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bushboy

Inflation

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The US have raised interest rates and we have held ours which means that there is a gap of .75% whereas just over a month ago this was 1.25%.

Rita is off and running towards the poor old Big Easy and oils back above $67.

Is this all too late to impact on the upcoming inflation report?

Surely this kind of news should be getting more press coverage or am i being a bit a bit naive?

Anyone with an economic brain i await your views.

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Nice link – might as well be in French though. Some of us have to work for a living and I just cannot find the time for a quick collage course to learn the fundamentals in ‘International Finance Theory & Policy’

Anyone got a dumbed down version

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Nice link – might as well be in French though. Some of us have to work for a living and I just cannot find the time for a quick collage course to learn the fundamentals in ‘International Finance Theory & Policy’

:lol::lol:

Like it LOL :lol:

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Nice link – might as well be in French though. Some of us have to work for a living and I just cannot find the time for a quick collage course to learn the fundamentals in ‘International Finance Theory & Policy’

Anyone got a dumbed down version

Think of it like this, you have two pubs, one that is in a rough area, sort of run down and cold with bales of hay for chairs and overly excited customers but the beer is only £1 a pint, then you have another pub that is in a nice area, lovely and warm with big comfy seating, plasmas screens showing Sky Sports and lovely customers that are extras from bond movies just killing time, but the beer is £2 a pint.

So you have a clear choice based on the beer v. comfort ratio, it's finely balanced, say however that the nice put cuts its price to £1.10 per pint then the choice has already been made for you.

Same thing applies to UK v. US interest rates, money flows to areas where there are better returns or faster growth, UK rates have to be placed at a >1% premium to US rates in order to attract inflows, which then funds our trade deficits.

Edited by BuyingBear

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Think of it like this, you have two pubs, one that is in a rough area, sort of run down and cold with bales of hay for chairs and overly excited customers but the beer is only £1 a pint, then you have another pub that is lovely and warm with big comfy seating, plasmas screens showing Sky Sports and lovely customers that are extras from bond movies just killing time but the beer is £2 a pint.

So you have a clear choice based on the beer v. comfort ratio, it's finely balanced, say however that the nice put cuts its price to £1.10 per pint then the choice has already been made for you.

Same thing applies to UK v. US interest rates, money flows to areas where there are better returns or faster growth, UK rates have to be placed at a >1% premium to US rates in order to attract inflows, which then funds our trade deficits.

Now I understand :)

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Think of it like this, you have two pubs, one that is in a rough area, sort of run down and cold with bales of hay for chairs and overly excited customers but the beer is only £1 a pint

Are you saying that the UK is run down? :o

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Think of it like this, you have two pubs, one that is in a rough area, sort of run down and cold with bales of hay for chairs and overly excited customers but the beer is only £1 a pint, then you have another pub that is in a nice area, lovely and warm with big comfy seating, plasmas screens showing Sky Sports and lovely customers that are extras from bond movies just killing time, but the beer is £2 a pint.

So you have a clear choice based on the beer v. comfort ratio, it's finely balanced, say however that the nice put cuts its price to £1.10 per pint then the choice has already been made for you.

Same thing applies to UK v. US interest rates, money flows to areas where there are better returns or faster growth, UK rates have to be placed at a >1% premium to US rates in order to attract inflows, which then funds our trade deficits.

I take it that if we have a deficit

the pound falls

which puts up inflation

which makes us put up rates.

Is it realy that simple or does anything else get in the way?

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Are you saying that the UK is run down?  :o

The UK is different again in that analogy, not only is it run down they just pretend it's not and then charge £2 a pint like the nice pub, even when the nice pub has dropped its prices to £1.10

Btw, the GBP is no longer a reserve currency, the US can get away with all sorts of things with the dollar because of its reserve status.

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Btw, the GBP is no longer a reserve currency, the US can get away with all sorts of things with the dollar because of its reserve status.

Indeed, but the US can't afford to take the piss too much. They may strain the patience of their creditors, especially with the Euro become a more feasible reserve currency.

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Indeed, but the US can't afford to take the piss too much. They may strain the patience of their creditors, especially with the Euro become a more feasible  reserve currency.

Yup, it really only takes on major asian economy to say, thats it had enough of US bills and you get an expectation slide and the currency crashes. Clearly its in none of the Asian economies interests to let this happen because it decreases the value of their debt and also makes their exports more expensive - but it can't go on forever. With growing trade and budget defecits the $ is over valued, but no one wants it to fall so its being held up. This is not something that can last for ever.

A falling currency is not generally a bad thing for a country though, it certainly wouldn't be a bad thing for the UK; imports get more expensive, and while this does fuel inflation in the short term or also causes a shift from imports to local goods. Our exports become cheaper for foreigners which is also good for local business.

This is why the CBI etc want i.r. rates low. Not just because of borrowing for business but because raising i.r. increases the value of the pound which is all round a bad thing for business.

The trade defecit is not really the best argument. If your currency falls you start importing a lot less and exporting a lot more. Its a self correcting situation.

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The trade defecit is not really the best argument. If your currency falls you start importing a lot less and exporting a lot more. Its a self correcting situation.

That assumes the UK still has the industrial capacity or capability to substitute for the sort of things we traditionally import whilst simultaneously providing exports that compete with exports from places like China, it's laughable to say we can compete on the same basis. Also, we are now net importers of oil and natural gas, if the North Sea cannot even provide for domestic needs then how do we suddenly become an exporter again just because our currency favours it?

Edited by BuyingBear

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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