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Is Inflation Really As High As We Think ?

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A popular perception on this board is that inflation is really running at 10%. The perception of economists is that it is running flat and you need a 2% target just to stand still, because CPI overstates inflation by 2%.

Well, if inflation was really running in double digits, after 7 years you would know about it because prices would have doubled. Strangely my 12 month rolling drawings have just hit a record low for the last seven years.

I agree that rents, food and fuel have indeed gone up well beyond inflation. The latter two do have some discretionary element...I managed to pick up fours loaves of Kingsmill from Wilko of all places at 20p each for the freezer yesterday. Five pineapples at 10p for the fridge the day before at Sainsbury. So food costs us diddly squat.

But looking at other areas motoring, phones etc. the deflation is massive.

In 1980s an entry level car was made of sardine cans, broke down every month, had a shelf life of maybe 5 years, did 30 to the gallon and cost about 10 grand in today's money. Yep we are talking FSOs and ladas.

Now you can get an entry level that never breaks down, does 64 to the gallon, no car tax and will last for 20 years at a fraction of the cost of a 1980s lada.

Phones, my contract is now £8 per month, it was £30 a month only a few years back.

And consumer goods well they are permanently in deflation mode.

Edited by crashmonitor

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If people's budgets are being squeezed by fuel, food, heating, electricity, etc then consumer goods HAVE to come down in order to make the sale.

Plus (as you say) the general quality of goods seems to have increased, leading to much longer life. My last two cars hit 180K miles without any major issues (BMW, Honda).

I think genuine deflation will start when interest rates start to climb - if you knock a few hundred quid a month out of the budget of a majority of UK households it's going to be carnage for general consumer spending.

Yep, it's easy to concentrate on what is going up and I am glad someone has conceded my point on consumer goods. I would have thought that with many members being cash rich and property poor, it isn't exactly in our interests to talk up CPI as we do (barring having a bit of fun at the MPCs expense for missing the target forever)

Edited by crashmonitor

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A popular perception on this board is that inflation is really running at 10%. The perception of economists is that it is running flat and you need a 2% target just to stand still, because CPI overstates inflation by 2%.

Well, if inflation was really running in double digits, after 7 years you would know about it because prices would have doubled. Strangely my 12 month rolling drawings have just hit a record low for the last seven years.

I agree that rents, food and fuel have indeed gone up well beyond inflation. The latter two do have some discretionary element...I managed to pick up fours loaves of Kingsmill from Wilko of all places at 20p each for the freezer yesterday. Five pineapples at 10p for the fridge the day before at Sainsbury. So food costs us diddly squat.

But looking at other areas motoring, phones etc. the deflation is massive.

In 1980s an entry level car was made of sardine cans, broke down every month, had a shelf life of maybe 5 years, did 30 to the gallon and cost about 10 grand in today's money. Yep we are talking FSOs and ladas.

Now you can get an entry level that never breaks down, does 64 to the gallon, no car tax and will last for 20 years at a fraction of the cost of a 1980s lada.

Phones, my contract is now £8 per month, it was £30 a month only a few years back.

And consumer goods well they are permanently in deflation mode.

My rent is now 50 p.m more than it was in 1998, which if anything highlights the total money pit that is BTL, and as you say food can be very cheap if you look for deals. I have never agreed with the "raging inflation" posters, we had the inflation when money flowed through property and cheap credit, now the PTB are desperately trying to stop deflation IMO.

Edited by dances with sheeple

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A popular perception on this board is that inflation is really running at 10%. The perception of economists is that it is running flat and you need a 2% target just to stand still, because CPI overstates inflation by 2%.

Well, if inflation was really running in double digits, after 7 years you would know about it because prices would have doubled. Strangely my 12 month rolling drawings have just hit a record low for the last seven years.

I agree that rents, food and fuel have indeed gone up well beyond inflation. The latter two do have some discretionary element...I managed to pick up fours loaves of Kingsmill from Wilko of all places at 20p each for the freezer yesterday. Five pineapples at 10p for the fridge the day before at Sainsbury. So food costs us diddly squat.

But looking at other areas motoring, phones etc. the deflation is massive.

In 1980s an entry level car was made of sardine cans, broke down every month, had a shelf life of maybe 5 years, did 30 to the gallon and cost about 10 grand in today's money. Yep we are talking FSOs and ladas.

Now you can get an entry level that never breaks down, does 64 to the gallon, no car tax and will last for 20 years at a fraction of the cost of a 1980s lada.

Phones, my contract is now £8 per month, it was £30 a month only a few years back.

And consumer goods well they are permanently in deflation mode.

+1

Inflation's not taking off. In fact everything's much as Keynes would have predicted when the economy is caught in a liquidity trap.

But where are the contrite apologies from all those predicting Zimbabwe levels of inflation?

For example I might regard Niall Ferguson as a serious academic (rather than an attention seeking scaremonger) if he recognised he was wrong and shared with us how he had changed his thinking now that events haven't played out as he predicted.

http://krugman.blogs.nytimes.com/2013/06/29/the-always-wrong-club/?_r=0

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+1

Inflation's not taking off. In fact everything's much as Keynes would have predicted when the economy is caught in a liquidity trap.

But where are the contrite apologies from all those predicting Zimbabwe levels of inflation?

For example I might regard Niall Ferguson as a serious academic (rather than an attention seeking scaremonger) if he recognised he was wrong and shared with us how he had changed his thinking now that events haven't played out as he predicted.

http://krugman.blogs...rong-club/?_r=0

He won`t though, none of them will, they will just drop off the radar for a while and then pop up in a year or two with another book full of nonsense.

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Yep, it's easy to concentrate on what is going up and I am glad someone has conceded my point on consumer goods. I would have thought that with many members being cash rich and property poor, it isn't exactly in our interests to talk up CPI as we do (barring having a bit of fun at the MPCs expense for missing the target forever)

I think it tends to depend on whether you are in a family or not.

In families the incremental cost is stuff like food, fuel and clothes. Also in a family you have less ability to cut back. Whereas if you are on your own choosing not to go on holiday, to take the kids to tennis or to keep the heating off is a much simpler decision that can be taken without howls of protest - a bit like government spending in a democracy and a dictatorship !

I've managed to half my fuel spending recently. Consumer goods were chopped for me a long time ago, but try telling your girlfriend you don't "need" fabric conditioner, or 700 bottles of crap in the bathroom.

Next on my list is food.

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I think it tends to depend on whether you are in a family or not.

In families the incremental cost is stuff like food, fuel and clothes. Also in a family you have less ability to cut back. Whereas if you are on your own choosing not to go on holiday, to take the kids to tennis or to keep the heating off is a much simpler decision that can be taken without howls of protest - a bit like government spending in a democracy and a dictatorship !

I've managed to half my fuel spending recently. Consumer goods were chopped for me a long time ago, but try telling your girlfriend you don't "need" fabric conditioner, or 700 bottles of crap in the bathroom.

Next on my list is food.

I do think it is difficult for families to cut back. The discretionary spend goes out of the window at the supermarket as you probably have to stick rigidly to favourite brands for the kids sake and can't go out on a limb on a bag of fennel slashed to10p because they probably wouldn't eat fennel soup anyway. Fortunately my partner is as keen as me to shop smart.

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I think it tends to depend on whether you are in a family or not.

In families the incremental cost is stuff like food, fuel and clothes. Also in a family you have less ability to cut back. Whereas if you are on your own choosing not to go on holiday, to take the kids to tennis or to keep the heating off is a much simpler decision that can be taken without howls of protest - a bit like government spending in a democracy and a dictatorship !

Quite. My wife is doing something with some friends. Hotel and activities is 'only' about £100 which she thinks is good value. The problem is when you want to do something as a couple or family, the cost doubles, trebles but really hurts because it is only coming out of 1 pocket.

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Quite. My wife is doing something with some friends. Hotel and activities is 'only' about £100 which she thinks is good value. The problem is when you want to do something as a couple or family, the cost doubles, trebles but really hurts because it is only coming out of 1 pocket.

get the kids up a chimney and collateralise the forward earnings, worked for us and the nippers learn a valuable life lesson to boot. Everyones a winner.

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get the kids up a chimney and collateralise the forward earnings, worked for us and the nippers learn a valuable life lesson to boot. Everyones a winner.

Why didn't I think of that? Maybe I should start MLM scheme for chimney sweeping paraphenalia.

This time next year Rodders...

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Why didn't I think of that? Maybe I should start MLM scheme for chimney sweeping paraphenalia.

This time next year Rodders...

The 2 big reasons most people dont do this are

1) Lack of innovativitivity

2) The wife has a real problem with it

Most people are ok with 1 but struggle with 2 which needs real stamina, her indoors, whilst upset at first, really came round when the first Faberge egg was delivered from the proceeds

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I think the consencus is that all the cash stashed at the banks is a trigger for inflation....not one that has happened yet.

This is based on the reason for QE>..to maintain asset values....a sword against the white knight of deflation....

this has devalued currencies, and kept assets up...including houses, and stocks....however, this seems to be all that is keeping things up...

So, at some time, it has to end...either in a hyperinflation or a deflation...they keep aiming for a soft landing...so far that have managed to raise the landing strip to 50,000 ft.

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+1

Inflation's not taking off. In fact everything's much as Keynes would have predicted when the economy is caught in a liquidity trap.

But where are the contrite apologies from all those predicting Zimbabwe levels of inflation?

For example I might regard Niall Ferguson as a serious academic (rather than an attention seeking scaremonger) if he recognised he was wrong and shared with us how he had changed his thinking now that events haven't played out as he predicted.

http://krugman.blogs.nytimes.com/2013/06/29/the-always-wrong-club/?_r=0

We have seen asset price inflation and debasement of currency, relative to cash. Why else have we had a stock market boom and a house price spike in London based on declining real terms wages?

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If people's budgets are being squeezed by fuel, food, heating, electricity, etc then consumer goods HAVE to come down in order to make the sale.

Plus (as you say) the general quality of goods seems to have increased, leading to much longer life. My last two cars hit 180K miles without any major issues (BMW, Honda).

I think genuine deflation will start when interest rates start to climb - if you knock a few hundred quid a month out of the budget of a majority of UK households it's going to be carnage for general consumer spending.

.....but interest rate rises will affect mainly those with debt reducing their disposable income.....those with falling income already have slowed down with spending, the ones with both high debt and falling income will suffer the greatest....the government along with the central bank can create their own inflation, trouble is few are or will be in a position to play their game with them. ;)

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So, at some time, it has to end...either in a hyperinflation or a deflation...they keep aiming for a soft landing...so far that have managed to raise the landing strip to 50,000 ft.

I used to think they were aiming for a soft landing, and in fact this is their job.

In reality I think they are just more concerned about making sure the landing of any sort doesn't happen on their watch.

The policy seems to be kick the can down the road until after the next election, we'll worry about what to do if we are still in power after that. And in a way, who can blame them for this way of thinking ?

Hence we have stuff like help to buy, which as many people have pointed out in the press appears to be aimed at inflating another housing bubble or at least make house prices tread water until the next election.

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Plus (as you say) the general quality of goods seems to have increased, leading to much longer life. My last two cars hit 180K miles without any major issues (BMW, Honda).

It's easy to forget how expensive motoring used to be. In 1985 I bought a four year old metro for £2495 (more than I paid in real terms for an 11 month old Peugeot 107 this year). Add to that car tax at £105 pa (now zero on the Peugeot) and servicing and repairs at about £500 pa and horrendous depreciation. I sold it in 1988 for £1,000 to a person who scrapped it in 1989. Eight years was about right for a metro with its corrosion problems.

Anybody ever seen any corrosion on an eight year old 05 Aygo, 107, C1 triplet that came out of the Peugeot Euro superplant in conjunction with Toyota and Citroen, thought not. And now they are dumping them from 7K new on the UK, the only country that is still buying cars at a pre-recession level.

Moreover the Peugeot does 64 mpg, the Metro 40 mpg. Petrol hit £2 a gallon in the summer of 1985, not dissimilar to today.

Even food, despite the recent rises, is a fraction of what it used to cost in the 80s......thanks to a world beating logistics and supermarket set up.

Edited by crashmonitor

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It's easy to forget how expensive motoring used to be. In 1985 I bought a four year old metro for £2495 (more than I paid in real terms for an 11 month old Peugeot 107 this year). Add to that car tax at £105 pa (now zero on the Peugeot) and servicing and repairs at about £500 pa and horrendous depreciation. I sold it in 1988 for £1,000 to a person who scrapped it in 1989. Eight years was about right for a metro with its corrosion problems.

Anybody ever seen any corrosion on an eight year old 05 Aygo, 107, C1 triplet that came out of the Peugeot Euro superplant in conjunction with Toyota and Citroen, thought not. And now they are dumping them from 7K new on the UK, the only country that is still buying cars at a pre-recession level.

Moreover the Peugeot does 64 mpg, the Metro 40 mpg. Petrol hit £2 a gallon in the summer of 1985, not dissimilar to today.

You're looking at one item and extrapolating the entirety of inflation from there. For balance:

_65430205_railfares_barchart.gif

My partner's rail ticket is £5000 a year. It's necessary to pay for this, plus run a car, because it would be impossible to commute to work by car given the current levels of congestion (something that's always conveniently left out of hedonic adjustments).

Given that the price of necessities (housing, education, transport) has gone through the roof, it's not surprising that the price of some consumer goods would lag the official CPI estimates.

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Pack sizes of food are shrinking before our eyes.

Call it what you like.

Avoid buying stuff in packs......buy by weight and volume, save on plastics, packing and stuffing.

There are places where you can take your own containers and they will refill for you for less, better for the environment also...... ;)

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Pack sizes of food are shrinking before our eyes.

Call it what you like.

Yes, this has been very noticeable. Some points are maintained, e.g., £1 packs but portion size is falling.

I see lots of inflation in food prices, beer, energy, travel, petrol now stuck around £1.30/l.

If you have a mortgage low interest rates help maintain some disposable income; however, this is a false sense of security - at some point rates will go up. Which is why of course all of these 'help to buy' schemes are so evil.

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  • 242 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% +
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