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Inflation 16Th August 2011

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What did Darling do ?

Whatever Mervyn and the banksters told him to, just like Osborne does.

Man who writes cheques allocates work.

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It is absolutely nothing to do with VAT either. Zero-rated items (safety footwear for instance) are going through the roof.

Funny you should say that, the long standing work wear shop down the road had a For Let sign put up yesterday, 'due to relocation', yeah right.

In fact 9 out of 25 varied businesses (36%) have shut on the same road in the last year or so, and many others in nearby roads too. I'm sure, with inflation eating into peoples disposable income, growth is just around the corner to ride to the rescue.

I have a feeling this next year or so is going to be the realisation of a calamitous chapter for this country.

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Who was naive enough to think they wouldn't inflate the problem away? :rolleyes:

If the "problem" is debt..

Price inflation makes debt harder to service.

Wage inflation makes debt easier to service.

We have the first - and rampant. We don't have the latter. Indeed wages are falling in real terms and full time positions have been vanishing in favour of part time ones.

So the trick in the 1970s where inflation topped 20% - both price and wage inflation - which basically bought our parents' houses for them to some degree (there was more of a cushion against rising interest/mortgage rates because the house price to wages multiplier was much lower then) won't work the same this time.

Unless we get wage inflation. Which doesn't look likely, and as far as our competitiveness is concerned, isn't wanted by government either.

I have a suspicion that older generations knowingly look at what's going on, remember the 1970s, and think "it will all turn out fine in the end" however the end result will be that we end up far more impoverished than they did.

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If the "problem" is debt..

Price inflation makes debt harder to service.

Wage inflation makes debt easier to service.

We have the first - and rampant. We don't have the latter. Indeed wages are falling in real terms and full time positions have been vanishing in favour of part time ones.

So the trick in the 1970s where inflation topped 20% - both price and wage inflation - which basically bought our parents' houses for them to some degree (there was more of a cushion against rising interest/mortgage rates because the house price to wages multiplier was much lower then) won't work the same this time.

Unless we get wage inflation. Which doesn't look likely, and as far as our competitiveness is concerned, isn't wanted by government either.

I have a suspicion that older generations knowingly look at what's going on, remember the 1970s, and think "it will all turn out fine in the end" however the end result will be that we end up far more impoverished than they did.

Older generations in the 70s and 80s merely kicked the can further down the road for later generations to deal with.

Which is where we are now.

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I find it to be like the story about the wind and the sun trying to get someone to remove their coat.

Whilst inflation is high and rates are low I just spend less and less.

I can quite happily do without a great many things, such as nice clothes, electronic gadgetry, pricier food, redecorating, garden plants....the list really does go on and on.

For me, it's personal, and every time there's something I don't buy it's another bit of tax the bastards aren't having.

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Who was naive enough to think they wouldn't inflate the problem away? :rolleyes:

Exactly, I dont understand all the moaning and complaining here about it.

I thought the first rule when dealing with politicians was dont listen to what they say, watch what they do. They clearly are not targeting inflation, but are setting interest rates as low as possible to try and stimulate growth and, at the same time, inflate the debt away.

Would everyone feel better if they just admitted that they were no longer following their supposed remit? What difference would that make? It's clear what they're doing - base your decisions on that.

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Older generations in the 70s and 80s merely kicked the can further down the road for later generations to deal with.

Which is where we are now.

Yep, the 70s generation waiting for the same result will be rudely awaken, the 70s debt problem was govt debt, not private debt, this was kicked down the road/fixed, via massive mortgage/private debt expansion taking it off the govts books, now private debt is finally saturated after 30 years expansion and govt debt is saturating (the demographics are also set nicely in place so they have peaked with private debt saturation, so we will be left with both saturated at some point in the near future and eventual default whereas the the 70s was only govt saturated, this is completely different to the 70s, it was far earlier in the credit cycle. The lack of private debt in the 70s was why interest rates had to go up because there was actual velocity and why they are zirp now, there is no velocity to worry about, if that doesnt highlight the different points in the cycle to people i dont know what will

At the same time you had 30 years of imported deflation due to the likes of GATT, this imported deflation trend has clearly reversed already, that longer cycle is already on the up and will likely result in decades of imported inflation, but that isnt the type of inflation that creates hyperinflation, its structural and unavoidable relaigning of British salries relative to others which the BOE are well aware of and is why they dont give a toss about inflation, any global slowdown via recession will see that inflation wiped out

Edited by Mary Cassatt

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Is that true?

If so, there's not really much to worry about? .... but I don't believe it!

You could email this fella for his data.

It's included in a BBC article so I imagine the entire piece must be fictitious using made up data on personal instructions from Red Ed. :rolleyes:

"The big picture is still that rises in energy prices and in particular the VAT hike at the start of the year are still keeping inflation high," said Colin Ellis, chief economist at the British Private Equity and Venture Capital Association.

"At constant tax rates, CPI inflation was 2.8% in July."

http://www.bbc.co.uk/news/business-14540818

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Whatever Mervyn and the banksters told him to, just like Osborne does.

Yet again I'm agreeing with Injin.

Someone shoot me please!

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Of course. Social Landlords can put up rent to whatever they like - who is there to stop them? (Serious question as we know who is there to pay them, but who is there to stop them?).

Social landlords have to put rents up according to the rules set by the government, currently around 6 to 9% per year. It seems that most tenants won't complain as they are on benefits but will start to complain when these rises have to come directly from their pockets. A storm is a brewing.

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http://www.thisislondon.co.uk/standard-business/article-23978648-inflation-goes-marching-on-with-threat-of-worse-to-come.do

The cost of living resumed its upward march today as Bank of England Governor Sir Mervyn King penned yet another letter to the Chancellor to explain away high inflation.

The photos of the two people officially responsible for running the UK economy at the top of the article says it all.

All it needed was MicBrown and Darling's photos as well, even Blair's wouldn't have gone amiss.

The UK is totally ruined and with no way out.

Edited by billybong

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Dear Chancellor,

The Office for National Statistics will publish data tomorrow showing that CPI inflation was 4.4% in July. As it is three months since I last wrote an open letter to you, and CPI inflation remains more than one percentage point above the target, I am writing a further open letter to you on behalf of the MPC.

In accordance with our remit, this letter explains why inflation has moved away from the target, the period within which we expect inflation to return to the target, the policy action the Committee is taking to deal with it, and how this approach meets the Government's monetary policy objectives. Following our usual procedure, the Bank of England will publish this open letter at 10:30am tomorrow.

Why has inflation moved away from the target?

Inflation was above the 2% target throughout 2010 and has risen further this year. The current elevated rate of inflation continues to reflect the temporary impact of the factors described in recent Inflation Reports and my previous letters: the increase in the standard rate of VAT to 20%, and past increases in global energy prices and import prices. Although it is impossible to identify the effects of those factors with precision, it is likely that inflation would be below target in their absence.

Over what period do we expect inflation to return to the target?

As set out in the August Inflation Report, it is likely that inflation will rise to around 5% in the coming months, boosted by increases in utility prices, and reflecting the continuing effects of the temporary factors described above.

Inflation should then fall back through 2012, as those effects dissipate and downward pressure from slack in the labour market persists, although the precise timing and extent of that fall are highly uncertain. At the time of its August meeting, the Committee judged that, based on the conditioning assumptions that Bank Rate follows a path implied by market interest rates and the stock of purchased assets financed by the issuance of central bank reserves remains at £200 billion, the chances of inflation being above or below the target were roughly equal in the medium term.

There have been significant movements in financial asset and energy prices since the time of that meeting. The Committee will continue to monitor those developments closely and will consider their implications for the inflation outlook at its meeting in September.

What policy action are we taking?

Although the Committee's central view is that inflation is likely to fall back in 2012, very significant uncertainties and risks around the outlook for inflation remain. The Committee seeks to balance these risks to the inflation outlook, relative to the target, when making its policy decisions.

On the upside, the key risk remains that the sustained period of above-target CPI inflation may push up on inflation expectations, or lead to some resistance to the erosion of real take-home pay, putting upward pressure on wages and prices. Inflation will continue to be sensitive to fluctuations in global commodity and trade prices, but recent evidence of a moderation in global growth suggests that the risk of significant increases in those prices has diminished somewhat.

On the downside, the key risk is that demand growth will not be sufficiently strong to soak up the pool of spare capacity in the economy, leading inflation to fall materially below target in the medium term. Recent developments in world stock markets and in the euro area are of particular concern. Several member countries face substantial challenges in ensuring the sustainability of their fiscal positions and preserving the stability of their banking systems. There is a risk that this could lead to further severe stress and dislocation in financial markets and, were this risk to crystallise, it would have a significant impact on the UK economy.

The upside and downside risks are discussed more fully in the August Inflation Report. There is a range of views among Committee members over the balance of risks around the inflation outlook. But every member is determined to adjust the degree of monetary stimulus as required in order to return inflation to the target in the medium term, mindful of the risk of generating undesirable volatility in output by attempting to bring inflation back to the 2% target too quickly. At the August meeting, the Committee judged it was appropriate to maintain Bank Rate at 0.5% and the stock of purchased assets financed by the issuance of central bank reserves at £200 billion.

How does this approach meet the Government's monetary policy objectives?

The big risks currently facing the UK economy come from the rest of the world. In responding to those risks, or indeed to other risks in either direction, the MPC can use Bank Rate or asset purchases to achieve its objective. There is, however, a limit to what monetary policy can do when large real adjustments are required. And it cannot influence inflation over the next few months. But it can ensure that the adjustment takes place against a backdrop of low inflation in the medium term. In so doing, monetary policy will make the best contribution it can to high and stable levels of growth and employment.

I am copying this letter to the Chairman of the Treasury Committee, through which we are accountable to Parliament, and will place this letter on the Bank of England's website for public dissemination.

Apparently he's quickly worked out that if it weren't for the factors causing inflation then inflation would be below target.

No wonder he got the Knighthood.

Edited by billybong

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The photos of the two people officially responsible for running the UK economy at the top of the article says it all.

The UK is totally ruined and with no way out.

It is more enlightening to read Merv's letters from a couple of years ago. All the predictions turn out to be tripe.

p-o-p

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Apparently he's quickly worked out that if it weren't for the factors causing inflation then inflation would be below target.

No wonder he got the Knighthood.

How much are we paying him for this? Plus the senior citizen's railcard and what was it £130,000 of expenses or is my memory playing tricks?

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It's quaint the way you think VAT will fall back to 15%.

Oh dear - you didn't understand the post, did you?

I was talking about when VAT was cut to 15% in 2009 ... at the same time that the politicians who cut it were bleating about the dangers of deflation.

Regarding the effects of the last VAT hike, once we are one year from the introduction of 20% VAT (up from 17.5%, then the inflationary effects of it will 'drop out' of the annual inflation indices. It doesn't need to fall back to anything in order for there to be 'reduction' in upward pressure on the figures (which are year-on-year based).

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It's a shocking state of affairs but Merv doesn't give a toss. Neither does David or George.

We are fooked and thats that. Time to go bankrupt for the majority I think!! :rolleyes:

Edited by Wait & See

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  • 317 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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