Wednesday, Aug 05, 2009
The real world!! not browns fantasy world
Daily mail: Families and the elderly pay the price as cost of food keeps rising
Families are still suffering punishing rises in the cost of living as food prices continue to go up
Posted by mark @ 10:27 AM (917 views) Add Comment
19 Comments
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1. alan_540 said...
But the BoE is worried about deflation... Makes you laugh. Well, it would if it wasn't so appalling. What staggers me is that the opposition parties are not pointing out these shortcomings. The fact that they are not is damning in itself, and says to me that the ruling elite don't give a damn about the general population. All that matters to them is the pursuit and holding of power and the wealth that goes with it, for them and their cronies. I kinda realise I'm ranting, but I just feel disillusioned with the whole political process. How can a government be allowed to distort the economy to the extent that Labour have just to help them in their objective of staying in power? There is a lot of talk at the moment about regulating the banking system. I think governments should also have their regulation looked at as well to prevent a repeat of this in the future - I'm not holding my breath on that one either.
Rant over. Apologies.
2. paul said...
You never have to apologise for ranting here, as long as your point is well made and relevant.
I think it is telling that in its 350 year history, the Bank of England has NEVER had to resort to ZIRP or QE. They can say whatever they want about not having the right tools and interest rates being a very blunt tool, but those tools have worked very well FOR 350 YEARS FFS!
And by that fact the Bank of England has failed abysmally to do its job - it is exposed as a sham and will be judged by historians as a temple of finance defiled by corrput moneylenders and powerbrokers.
History will not judge Mervyn King kindly.
There we are. Rant over, but no apologies.
3. icarus said...
Anyone found any major examples of deflation? e.g. a month ago I looked at direct return flights from London to Cape Town next February. Cheapest was Virgin economy class - £640. A few days ago I looked again. Cheapest was Virgin economy class - £424.
4. eyeoftheweasel said...
Icarus, to my eye the general trend in prices seems to be that things people actually need (e.g. food, electricity, etc) are going up in price, and going up at a shocking rate. However things they don't need aren't going up (by that much anyway), and in some cases are falling. Admittedly people need homes, but the thing is people don't need two homes.
The way that both CPI and RPI are calculated hides a lot of the inflation that many people are experiencing. CPI gives too much weight to the prices of luxury goods. Can't remember if RPI does that as well, but I think it might. What's particularly bad about RPI though is that it includes mortgage payments, so if the B of E slash interest rates and mortgage payments fall as a result, that means RPI falls as a direct consequence of the reduction in interest rates, even if the reduction in interest rates is intended to combat deflation.
Sorry, I'm probably ranting a bit, and yes I'm also sick of the political system in this country. I can't believe none of the so called 'opposition' parties are pointing this stuff out. I guess it's not in most MPs personal investment portfolios' interest to do that, regardless of which party they belong to.
5. icarus said...
eyeof - In general I agree with you, but it's not just the rich who take one holiday a year - especially one that involves an economy-class flight.
6. eyeoftheweasel said...
Sorry Icarus, didn't mean to imply that only rich people fly. The point I was trying to make (in flight terms) is that, in general, people don't need to take a holiday in a far off country and since most people now have less disposable income those are the things that are going to be less in demand, hence the price falls.
7. icarus said...
eyeof - but since the majority still take a holiday a £200+ flight saving (assuming there are similar savings on other trips/hols) is worth say a £4 a week per-head saving on food. My initial question was whether there are other examples of savings that benefit the majority.
8. eyeoftheweasel said...
Actually, my wife just called me from Sainsbury's to say that the price of her favourite non-dairy ice cream (Swedish Glace) has gone down to £1.61. It had been up near £2 a few months ago.
Having said that, the price only went up from around where it is now last year. Since it's imported from Sweden, I suspect exchange rates are probably a big factor.
9. Mjturner said...
If inflation is really running at much higher levels,say 10% a year, then real house prices have fallen by much more than the gummint says, say 25% more over 2 and a bit years. So presumably house prices are much more fairly valued in real terms than the charts on this site show...
10. Shawkie said...
Icarus - I'm not sure its accurate to call that price drop deflation since the price of flights is extremely volatile and is based on how many seats they still need to sell and how long they have left to sell them. They are probably already committed to making that particular flight so its all about making sure they fill it at the highest prices they can. Its quite likely that there is falling demand for flights and that in the short term prices will fall but I think the airlines have already started to respond by cutting flights and I suspect that prices will stabalise. Personally I'll believe in this deflation non-sense when my bus fare goes down instead of up for once. I'm not holding my breath.
11. happy mondays said...
My favourite sausages had been discounted by a 3rd for a short period of time, 5 to a pack but the discounted sausages only had 4...Cheeky Ba'stards. i bet when they go back to there normal price, only have 4 in the pack... Dirty rotten scoundrels JS
12. matt_the_hat said...
Paul @2 if the BOE has never printed money before (or pressed keys on a computer) then where do you think sums like £1,600,000,000,000 (national debt) come from. They didn't exist 350 years ago and fractional reserve banking has finite multiples, i.e. 10x for 10% reserve 20x for 5% reserve etc....
13. paul said...
matt_the_hat
The BoE has controls the money supply - of course they print money, but not hundreds of billions purchased in gilts in order to combat the spectre (and that's exactly what it is, an imaginary ghost) of deflation and pump money into banks to try to re-invigorate the over-leveraged residential property market.
It is telling that the Bank of England is no longer considering expanding QE just as the Halifax figures show more house price rises.
Is the Bank of England interested in anything else apart from property prices? You know the boring things that we used to measure a stable economy on like financial stability, low inflation across the board (not selective and exclusionary measures of inflation) and currency stability? It seems not.
So no, the BoE has never had to resort to ZIRP (you do know, matt, that interest rates are currently at their lowest rate in 250 years - the entire bank's history?) and QE.
And that's why they've failed.
14. crunchy said...
From brand names to supermarket brands, down to dog food and dog food rations for the poorest.
They will not be able to, or want to fight inflation. A rock and a hard place!
I will say it again for the dim or wishful thinking.
Adios.
15. happy mondays said...
Crunchy welcome back, thought you had gone to a tropical island to escape..and live as a free man?
16. alan_540 said...
matt the hat @12 : My understanding is that the fractional reserve system was abandoned by "banks" such as Northern Rock et al by lending at 130% or more... by doing so the inherent safety mechanism is bypassed and we end up in the state we're in today.
17. icarus said...
Shawkie @10 - I checked several out and return dates and they all showed the higher price a month ago and all showed the lower price a week ago. I'm not sure that this is Easyjet or Ryanair type seat pricing.
18. matt_the_hat said...
16. alan_540 - you have mixed up fractional reserve banking and loan to value (LTV) ratio's.
When you understand fractional reserve banking you will fell better about 130% mortgages in comparison, you will then understand why a bank run like NR had makes all banks insolvent.
19. matt_the_hat said...
13. paul
Some questions:
1. How do you know how much they printed?
2. If you like financial stability then you don't like periods when the economy grows at a rate above average, my guess is you just don't like crashes?
3. Real interest rates have been negative for sometime, why do you just care about nominal?
4. We are entering a correction in currencies where the pound/dollar/euro is more accurately priced against eastern currencies, why should a taxi driver in dudley earn more than one in Bangkok for doing the same job?
My guess is some people in the west will just have to start adopting subsistence farming techniques like most of the other people in the world, lets hope the Chinese buy fair trade!!