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50% Inflation

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With the cost of something being the relative expense of that thing compared to our wealth, haven't we already seen perhaps a 50% rise in the cost of things? When the FTSE goes from 8000 to 4000 isn't it a valid thing to say real terms inflation is 50%? Many people have lost much more than 50% of their wealth. Some people have found that actually they have no wealth at all, just debt.

Is it valid to talk about inflation in terms of affordability?

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With the cost of something being the relative expense of that thing compared to our wealth, haven't we already seen perhaps a 50% rise in the cost of things? When the FTSE goes from 8000 to 4000 isn't it a valid thing to say real terms inflation is 50%? Many people have lost much more than 50% of their wealth. Some people have found that actually they have no wealth at all, just debt.

Is it valid to talk about inflation in terms of affordability?

not sure the FTSE is a good guide as the mix of firms on the index changes every few months...the bad drop off and new ones replace.

If the mix didnt change, then you would also have to take into account the profits and therefore the breakup value of the companies as well.

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not sure the FTSE is a good guide as the mix of firms on the index changes every few months...the bad drop off and new ones replace.

If the mix didnt change, then you would also have to take into account the profits and therefore the breakup value of the companies as well.

I think athom means. % to your wealth, not the actual price you pay. :unsure:

When you have a job and earn 20,000. Paying £3.00 for a pint isn't much, but if you loose your job and were running debts upto say 50,000 then £3.00 is alot more.

Wages deflation? It stands to reason if we have less money floating around, we will get paid less.

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Unaffordability is not the same as expensive.

A new car might not be expensive at say £5000 but is unaffordable to someone without savings or credit.

Credit contraction and the fall in asset values has reduced peoples spending potential. This is deflationary rather than inflationary because if you can't afford a new car you by a cheaper one or the manufacturer cuts the price (unless government interfers of course).

With the example the OP gives, I can now buy a pint in Weatherspoons for £1.29 whereas 4 years ago I paid £3 in a pub in London

So the OP is incorrect. The credit contraction is deflationary because it makes people poorer. The worry is that government policy will be inflationary- if the goverment gave out £30/week in beer vouchers I am pretty sure Weatherspoons would put the price up.

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