Tuesday, May 19, 2009
Fantasy wages following fantasy house prices!
Telegraph: Britain sinks into deepest deflation since 1948
Although in the short term falling prices will appeal to consumers, RPI is used to calculate wage increases so the sharp fall in April is likely to add to downward pressure on salaries already caused by higher unemployment and falling corporate profits.
"As a result, many workers are likely to wage freezes or even pay cuts," said Howard Archer, chief UK economist at IHS Global Insight.
Posted by cheekie charlie @ 12:38 PM (793 views) Add Comment
4 Comments
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1. inbreda said...
flawed logic. If wages will reduce along with prices then everything - relatively speaking - stays the same. So why should anyone give a stuff?
Besides, inflation is still positive. We are not in a deflation - whatever that is.
And the icing on the cake is that wages are (theoretically at least) set by inflation which is calculated historically. i.e. you are paid enough to buy XX loaves of bread according to the price of bread today. One year later inflation is calculated and they found that the price of bread has risen steadily, meaning that you were not actually, over the year, able to buy XX loaves. You were only able to buy XX-10. The point being that with inflation you are constantly losing out. With deflation you are constantly winning. With deflation, by the time your wages have been reduced, you've already had some *additional* advantage from having the previous higher salary.
2. bidin'matime said...
But relating this to house prices... it has to be good news for us - we want people to feel that their mortgages are becoming more of a burden, not less, so they forget the idea that you borrow as much as possible and pay as much as possible. It will inevitably return when the printing presses are running so fast that inflation is stuffed down our throats, but there will be a short window of opportunity – when the masses are talking about ‘millstone round your neck’, we shall all load up with finance and buy, buy, buy!
3. enuii said...
And after deflation v comes inflation ^^^^^^^^
4. enuii said...
Nice banner ad at the top of the page for fake (sorry replacement) payslips as part of your same day proof of income service for all the UK mortgage fraudsters who made Gordon's economic miracle possible.