Tuesday, Mar 24, 2009
Place your bets
Guardian: Deflation returns to UK after nearly 50 years
Deflation is expected to officially return to Britain after an absence of nearly 50 years, when government data is released showing that the retail prices index has gone negative. RPI was just 0.1% year on year in January, and experts forecast February's figure will be -0.8%. CPI is expected to fall from 3% to 2.6%.
Posted by little professor @ 01:29 AM (711 views) Add Comment
6 Comments
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1. nubbers said...
Hate to be the boring scientist here but why the headline? Surely 50 years ago we would never have heard of RPI and would have all been happily using CPI, or whatever the equivalent was at the time, and we would still be in positive territory.
I guess the thing is that the new lower measures of inflation have been used to reduce the real value things such as wages and pensions, and that is going to become even more obvious to everyone once the RPI becomes negative, while the cost of living is still obviously increasing. Otherwise the government wouldn't be making deliberate moves to increase pensions and benefits instead of allowing them to reduce, as mentioned in the article. Not a good time to be working in the private sector though.
2. nubbers said...
I'm spouting nonsense - RPI was the inflation measure used in 1960, not CPI, so we really are heading for deflation after all.
3. phdinbubbles said...
"Surely 50 years ago we would never have heard of RPI and would have all been happily using CPI"
50 weeks ago the media were happily using CPI. I'm not expecting to see the headline "Inflation index still above BoE remit" today.
4. Dan said...
This is good news for people like me, who have drawn all of their cash savings out of the bank, [everyone should do this, in my opinion, its the best way to kick the government in the balls]
And yet, do not have a single clue what to invest in?
Japan, China, Equities, Corporate bonds, CFD's, BRIC, Metals ??!!!!
My understanding of Deflation is that basically cash becomes a more valuable commodity than goods.
So Deflation would only occur if:
The supply of money goes down. [Not happening as they are printing £150 Billion]
The supply of other goods goes up? [Is this happening? I assume not.]
Demand for money goes up. [This is happening Im sure, but right now I cannot think of any succint examples]
Demand for other goods goes down. [Not sure about this one.]
5. inbreda said...
@3
quite.
6. 51ck-6-51x said...
Dan - paying down or defaulting on debt is also deflationary, as are the devaluation of banking assets - this is what has been being fought off by the central banks & governments.