Monday, Jun 28, 2010
We're getting inflation, but it won't help debtors
Telegraph: It's 'negflation' that Britain really needs to worry about
Inflationary pressures have remained surprisingly strong right through the downturn, and there is little sign of a let-up. Nor are these pressures of the traditional sort, where there is an excess of domestic demand over supply with a consequent build up of wage pressures. There is hardly any danger of that right now. Rather they come either from external sources. This is "cost push inflation", rather than "demand pull", but no less damaging to disposable incomes and business confidence for it. Rising domestic demand from the big developing economies of Asia and Latin America mean these elevated levels of inflation are not just temporary. These countries now compete aggressively with the West for all forms of resource, from labour to energy and food. Living standards will thus suffer....
10 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. quiet guy said...
"Philip Hammond, the Transport Secretary, that swingeing public spending cuts are likely to cause steep increases in rail fares next year."
All of the towns that I have lived in have relied upon rail links to London or Edinburgh to sustain their commuter populations. Significant rises in rail fares could be bearish for property prices in some commuter towns. At the same time, this could be bullish for unpopular (socially blighted) areas of big employment cities that are in easy travelling range of the high paying salaries.
2. drewster said...
quiet guy,
You're quite right. Regulated season ticket fares are nothing but a taxpayer subsidy to property owners, especially in the southeast.
(I say this as someone who quite likes trains. I just think people who live near subsidised transport should pay more towards that subsidy, perhaps through some kind of tax on the increase in land value caused by the proximity of the station...)
3. drewster said...
On the in/de/stag/negflation theme though, I think this article is quite close to the mark. Chinese workers are fed up of being paid peanuts; their wages will rise, wealth will shift east to Asia, Britain will have to pay more for clothes and fuel. This means plenty of CPI and RPI inflation; but no wage inflation. Faced with such an inflationary picture, money-printing won't be an option. Meanwhile consumers will have less money left over each month after buying essentials; so less money to pay towards mortgages and debt servicing. This means falling house prices. Unfortunately it looks like a slow, steady fall rather than a sharper crash.
4. simon68 said...
The financial tsunami in 2008 just explored the problem about misallocation of capital & resources towards housing bubble, and fuelled those bubble by selling various financial instruments to foreign investors.
As long as UK and PIIGS won’t build things, manufacturing things and export things and re-structure its private sector and re-train labour force into productive activities, all government monetary policies to hold down interest, inject liquidity and expand public sector is destined to fail.
5. uncle tom said...
Although it is terribly unfashionable to say so, rail is a hopelessly uneconomic way of getting people from A to B.
The railways pay no fuel duty, and there is no VAT on rail fares, yet they need a public subsidy of around £3 per journey.
Coaches pay fuel duty, RFT and VAT, have cheaper fares yet require no subsidy,
There seems to be an overwhelming case for replacing rail lines in commuter areas with express coach routes.
However, if the population wants to retain a rail service, there is no justification for making those who do not travel by train subsidise those who do.
6. mark wadsworth said...
Uncle Tom, read what Drewster says.
Part of the reason why my rent is so high is because it is near a Tube station (and I am prepared to pay for that convenience). But who receives the financial benefit of that convenience? It is my landlord, of course, even if he never travels by Tube. So as a daily commuter, I wouldn't be too bothered if they hiked fares - all things being equal, my rent would come down to match.
7. Crunchy said...
6. mark wadsworth said... 'Part of the reason why my rent is so high is because it is near a Tube station.'
The other part is that the banks blew up their profit margins with a runaway mortgage bubble that is still being supported through sacrifice by the people it most marginalised. Hey, why has my rent gone up again, why I am being taxed more on a lesser (inflation adjusted) wage and where is all this money going? Always follow the money.
Mind the Gap!
8. Roberth said...
@Uncle Tom
Do you include the costs of maintaining the road infrastructure in your coach price?
When the hidden costs are taken into account things aren't always so black and white. There are also other costs than financial
It depends where you are talking about as well. I am sure that in a small city with good arterial roads, coaches work well. Electric trains are pretty good at moving large numbers of people into large congested cities where there is not so much space for extra coach lanes
These things come down to emotion, not logic. The free market way of comparing things is nonsense as there are so many hidden interests, subsidies and what have you
9. drewster said...
@Crunchy,
Actually rents have barely risen at all, especially compared to house prices.
@Roberth,
Normally the cost of maintaining the road infrastructure is shared amongst all road users, not just coaches, so you may have a point. However there is an increasing trend worldwide towards guided busways (or Bus Rapid Transit) whereby the bus routes are given their own dedicated road. This is cheaper than rail.
My original point was simply that good transport links (whether rail or express bus) will raise property values. In the case of rail, that's a subsidised service - the rest of us are paying to subsidise high land prices.
10. robh said...
@drewster
Yes, I am sure you are right. As far as I have seen, the best system is to use the best system locally. Ken did a good job with bus lanes in London and gets a really good useage, and with Oyster very fast boarding. The commuter trains do well in London too. My local C2C beating Swiss railways for punctuality. Towns like York and Bath have good Park and Ride systems, which work well for a scattered population
The new build is expensive for rail, though trams are cheaper. They don't take as much space I think, as a road. Quite good in places where there are a lot of hills and winding roads. Manchester runs a good tram service partly on the old rail lines.
As to property values, if we were to re-calculate the 'rateable value' it would sting the highest value houses and claw some revenue back
It's all such a muddle!!
I like walking. It makes me feel that I am a person rather than a function unit of the world of finance...
On holidays I try to go on one of each vehicle... though not always a plane