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Inflation Rockets To 3.5%


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except its not inflating out the issue, thats the point, it is making the issue bigger, debts are increasing and people are welcome to join unions, the call for union power is a natural side effect of the deflation cycle, just as credit expansion on the upside over the last 50 years has seen the natural result of declining unions. It matters not how strong the union is though if the company becomes uncompetitive through demands. The company simply fails

Good point. Talk of inflating the problem away doesn't account for the fact that IR's will likely have to go up to control said inflation and then what? Lots more defaults as people already saddled with debt cannot afford their repayments (and you can bank on the fact that wage inflation will not keep up). What is this? More write-downs and bankrupcies - deflationary. What is it to be?

Edited by MinceBalls
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I don't know why you think this is it. Inflation hasn't rocketed at all - both CPI and RPI have fallen since December ie prices were lower in January than in December in spite of the VAT increase.

This doesn't look like inflation to me.

agreed that prices went down slightly this january, but then they always do, without fail, every january because of the sales.

i personally think either that there was an error in the jan 09 figures or there was something special about that month [e.g. a post-VAT cut mini, transient price war] that made the CPI figure unrealistically/unrepresentatively low, much lower than either the dec 08 or feb 09 figure. either way, the feb 10 yoy CPI growth figure will be far less than 3.5%, probably in the mid to late 2.something'%s, i.e. much closer to the BoE's target. Merv's letter will use almost this exact explanation [he has to write if there's even a single month of inflation this high, right?]. [edit - i just read it - he used a much more complicated explantion than was necessary - whilst there are some underlying inflationary pressures, the fact is that the 3.5% figure is a freak one-off]

good luck with getting the headline writers [or, dare i say it, most on here] to understand this. it is subtle, to be fair, i didn't twig myself until looking at the figures for a few minutes.

Edited by the flying pig
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Exactly, the 1992 devaluation came at just the right time for the UK. The world was then moving into a prolonged spell of growth.

This time round, all I can see is increased costs and diminished returns.

These diminishing returns have been the driver for Capital Growth and the peak debt spike over the last decade. The real growth probably ended in the early mid 90s, since then the only way to hide this has been the through peak debt expansion, so it spiked exponentially (which all markets do as they peak). The market can stay irrational based on fundamental valuation for a hell of a long time but once its over it is over. Without the Capital growth focus will once again as it always does move back to yield. Even ignoring the housing market yields in the stock market that have seemed the norm over the last couple of decades are in fact pathetic historically speaking.

The housing market and stock markets will do what they always do and return to historic normal but like all other bubbles they will likely move to the same extreme undervaluation that they did to overvaluation

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First post for me in 4 years I have been surfing that site :)

Bought my first property this year (march at 20% off the peak) and I was saying I would never...

The main reason I bought was QE.

* QE destroys saving (had 500k spread across too many bank accounts).

* QE creates inflation if interest rates are kept low. It has...

* If Inflation is created wage inflation will follow (don't expect the gov to increase rates now).

My biggest fear was wage inflation. that would have wiped out my savings....

Fear wage inflation....

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First post for me in 4 years I have been surfing that site :)

Bought my first property this year (march at 20% off the peak) and I was saying I would never...

The main reason I bought was QE.

* QE destroys saving (had 500k spread across too many bank accounts).

* QE creates inflation if interest rates are kept low. It has...

* If Inflation is created wage inflation will follow (don't expect the gov to increase rates now).

My biggest fear was wage inflation. that would have wiped out my savings....

Fear wage inflation....

thats nice.

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I don't know why you think this is it. Inflation hasn't rocketed at all - both CPI and RPI have fallen since December ie prices were lower in January than in December in spite of the VAT increase.

This doesn't look like inflation to me.

News just in: Inflation is calculated year on year. :rolleyes:

In other news, prices nearly always fall between December and January due to the Christmas season profiteering followed buy cut price sales but this year they fell less than usual.

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price inflation leads to wage inflation.

Wages didn't stop rising, they have been rising all the way through the crisis, only the rate of change slowed when we had deflation.  But now inflation is picking up expect wage inflation to recover...

10.gif

http://www.statistic...ugget.asp?ID=10

Before this crisis wages were rising at 5% PA, but CPI was 2%.  We have a debt based money system, there is always ever more money which means there is always wage inflation. (Unless you worked in IT and your sector was still recovering from the tech crash)

that graph is someone's dream?

seems very detached from reality. or perhaps bankers bonuses have pushed the averages up.

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I wouldn't put much faith in that wiki number it's up and down like a whores draws.

The fact is we are one of the worlds biggest exporters.

We are also one of the world's buggest consumers. The issue is we don't export enough to pay for what we consume. It does not matter how much we export if we import one heck of a lot more. We are still living beyond our means. Just like the few rich celebrities that go bankrupt - we could all wonder how they do it, but it is simple, they spend more than they earn. The UK has been doing that for a long time now.

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First post for me in 4 years I have been surfing that site :)

Bought my first property this year (march at 20% off the peak) and I was saying I would never...

The main reason I bought was QE.

* QE destroys saving (had 500k spread across too many bank accounts).

* QE creates inflation if interest rates are kept low. It has...

* If Inflation is created wage inflation will follow (don't expect the gov to increase rates now).

My biggest fear was wage inflation. that would have wiped out my savings....

Fear wage inflation....

It would have to end up seriously Zimbabwe for wage inflation to 'wipe out' 500k of cash.....

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We are also one of the world's buggest consumers. The issue is we don't export enough to pay for what we consume. It does not matter how much we export if we import one heck of a lot more. We are still living beyond our means. Just like the few rich celebrities that go bankrupt - we could all wonder how they do it, but it is simple, they spend more than they earn. The UK has been doing that for a long time now.

Over time the weakness of sterling should promote fewer imports and greater export activity so it will force the balance of trade issue to be addressed - though given the size of the imbalance we are in for a lot of pain in the process and devaluation/debasement is unlikely to provide the 'quick fix' that it has in the past.

It's stagflation a go-go. Higher prices of essentials, an anaemic economy, static or falling wages.

But never mind, against this backdrop house prices are managing to rise from already silly overpriced levels by double digit figures annually ... WTF? There's going to be one hell of a mess when this house of cards (no pun intended) collapses.

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We are also one of the world's buggest consumers. The issue is we don't export enough to pay for what we consume. It does not matter how much we export if we import one heck of a lot more. We are still living beyond our means. Just like the few rich celebrities that go bankrupt - we could all wonder how they do it, but it is simple, they spend more than they earn. The UK has been doing that for a long time now.

We are today, I think we are discussing tomorrow though.

Look through history to discover how a nation like Britain goes from a net consumer to a net exporter. Britain is actually a good example of this its amazing what you can do when you devalue.

Britain will trade itself through this, of that I have no doubt, the only doubt I have is the time horizon.

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