vinny Posted September 10, 2005 Share Posted September 10, 2005 Quote BB" Lots of interesting things happen with weightings and hedonic adjustments, if any component rises in price significantly it drops down the index, it automatically takes up a lesser proportion. This is done as a crude sort of supply and demand mechanism, as something rises in cost then demand should drop off, in theory. In the real world if you have to drive 20 miles to and from work each day and fuel prices go up 25% they now assume you only have to travel 15 miles" As you've said elsewhere - cynical!! Does not seen it mentioned on HPC but pensioners get their "own" RPI figure "based on their different spending habits". More like Government pulling a fast one on them before the normal lies we get. BB would you consider starting a thread (if you have not already) on CPI / RPI smoke and mirrors? You seem able to explain better than most (myself included) and to have a good grasp / knowledge on inflationary measures. I think it would be useful to many. Quote Link to comment Share on other sites More sharing options...
Dancing Bear Posted September 10, 2005 Share Posted September 10, 2005 i'll second that , vinny. Quote Link to comment Share on other sites More sharing options...
Michael Posted September 10, 2005 Share Posted September 10, 2005 yes, in the case of things like PCs the inflation figure is actually overstated as a PC of 2005 is the same price as one of 2000 ....but more advanced technology is is constantly iimproving the product instead of bringing down the price of a like-for-like product..... Increased/decreased taxation is simply a transfer of money from one party to another so not deemed directly inflationary............. My personal gripe with the inflation figures is that my own personal inflation rate far excedes 2%..........I don't really buy cheap chinese stuff but like things like taxi journeys, haircuts and restaurant meals and these are always going up.... Quote Link to comment Share on other sites More sharing options...
Casual Observer Posted September 10, 2005 Share Posted September 10, 2005 Most of us here are in agreement that the CPI as a measure of inflation is at best ineffective, at worst entirely bogus.It conveniently excludes the most significant costs of living - housing, fuel, council tax - and seems to be composed mainly of DVD players and TVs. So while the CPI is chugging along at a tidy little 2.3%, out in the real world we all know that prices are rising steadily. My question is the following: how long can this little charade go on? At what point does the the discrepancy between fantasy inflation and real inflation get so large that something has to give? At what point does Gordy have to stop pretending that we have low inflation? And what will the political/economic/social fall-out of this growing imbalance be? Any suggestions people? <{POST_SNAPBACK}> Regardless of how accurate or inaccurate published inflation figures are, we all experience our own inflation - there's no hiding place for that. That's the reason the High St is in recession - people have less disposable incomes because their take home pay is inflating at CPI rates and their costs are inflating at the true rate. Quote Link to comment Share on other sites More sharing options...
munro Posted September 10, 2005 Share Posted September 10, 2005 I am going to ask a very silly question. I have attempted to apply simple logic but I`m afraid my feeble brain is simply not capable of reaching a conclusion so let me pose the question for you. Inflation erodes debt. Does anyone disagree? Thus, if the `inflation rate` used by HMG is generally perceivced to be higher (as an example) than the rate published by HMG is debt eroded? horace. <{POST_SNAPBACK}> You owe £100k. You earn £20k. Inflation 2%. IR 4.5%. You service your debt at 4.5%. Annual pay rise 4%. Your monthly outgoings rise 2% over the year (assuming inflation rate fairly reflects inflation for the basket of stuff you buy). You owe £100k. You earn £20k. Inflation 20%. IR 15%. You service your debt at 15%. Annual pay rise 4%. Your monthly outgoings rise 20% over the year (same assumption). You are almost certainly comprehensively screwed. What erodes debt is if inflation runs at 20% and your annual wage increase goes up to match, otherwise inflation wipes you out. Repeat mantra - it is WAGE INCREASES that erode debt, NOT price inflation. Quote Link to comment Share on other sites More sharing options...
MarkG Posted September 10, 2005 Share Posted September 10, 2005 but more advanced technology is is constantly iimproving the product instead of bringing down the price of a like-for-like product Meanwhile, most of those 3.5GHz PCs are used to do _EXACTLY_ what they were previously using 350MHz PCs for: word processing, spreadsheets, playing games, etc. Ok, so your spreadsheet calculations may finish in 0.15 seconds rather than 1 second... big deal. Just because a PC is faster, that doesn't mean it's any more productive... new software typically just bloats until it's as slow as the old one. So if the government are claiming that inflation is low because we can buy a 3.5GHz PC for the same price as a 350MHz PC a few years ago, it's just the same old BS. Repeat mantra - it is WAGE INCREASES that erode debt, NOT price inflation. Indeed. Price inflation without wage inflation makes you poor, not rich... I honestly don't understand why so few people see that. Quote Link to comment Share on other sites More sharing options...
OnlyMe Posted September 10, 2005 Share Posted September 10, 2005 Trade deficit busted again and the first signs that import costs are beginning to rise rapidly. A large part of China's competive advantage is down to subsidized fuel and a surfeit of investment allowing businesses to run unproductively - in the long term this may not be possible to carry. High commodity and oil prices are about to burst ultra-low production costs. http://news.ft.com/cms/s/f8829edc-2198-11d...000e2511c8.html Trade figures suggest inflation will rise By Scheherazade Daneshkhu, Economics Correspondent Published: September 10 2005 03:00 | Last updated: September 10 2005 03:00 The cost of manufactured goods from China and other countries outside the European Union increased sharply in July, according to official trade figures published yesterday, suggesting inflation could keep rising.+ The 1.8 per cent increase in the price of goods imports, excluding oil and erratics - items with volatile prices - from non-EU countries was the highest monthly rise since January, according to the Office for National Statistics. Quote Link to comment Share on other sites More sharing options...
Milkshock Posted September 10, 2005 Share Posted September 10, 2005 I am going to ask a very silly question. I have attempted to apply simple logic but I`m afraid my feeble brain is simply not capable of reaching a conclusion so let me pose the question for you. Inflation erodes debt. Does anyone disagree? Thus, if the `inflation rate` used by HMG is generally perceivced to be higher (as an example) than the rate published by HMG is debt eroded? horace. <{POST_SNAPBACK}> no one is questioning that the inflation figures are kept falsely low. what also has to be acknowledged is that wage settlements are in line with the fiddled figures, not the real rate. Quote Link to comment Share on other sites More sharing options...
right_freds_dead Posted September 10, 2005 Share Posted September 10, 2005 Meanwhile, most of those 3.5GHz PCs are used to do _EXACTLY_ what they were previously using 350MHz PCs for: word processing, spreadsheets, playing games, etc. Ok, so your spreadsheet calculations may finish in 0.15 seconds rather than 1 second... big deal.Just because a PC is faster, that doesn't mean it's any more productive... new software typically just bloats until it's as slow as the old one. So if the government are claiming that inflation is low because we can buy a 3.5GHz PC for the same price as a 350MHz PC a few years ago, it's just the same old BS. Indeed. Price inflation without wage inflation makes you poor, not rich... I honestly don't understand why so few people see that. <{POST_SNAPBACK}> they crank up the bus speed, but the delay is always with the hard disks and software. Quote Link to comment Share on other sites More sharing options...
MarkG Posted September 10, 2005 Share Posted September 10, 2005 Actually, I'd say the delay is usually with the user. Most PCs spend 90+% of the time waiting for the user to do something. That's why Microsoft has had to design a new operating system that sucks up lots of CPU cycles and memory even when it's 'not doing anything', to encourage people to buy faster PCs . Quote Link to comment Share on other sites More sharing options...
MrB Posted September 10, 2005 Share Posted September 10, 2005 Why would any house owner care?If you have a mortgage; high inflation AND low interest rates is the best present any chancellor could give you, short of paying the mortage himself. <{POST_SNAPBACK}> See below. What erodes debt is if inflation runs at 20% and your annual wage increase goes up to match, otherwise inflation wipes you out. Repeat mantra - it is WAGE INCREASES that erode debt, NOT price inflation.<{POST_SNAPBACK}> Important to get the above into your head. High inflation makes you poorer, not richer. Just pray wage inflation matches price inflation (which it doesn't). There was an article in the Mail on Sunday I beleive regarding CPI and how it canes the middle classes more than the working classes beacause of their spending habits. CPI may be at 2.3% but some items have fallen in value spectacularly (clothes, shoes, white goods, electronic items) others have risen equally spectacularly (private education, eating out, theatre etc). If your personal shopping basket is made of things that have risen then you can be much worse off than the 2.3% overall index would suggest. Quote Link to comment Share on other sites More sharing options...
birdie Posted September 10, 2005 Share Posted September 10, 2005 An article I mentioned on a similar thread earlier. May be relevant here too. Fry Group Quote Link to comment Share on other sites More sharing options...
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