Inflation Is Heading Up Worldwide

[Tempest]

Prompted by Friday's shocking (non core) CPI news in the US and in advance of the UK's own CPI data on Tuesday this week, a quick web review over the weekend revealed accelerating inflation in all of these countries at the moment:

US - http://msnbc.msn.com/id/9699943/ - up to 4.7% in Sept and climbing (that is the rate with energy and food stripped out - why do central bankers strip out essential items from their "core" figures!)

New Zealand - http://www.bloomberg.com/apps/news?pid=100...refer=australia - 3.4% against a 1-3% target band.

Euroland - http://quote.bloomberg.com/apps/news?pid=1...JmZs&refer=home - heading above 2%

Canada - http://today.reuters.com/investing/finance...ON-UPDATE-2.XML - up from 2% in July to 2.6% in Aug and rising - forecast to breach 3% upper limit of target soon

Ireland - http://216.239.59.104/search?q=cache:FfZDB...land+news&hl=en - up from 2.3% in Aug to 3% in Sept - only going one way

Australia - http://www.bloomberg.com/apps/news?pid=100...refer=australia - forecast to hit 3.2% - breaking 2-3% target band.

India - http://www.dawn.com/2005/10/17/top13.htm - broken through 4% in Oct headed towards 5-5.5% this year

Japan - forecast to head positive this year and come out of deflation.

Inflation in many of these areas has doubled in the last 18-24 months (which pre dates the oil price spikes). I cannot recall a time when so much of the world was in fear of inflation - something must be wrong.

My view is that inflation does not feature the effects of oil price inflation fully yet and will get a lot worse. How some central bankers will hold their heads in shame one day for failing to use their historically powerful vaccine for this disease - higher interest rates - until it was too late.

Edited October 17, 2005 by Tempest

[OnlyMe]

Agreed,

Money supply - up the wazoo for years

Energy - Increasing rapidly for years

Other Commodities and raw materials - increasing for years

Debt fuelled speculative asset inflation - increasing for years

Not only have the central banks not fought it, they have been the root cause of it, it has been policy.

Wait till people run out of money to afford the lifestyle and commitments they already have, let alone can afford to increase their commitments and further support the economy by more consumer spending.

[Smurf1976]

The longer a rate rise is delayed, the higher rates will need to go to get this inflation problem under control.

So from a property perspective, the big slump may well be taking longer than expected to get going but it is ggetting bigger at the same time.

[Tempest]

To support the main post, see the link today below to a Heinz strike up north - Private sector pay demands are increasing (seeking above inflation pay deals) - when added to the inflation busting public sector wage increases one can see how things can feed themselves and spiral away here soon.

http://news.bbc.co.uk/1/hi/england/manchester/4347638.stm

Even more significantly, see the link to the 2006 Worldwide Pay Survey from Mercer Group from early October. Check out some of the figures in the table of expected wage increases around the world against expected inflation rates...If this is not a leading indicator then I'll be...

http://www.prnewswire.com/cgi-bin/stories....04158111&EDATE=

Edited October 17, 2005 by Tempest

[MarkG]

The real problem is that for as long as all that money was going into central bank vaults and housing, it was possible to ignore the vast inflation of the money supply. Now it's coming out of bank vaults and housing and going into vital things like energy and other commodities instead, not only is the inflation impossible to ignore, but it's also real hard to stop with interest rate increases, because the money that's causing the inflation was 'printed' years ago.

This is exactly why you don't want to do what the central banks have been doing for years.

[right_freds_dead]

My view is that inflation does not feature the effects of oil price inflation fully yet and will get a lot worse. How some central bankers will hold their heads in shame one day for failing to use their historically powerful vaccine for this disease - higher interest rates - until it was too late

i think they have left it too late. the idea to use IR to hold off inflation is fine provided you use it to AVERT a crisis before it happens. once you have lost control you cant usa IR to CHANGE the situation back. the money has already been lent at a low IR and is already in the wider economy. its too late now.

they should have clamped it jan 04. possibly earlier.

[MarkG]

they should have clamped it jan 04. possibly earlier.

A lot earlier: Greenspan has been running artificially low interest rates since the late 90s, with the UK not far behind. The damage was done long ago, now they'll have to cripple borrowing with very high interest rates if they want to suck all that money they've printed out of the economy...

[right_freds_dead]

the saddest thing is that gordon brown had it in the bag in 97-98. all he had to do was be careful and slowly grow the economy under its own steam. why he created this lending boom ill never know. we didnt need one that badly and we done nothing but blow it on tat or useless services.

edit* saying that. they have regenerated a lot of towns, though its a painful price to pay for those at the bottom. i think its the general unfairness that pisses me off the most. if they wanted to go on some spending spree they should have done it through taxation so it was clearer to all how much they were spending.

instead they have done it through commercial means. i think the money at the bottom has run out. were lent up. no matter what IR or what sales are in town, people are lent up. pots dry. if gordon brown cant be prudent, then the public will be.

Edited October 17, 2005 by right_freds_dead

[OnlyMe]

the saddest thing is that gordon brown had it in the bag in 97-98. all he had to do was be careful and slowly grow the economy under its own steam. why he created this lending boom ill never know. we didnt need one that badly and we done nothing but blow it on tat or useless services.

edit* saying that. they have regenerated a lot of towns, though its a painful price to pay for those at the bottom. i think its the general unfairness that pisses me off the most..

The only real problem that would have needed to be tackled was the exchange rate - stong forces were unleashed when the US dumped their rates, a rapid increase in sterling value would have stuffed UK manufaturers in the same sort of way as rising costs. However there have been many timres over the last few years that whenever a positive housing market report came out that sterling jumped markedly - manybe the strengh of sterling was not so much down to interst rate diffentials but speculative money buying sterling either for direct investment int eh UK property market or in reaction to supposed healthy economics based on a strong housing market.

Gordon is and has been a one trick pony - housing inflation, taxation and spending through government job creation - the bills for all this in the future will be horrendous and maybe unpayable.

[right_freds_dead]

stong forces were unleashed when the US dumped their rates, a rapid increase in sterling value would have stuffed UK manufaturers in the same sort of way as rising costs

real uk manufacturers would have had cheaper material imports though. that would stave off some of the pressure. then leaner business practices would have remained stronger. we should have held our breath and let the usa do what it had to do. then it would have only been them in the mess - not us. also better usa rates would mean more usa spending, so a general rise in demand would have accompanied that. both those factors would have solved half the balance.

inflation will soon close this fake manufacturing gap we have. then were back to square one, but with huge amounts of debt. all we have done is lend lend lend. not on business infrastructure, but on a domestic lifestyle front importing most goods.

[FTBagain]

The other driver to UK interest rates is the foreign exchange rates and since the last rate cut the £ has been sliding. If that continues then we will start to import inflation as well as suffering own our domestic inflation.

I know there has been a lot of talk in the press about the need to cut rates to prop up the growth figures, but I think that the markets are starting to get spooked by the growing inflation rates. That will soon be only too obvious to even the most compromised central banker! When they realise that they have waited too long they will start to act 'robustly' and then the bust will be well and truely on.

Another thing as just occured. We all talk about the debt burden, mostly personel debt, as the economy was inflated by cheap money. Well it is not only individuals who have be seduced by all this cheap money. Have you noticed how much the Retailers are squealing about a 'reduce growth rate'. Ever wonder why. I believe it is because they thought that the boom times wonder never end and have expanding to crash in. Trouble is they have expanded too far. The reduced growth of recent months mean that they cannot cover their increased costs! They have shot themselves in the foot, rather like to steel industry did back in the 60 and 70's. (Ironic that the UK steel industry has made some profits on the back of Chinese demand.) Sad thing is that the retraction will over shoot (just like the HPC will) and take down a lot of the Retailers with it.

[right_freds_dead]

Have you noticed how much the Retailers are squealing about a 'reduce growth rate'. Ever wonder why. I believe it is because they thought that the boom times wonder never end and have expanding to crash in. Trouble is they have expanded too far. The reduced growth of recent months mean that they cannot cover their increased costs! They have shot themselves in the foot

this is happening now. they over expand 15% they cut 15% back. if they did it right, they nipped in and took the cash, closed back and sat pretty. if they were foolish enough not to have seen the pattern and have geared themselves with long term assets to a short term boom - thats bad management.

B&Q may have pulled off the perfect cash-in. we'll see. though i think they left it too late.

i think travel is about to get battered.

[OnlyMe]

The other driver to UK interest rates is the foreign exchange rates and since the last rate cut the £ has been sliding. If that continues then we will start to import inflation as well as suffering own our domestic inflation.

I know there has been a lot of talk in the press about the need to cut rates to prop up the growth figures, but I think that the markets are starting to get spooked by the growing inflation rates. That will soon be only too obvious to even the most compromised central banker! When they realise that they have waited too long they will start to act 'robustly' and then the bust will be well and truely on.

Another thing as just occured. We all talk about the debt burden, mostly personel debt, as the economy was inflated by cheap money. Well it is not only individuals who have be seduced by all this cheap money. Have you noticed how much the Retailers are squealing about a 'reduce growth rate'. Ever wonder why. I believe it is because they thought that the boom times wonder never end and have expanding to crash in. Trouble is they have expanded too far. The reduced growth of recent months mean that they cannot cover their increased costs! They have shot themselves in the foot, rather like to steel industry did back in the 60 and 70's. (Ironic that the UK steel industry has made some profits on the back of Chinese demand.) Sad thing is that the retraction will over shoot (just like the HPC will) and take down a lot of the Retailers with it.

Retailers have largely been able to ignore inflation in rents and employee costs whilst sales volumes were booming and import prices were falling helped by a string £, the kickbacks from credit and other policy/warranty sales was booming. Now it is a totally different kettle of fish, in fact all the positive factors are going into reverse and their high costs are stuck there, together with upward oinly rent reviews and all the other rising costs. Again another sector that grew well beyond their long term capacity to create profit via the backdrop of a debt bubble. Last few year's monetary policy will have an awful lot to answer for when the chips are down, it was a terrible gamble.

[FTBagain]

B&Q may have pulled off the perfect cash-in. we'll see. though i think they left it too late.

i think travel is about to get battered.

I'm not so sure about B&Q, or ASDA for that matter. They have done enough to survive, but that is all IMO. As for travel, bound to get slaughtered as people cut back on the flash holidays. Pitty the people of places like Bali though, they will get hurt the most, them and the lame duck US carriers!

Big job loses on the way in the US IMO, especially in the light of the US car sales figures out today. GM sales down 57%, Ford not far behind. (Posted somewhere else on this forum, sorry feelng too slazy to go find it ). Could be we see some big household names go this winter / next year. Remember GM are still quite big here in the UK, so what hits in the US will spill over into the UK economy as well.

We're doomed! We're all doomed!