensible then they obviously were not performing their job correctly as a surprise base rate increase was essential betwixt two inflation reports which makes a mockery of her comment of quarterly meetings. My suggestion is they meet fortnightly until they can control inflation.
11. japanese uncle said...
It might be a bit naiive to accept the minutes of the MPC at their face value. They may well be undisclosed conversation under the table by which voting can be easily staged for the undoubting public.
12. talking rot said...
I agree with Denzil. Mervyn King is entering a boxing ring with one hand tied behind his back. I think Crash Gordon is an extremely clever politician because, when things go wrong, how much blame will be placed upon the BoE and Mervyn King. I think Crash Gordon will be able to say "It's not my fault; it's the fault of that nasty Mr King. You've lost your homes because Mr King is being too tough on inflation. Oh Dear."
13. Ticktock said...
I too have a little sympathy with Mr. King.
He has consistantly warned of inflation, and been out voted by Browns selected members and those in the pocket of the CBI.
The requirement to use a false inflation figure (CPI) in making calculations, the exclusion of HPI from inflation stats, BTL, and high energy prices are not Mr. Kings fault.
Will Lomax, Lambert and the Yank etc. receive any criticism at all for their incompetence? Will the be ridiculed for cosistanly caving in to the squeels for lowerer rates from the FT etc? Not a chance.
14. inbreda said...
Having become convinced that inflation figures were entirely made up over the last few years, I find it difficult to understand why - if low inflation is a good thing - 'they' don't just keep up the lies.
Makes me feel very nervous that JU isn't just paranoid.
If they can lie about the figures why are they suddenly becoming honest?
15. inflation is eating my savings said...
Inbreda- they are still lying about the figures. As most people are now aware of inflation, they have to admit an increase, but they are still lying about the magnitude.
16. japanese uncle said...
inbreda:
Conspiracy is a reality particularly when billions are at stake. The highly coordinated tone of media changing overnight in tandem with the BOE/MPC decisions. Any reasonably educated person can easily see something is wrong. There must be a lgislation to prohibit more than 1% stake in media companies, but widely dispersed ownership by common men and wemen, as media has a vital role in making people enlightened or thickheaded.