Inflation Rockets To 3.5%

[The Spaniard]

quality.

You musn't encourage me ...

Gordon Brown he is such a clown

He just cannot do his sums

And so he gives us Quantitative Easing

And the bankers remain his chums

Governor Merv does not have the nerve

To stand up to the politicos

And so he gives us Quantitative Easing

And the inflation rate just grows

Brother Tony was notably phony

He could never keep his vows

And so we give him Quantitative Easing

His guilty conscience to arouse

[winkie]

Inflation....but fewer in employment = higher wages for those with a job = harder work for those in a job = higher taxes for those in a job, to pay for those out of a job.

[CokeSnortingTory]

I can't see interest rates rising at all - inflation at 3.5 - 4% will be absorbed by foreign creditors without too much complaint - it's not enough to provoke a gilts strike, and will halve the UK's national debt over 14-18 years. This is exactly the kind of inflation rate that the BoE wants.

Which makes me suspicious, because I simply don't believe it. Almost every item I go to buy nowadays seems to get cheaper and cheaper. I've just been back from my local pub, where beer prices have slipped from an average £2.80 to a current £2.60. I'm actually starting to wonder if TPTB are starting to unconsciously manufacture the figures that they really want (but claim not to) rather than monitor what's actually happening.

[ImNotAllThere]

Almost every item I go to buy nowadays seems to get cheaper and cheaper. I've just been back from my local pub, where beer prices have slipped from an average £2.80 to a current £2.60.

Beer is not an everyday essential item (for most people )

Thousands of pubs have gone out of business and closed.

Prices will come down to get people through the doors.... remember, pub beer is still much more expensive than supermarket beer, so it's not expensive beer that's the issue but all the other costs associated with running a pub which they're taking a hit on when reducing the price of a pint. Or maybe crisps and peanuts etc. are stealthily increasing in price to partially compensate.

Essential items (energy and food) do keep showing price increases, as well as lots of other household goods in the supermarket.

But again, a lot of this is to pay for the costs of running "brand name" companies. There's always supermarket own-brands to switch to, and this doesn't always mean skimping on quality.

[winkie]

When push comes to shove......when you have a fixed income and prices rise you find ways of cutting back, using less...gone are the days when you can borrow it and hope for miracles.

If enough spend less....prices will have to fall.

[OnlyMe]

Beer is not an everyday essential item (for most people )

Thousands of pubs have gone out of business and closed.

Prices will come down to get people through the doors.... remember, pub beer is still much more expensive than supermarket beer, so it's not expensive beer that's the issue but all the other costs associated with running a pub which they're taking a hit on when reducing the price of a pint. Or maybe crisps and peanuts etc. are stealthily increasing in price to partially compensate.

Loss leader pricing to get punters to the supermarkets and in tandem put the off licenses out of business as well (which is another area where te supermarket has competition to tobacco sales and late night opening) and voila you have captured more of the market.

If it were as simple as just dropping prices there wouldn;t have been 1,000's pf pub closures already with very few pubs being re-opened either by chains or independents.

Costs too high to cover sales and demand they will go to to the wall, end of, especially when you can still get a ludicrous premiu on shutting the business down and selling off the properoty/land.

The pubs that seem to be doind OK with any sort of low price model are the ones that use some beer sales to drag punters in to then flog them food - something that seems to work in city centre locations but not for the rest in general.

[CokeSnortingTory]

Beer is not an everyday essential item (for most people )

Thousands of pubs have gone out of business and closed.

Prices will come down to get people through the doors.... remember, pub beer is still much more expensive than supermarket beer, so it's not expensive beer that's the issue but all the other costs associated with running a pub which they're taking a hit on when reducing the price of a pint. Or maybe crisps and peanuts etc. are stealthily increasing in price to partially compensate.

Essential items (energy and food) do keep showing price increases, as well as lots of other household goods in the supermarket.

But again, a lot of this is to pay for the costs of running "brand name" companies. There's always supermarket own-brands to switch to, and this doesn't always mean skimping on quality.

Yes - I think CPI is a bit of a crock really - just a wierd abstract figure. Does anyone know how M4 is performing against M0?

[Guest spp]

"Inflation is a hidden tax that comes like a thief in the night and steals one’s wealth or power to purchase"

"Currency devaluation is taking place. Money is being destroyed"

"Suddenly interest rates start to rise, as do prices. But the rise in interest rates does not support the currency. The purchasing power of the currency falls in spite of higher interest rates. Slowly panic sets in. People can’t spend their money fast enough – before it loses more purchasing power. The race to hell begins."

We have come to a fork in the road. Ludwig von Mises stated: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

...What is going on you ask...

Here is the full article from 2008 - OPEN YOUR EYES!

link

[dances with sheeple]

You musn't encourage me ...

Gordon Brown he is such a clown

He just cannot do his sums

And so he gives us Quantitative Easing

And the bankers remain his chums

Governor Merv does not have the nerve

To stand up to the politicos

And so he gives us Quantitative Easing

And the inflation rate just grows

Brother Tony was notably phony

He could never keep his vows

And so we give him Quantitative Easing

His guilty conscience to arouse

Brown takes his dick in his hand

and fires the free money all around

Problem is he`s firing blanks

so now he`s gone and fu*cked the banks

[Spoony]

Only a Labour Government would allow 0.5% interest rates with 3.5% inflation. I don't know what some of you are getting so excited about. These idiots are not going to raise the interest rates even with 4% inflation. They are not bothered about savers or gilts. All they seem to be worried about is inflating away their national debt and propping up overpriced houses to win an election.

Edited February 16, 2010 by Spoony

[Guest DoubleDigitCrackPipe]

Only a Labour Government would allow 0.5% interest rates with 3.5% inflation. I don't know what some of you are getting so excited about. These idiots are not going to raise the interest rates even with 4% inflation. They are not bothered about savers or gilts. All they seem to be worried about is inflating away their national debt and propping up overpriced houses to win an election.

I don't think they'll raise them very much

but I also don't think that IR's are the sole key to the HPC.

The QE will have to stop (and stay so). The removal of that 'prop' alone will allow the slow decline

[Gigantic Purple Slug]

Love the way it's being translated as a "temporary blip" which is political langauge for "we don't want to raise rates before the election therefore we'll declare the figures are anomalous and not part of a long term trend which we would have to do something about".

And the recovery is "still fragile".

But fear ye not. The longer they hold off the correction, the more aggressive the correction will have to be when someone responsible gets into power. And the rate of rate rises will be crucifying.

[Guest The Relaxation Suite]

How does one inflate debt away WITHOUT wage inflation, what have I missed? - Nothing....

It is quite unbelievable, we have inflation at 3.5% and base rates at 0.5%! Daylight robbery is being carried out directly under our noses by politicians who can't see any further than the election. (whenever that is...) They talk about being prudent and following fiscal rules, and yet those who meet that criteria (Savers) have been thrown to the sharks. QE has been nothing more than a damaging prop that will be wasted away in bonuses to a few spivs! (Barclays?)

Companies are seeing unemployment as good cause to reduce wages and redeploy workers on inferior contracts, I doubt there will be wage inflation. Unions are doing there best but are much more realistic than they were in the 70's.

To really sort this out we need HPC and higher interest rates. But it won't be pretty....

An excellent post. Since 2008 the Governments and banks have, in order to maintain their own positions of wealth and power, destroyed the prudent and responsible by looting their savings and passing them to the indebted and irresponsible. They have disenfranchised an entire generation of the most productive people in society and made them permanently hate the state and the nation. The theft of our wealth by the state and its transfer to the feckless and stupid will never be forgotten. I think it will continue until at least 2018 - a ten year plan.

The Great Looting: 2008 - 2018.

Of course, they could prove us all wrong by putting interest rates up to 5% over the next 18 months.

Edited February 16, 2010 by D-503

[Bloo Loo]

An excellent post. Since 2008 the Governments and banks have, in order to maintain their own positions of wealth and power, destroyed the prudent and responsible by looting their savings and passing them to the indebted and irresponsible. They have disenfranchised an entire generation of the most productive people in society and made them permanently hate the state and the nation. The theft of our wealth by the state and its transfer to the feckless and stupid will never be forgotten. I thikn it will continue until at least 2018 - a ten year plan.

The Great Looting: 2008 - 2018.

Of course, they could prove us all wrong by putting interest rates up to 5% over the next 18 months.

and yet, house sellers coming to market feel they too can take advantage and that prices are going to be supported by loans 6% higher than last year.

not sure that "feeling looted" is the right description...

[Guest The Relaxation Suite]

and yet, house sellers coming to market feel they too can take advantage and that prices are going to be supported by loans 6% higher than last year.

not sure that "feeling looted" is the right description...

1. No one is selling their house for asking price

2. You might not want to sell your home

3. Your principal wealth might be your life savings, now being destroyed at a rate of £££ every day

Better run down to the shops pushing your savings in a wheelbarrow and buy that bread before it costs £15 a loaf, ETC.

[Guest DoubleDigitCrackPipe]

I'm amazed at the diverse responses on this site.

In one corner we have those who think that the govt will just print their way out of this (HOW??) , support HP's, find some way of fiddling everything so that HP's never come down much

and in the other corner we have those who forecast the total meltdown of the economy and end of civilised life.

I can't see how HP's can survive this but I also can't see the HUGE falls that I previously forecast because the govt won't stop meddling. I think they'll try and engineer a SLOW deflation of the bubble (as they won't be able to stop it altogether)

Upset homeowners and it'll be all over the news. Upset savers and erode their wealth and nobody gives a f**k. Won't even make the back pages.

Edited February 16, 2010 by DoubleDigitCrackPipe

[bomberbrown]

I'm amazed at the diverse responses on this site.

In one corner we have those who think that the govt will just print their way out of this (HOW??) , support HP's, find some way of fiddling everything so that HP's never come down much

and in the other corner we have those who forecast the total meltdown of the economy and end of civilised life.

I can't see how HP's can survive this but I also can't see the HUGE falls that I previously forecast because the govt won't stop meddling. I think they'll try and engineer a SLOW deflation of the bubble (as they won't be able to stop it altogether)

Upset homeowners and it'll be all over the news. Upset savers and erode their wealth and nobody gives a f**k. Won't even make the back pages.

Konbanwa.

[shindigger]

An excellent post. Since 2008 the Governments and banks have, in order to maintain their own positions of wealth and power, destroyed the prudent and responsible by looting their savings and passing them to the indebted and irresponsible. They have disenfranchised an entire generation of the most productive people in society and made them permanently hate the state and the nation. The theft of our wealth by the state and its transfer to the feckless and stupid will never be forgotten. I think it will continue until at least 2018 - a ten year plan.

The Great Looting: 2008 - 2018.

Of course, they could prove us all wrong by putting interest rates up to 5% over the next 18 months.

Yes. :angry:

[Godley]

I can't see interest rates rising at all - inflation at 3.5 - 4% will be absorbed by foreign creditors without too much complaint - it's not enough to provoke a gilts strike, and will halve the UK's national debt over 14-18 years. This is exactly the kind of inflation rate that the BoE wants.

Which makes me suspicious, because I simply don't believe it. Almost every item I go to buy nowadays seems to get cheaper and cheaper. I've just been back from my local pub, where beer prices have slipped from an average £2.80 to a current £2.60. I'm actually starting to wonder if TPTB are starting to unconsciously manufacture the figures that they really want (but claim not to) rather than monitor what's actually happening.

its always been made up. It's manufactured bs.

Which is one of the many reasons why deflation was always only going to be a hpc'ers wet dream

[Tired of Waiting]

How does one inflate debt away WITHOUT wage inflation, what have I missed?

With high unemployment, and weak Unions.

But it has to be done, as the country (all of us) was living way beyond its means.

We have to allow sterling to fall, and have a surplus in the foreign current account. No other sustainable way for a country to make a living.

[Tired of Waiting]

"Higher inflation would help to keep interest rates low" said Blanchflower !

Who is this dummy?

A qualified teacher.

Take a look at his CV, on his website.

(Notice that he does not have a proper Economics degree)

From his CV, posted at his website:

"1973 B.A. Social Sciences (Economics), University of Leicester

1975 Postgraduate Certificate in Education, University of Birmingham

1981 M.Sc. (Econ), University of Wales

1985 Ph.D., University of London (Queen Mary College)"

There are many strange things here.

1st, if someone does a BA in Economics, it says "BA Economics", and not "B.A. Social Sciences (Economics)".

2nd, a "Postgraduate Certificate" is usually given to a student who has tried to get a Masters' Degree but failed.

3rd, Quite possible that he finally managed to get his Masters, and in "Economics", in Wales...

4th, He does not say that his PhD was in economics. I doubt it was.

I re-affirm: this guy does not think like an economist. I doubt that he really IS one - properly., essentially.

Beside, he is a moron.

Edit to add link to his CV: http://www.dartmouth.edu/~blnchflr/DGB%20CV08-09.pdf

Edit to add: sorry, having to log off now, but I'll come back tomorrow! (I hate this moron.)

Edited February 17, 2010 by Tired of waiting

[lowrentyieldmakessense(honest!)]

A qualified teacher.

Take a look at his CV, on his website.

(Notice that he does not have a proper Economics degree)

That would likely be a disadvantage anyway

Keynes

Chicago School

etc

[Tired of Waiting]

Thanks for the wiki link, we have sunk to 9th largest exporter.  wiki link shows you we export 1/3 of what china exports or the usa exports and they are much bigger countries.

These numbers are misleading, as we are part of a trading block, whilst the USA is counted as 1 country. I mean, suppose you considered California as a country, you would count as exports all that California sells to other US states.

[Neil B]

They have stopped QE. Now we see why, inflation has returned. It is a bit like summoning a devil from hell. That devil has arrived, how much mischief will it cause, or will it save us all?

One thing is for sure, it is going to be unpredictable.

The idea of creating inflation is to allow interest rates to go negative. That should, in theory at least, encourage people not to save all their money. Best blow it today, cos it wont buy as much tomorrow. If you get people spending again, economic activity picks up, people do things, make stuff and trade stuff, we all become richer as a result of the extra activity caused by inflation.

In theory anyway.

What can happen though is people try even harder to save when inflation strikes, to make sure they have enough for tomorrow.

Worst still, they abandon the currency completely. That little devil might try and force this outcome, also known as hyper-inflation. End result, currency becomes worthless. Who is to say it cant happen here?

QE + low GDP = Hyperinflation

Zimbabwe here we come!

[Bloo Loo]

QE + low GDP = Hyperinflation

Zimbabwe here we come!

QE + high GDP = Hyperinflation, as long as QE is MUCH > deflation of current assets...and Im not talking houses.