winkie Posted January 14, 2014 Share Posted January 14, 2014 Inflation has three main components; food, energy etc consumables which you need to buy, tech things such as TVs, cloths etc which you buy occasionally and these pretty much always get cheaper in real and nominal terms over time and the cost of a roof over your head. Mixing the first two distorts inflation for the poor who need to spend a bigger % on food etc so inflation for them is higher. The rich spend more on tech toys so inflation for them is less. The cost of a roof increased massively compared to wages under recent governments so they excluded it from the inflation figures. The figure of 2% is therefore meaning less if all you buy is food and energy which have gone up by 5 or 7%. Inflation is always higher for those will little income where most of their income is used to pay for the essentials to live, the things that are rising the fastest......inflation is very low for those that earn more, have no mortgage to pay or other debt, they may have another home/s they rent out and some may also get a good RPI index linked pension that supplements all their other incomes and few financial commitments.....a very small proportion of their income is spent on food and energy..... Income, expenditure and wealth taxes as a proportion of income is much higher for the working poor....and much less for the working rich, low taxes on wealth benefit them the most. Quote Link to comment Share on other sites More sharing options...
Doesn't Commute Anymore Posted January 14, 2014 Share Posted January 14, 2014 All looking a bit Japanese at the moment, even more so in Europe. Low IRs until 2030? Quote Link to comment Share on other sites More sharing options...
rantnrave Posted January 14, 2014 Share Posted January 14, 2014 All looking a bit Japanese at the moment Apart from the UK not having a house price crash you mean? Quote Link to comment Share on other sites More sharing options...
Doesn't Commute Anymore Posted January 14, 2014 Share Posted January 14, 2014 Apart from the UK not having a house price crash you mean? Well, yes. Maybe over the next 20 years it will slowly deflate like Japan, once the HTB final push-to-breaking-point ends But then again, maybe not if the number of houses per unit population keeps falling. Quote Link to comment Share on other sites More sharing options...
zugzwang Posted January 14, 2014 Share Posted January 14, 2014 Well, yes. Maybe over the next 20 years it will slowly deflate like Japan, once the HTB final push-to-breaking-point ends But then again, maybe not if the number of houses per unit population keeps falling. It took the Japanese 20 years to run their aggregate debts up from 400% to 500% of GDP. The UK accomplished the same feat in as many months. That's the difference between a house price crash and a house price swoon. Quote Link to comment Share on other sites More sharing options...
long time lurking Posted January 14, 2014 Share Posted January 14, 2014 RPI up from 2.6% to 2.7% though. How's that work? Heavy discounting during the run up to Christmas ? Quote Link to comment Share on other sites More sharing options...
Venger Posted January 14, 2014 Share Posted January 14, 2014 Well, yes. Maybe over the next 20 years it will slowly deflate like Japan, once the HTB final push-to-breaking-point ends But then again, maybe not if the number of houses per unit population keeps falling. We've not got the same 'compliance / obedience' of Japanese younger people in the UK. I'd like to think frustrations are running high, having been simmering for so many years. Even if we had a doubling in population, overnight, I can't see how that would do much to push up or support house prices. It's about what people are willing and able to pay, which depends on incomes. It would help if there was just a little tweak in the balance of things. Too many people inheriting houses, holding out big price and either getting it, or renting them out. Pathetic level of inventory on the market. And the majority of sellers prepared and positioned to hold out for their desired very high asking price. Supply Artificially restricted by policy, including base rates/saving rates so low, and a conviction in people property will always been supported, given all the hundreds of billions in QE. A report of today suggesting 10 people willing/enabled to compete in buying process for every house, in this supply restricted market. The best place to look for a market to go straight down is in a rich/advanced country. Okay, so it's a balance. All societies are like that; the damping hand of the old and the firebrand youth together. It works out through generations, or through the set-up of your institutions, and their change and even replacement. Quote Link to comment Share on other sites More sharing options...
cybernoid Posted January 14, 2014 Share Posted January 14, 2014 So all the prices are still higher. We're saved. Quote Link to comment Share on other sites More sharing options...
Spot Posted January 14, 2014 Share Posted January 14, 2014 Spot - mini eggs, or cream eggs, the World must know. As you asked...... Mini. Quote Link to comment Share on other sites More sharing options...
Quicken Posted January 14, 2014 Share Posted January 14, 2014 One of those BoE prediction fan charts consistently hitting exactly 2% in the medium term had to be right eventually, I suppose. Give those chaps a bonus for a job well done. Quote Link to comment Share on other sites More sharing options...
zugzwang Posted January 14, 2014 Share Posted January 14, 2014 One of those BoE prediction fan charts consistently hitting exactly 2% in the medium term had to be right eventually, I suppose. Give those chaps a bonus for a job well done. No need. They're bankers. They get a bonus whether they're right or wrong. Quote Link to comment Share on other sites More sharing options...
Steppenpig Posted January 15, 2014 Share Posted January 15, 2014 The bit I wonder about is the "quality adjustment". Last year 500gb hard drives cost 50 euro, but now you can get a 1tb drive for that price, so they calculate it as inflation of minus 50%. But do they take into account, that all the extra crap actually means you need twice as much storage space as before so there's barely any benefit, plus, your old drive is now obscelescent? The increasing speed of obscelescance is a cost as far as I'm concerned, not a benefit. Quote Link to comment Share on other sites More sharing options...
InlikeFlynn Posted January 17, 2014 Share Posted January 17, 2014 Sorry to come to this thread late, but I think it's worthy of resurrection. The news that CPI has at last hit target seems to me to be a really major development, the two immediate effects are that. 1. Interest rate rises are off the table 2. It gives the government limited more scope for easing measures (QE etc.) I don't think the government will authorise more QE (the news headlines and economic data are both broadly positive at the moment so they won't want to rock the boat) but if they have any pet inflationary stimuli that they have been itching to try then they might think now is the time. The energy price rises will continue to feed through into next months figures: there has been a small rise in fuel prices here which, if replicated nationally, may also push next months figure up. If that's the case then this situation may not last for long. From Carney's recent pronouncements it sounds as though he favours tightening mortgage lending criteria rather than increasing interest rates, to try and curb HPI in London and the South East without having to depress the wider economy. In conclusion, I'm not sure we are goingt to see a rise in interest rates triggering a fall in house prices in the near future. I suspect that this year we may well have the usual situation where rises in London and the SE mask smaller rises/stagnation in the provinces..... so the same old boring conundrum...... to buy now at an inflated price but at excellent long term fixed rate... or to wait for interest rate rises and buy at a better price but higher interest rate. Quote Link to comment Share on other sites More sharing options...
crashmonitor Posted January 17, 2014 Share Posted January 17, 2014 (edited) I noticed on HUKD earlier that JD is now 25-27 for 70cl bottle! I'm sure it was once 17/18 ish. 2% inflation? my ass! Agreed I could not find it lower than £19.99 and that involved postage on amazon. Time to change your basket and punish JD, it's what consumers do best.......... http://groceries.asda.com/asda-webstore/landing/home.shtml#!product/81330715 Edited January 17, 2014 by crashmonitor Quote Link to comment Share on other sites More sharing options...
zugzwang Posted January 17, 2014 Share Posted January 17, 2014 I noticed on HUKD earlier that JD is now 25-27 for 70cl bottle! I'm sure it was once 17/18 ish. 2% inflation? my ass! JD is just about unaffordable at that price, agreed, but you need to set that against the January sales being brought forward into December i.e. 70% discounts off women's shoes and coats etc. Quote Link to comment Share on other sites More sharing options...
cybernoid Posted January 17, 2014 Share Posted January 17, 2014 So by some measure, not reflecting a real persons spending patterns, prices are not hiking up quite so aggressively as they were. They haven't fallen, everything is still expensive. Wages are not rising. People are still concerned about their jobs and just as stretched as before. Borrowing costs are still at emergency lows. Buying a house with a mortgage without significant cash reserves is very dangerous with a strong risk the cost of borrowing over the mortgage term will increase by several times. Who has faith that their income is going to rise significantly in the near future? Who really feels we are on the way to a sustainable improvement? Talk of the end is rather overblown! Expect more can kicking? What a mess. When the can kicking can last a term in power you have to wonder if anyone will ever do the right thing. Quote Link to comment Share on other sites More sharing options...
zugzwang Posted January 17, 2014 Share Posted January 17, 2014 Sorry to come to this thread late, but I think it's worthy of resurrection. The news that CPI has at last hit target seems to me to be a really major development, the two immediate effects are that. 1. Interest rate rises are off the table 2. It gives the government limited more scope for easing measures (QE etc.) I don't think the government will authorise more QE (the news headlines and economic data are both broadly positive at the moment so they won't want to rock the boat) but if they have any pet inflationary stimuli that they have been itching to try then they might think now is the time. The energy price rises will continue to feed through into next months figures: there has been a small rise in fuel prices here which, if replicated nationally, may also push next months figure up. If that's the case then this situation may not last for long. From Carney's recent pronouncements it sounds as though he favours tightening mortgage lending criteria rather than increasing interest rates, to try and curb HPI in London and the South East without having to depress the wider economy. In conclusion, I'm not sure we are goingt to see a rise in interest rates triggering a fall in house prices in the near future. I suspect that this year we may well have the usual situation where rises in London and the SE mask smaller rises/stagnation in the provinces..... so the same old boring conundrum...... to buy now at an inflated price but at excellent long term fixed rate... or to wait for interest rate rises and buy at a better price but higher interest rate. 1. Interest rate rises were never on the table. 2. QE doesn't work. It inflates financial assets but depresses everything else. Rents go up but no wealth trickles down. Quote Link to comment Share on other sites More sharing options...
dizzib Posted January 17, 2014 Share Posted January 17, 2014 Some anecdotal evidence: 1. A pack of potatoes at my corner shop have just gone up 15% in price for 20% smaller packs. 2. Tesco 2kg red lentils went up by 50% in price a few weeks back. 3. This morning a received a letter telling my my rent is incresing by 17%. Quote Link to comment Share on other sites More sharing options...
honkydonkey Posted January 17, 2014 Share Posted January 17, 2014 Agreed I could not find it lower than £19.99 and that involved postage on amazon. Time to change your basket and punish JD, it's what consumers do best.......... http://groceries.asda.com/asda-webstore/landing/home.shtml#!product/81330715 Buy the one from Lidl, it's pretty good and 12 quid or so. Quote Link to comment Share on other sites More sharing options...
The Knimbies who say No Posted January 17, 2014 Share Posted January 17, 2014 I found JD for £15 at the Coop local supermarket before Xmas. It was a present for someone so I am unused to the normal sort of prices- Tesco had it for £25 and I though sod that and tried the local coop instead. Quote Link to comment Share on other sites More sharing options...
renting til I die Posted January 17, 2014 Share Posted January 17, 2014 so the same old boring conundrum...... to buy now at an inflated price but at excellent long term fixed rate... or to wait for interest rate rises and buy at a better price but higher interest rate. Of course this doesn't matter if you are paying in full. Its more a case of working out if you are better off renting in the short to mid term. Agree with all your other points. Interest rises are unlikely to rise (at least not high enough to cause a HPC) unless there was some sort of black swan event which would force the issue. Of course this event could well wipe out any cash savings we have so could be of little help! Quote Link to comment Share on other sites More sharing options...
Venger Posted January 17, 2014 Share Posted January 17, 2014 3. This morning a received a letter telling my my rent is incresing by 17%. Can't you call their bluff? Rents are falling, or should be. Yet I notice one council is being 'forced' to put them up at the lower end of the market, in Stevenage. http://www.theadvertisergroup.co.uk/Daily-News/Stevenage/Council-rents-set-to-rise-by-hundreds-of-pounds-a-year-in-Stevenage-20140115120000.htm Stevenage also around the top for evictions/possession instructions, with many tenants in arrears. http://www.thecomet.net/news/stevenage_among_worst_for_eviction_rates_1_3163177 The rent is too damn high. Quote Link to comment Share on other sites More sharing options...
zugzwang Posted January 17, 2014 Share Posted January 17, 2014 Of course this doesn't matter if you are paying in full. Its more a case of working out if you are better off renting in the short to mid term. Agree with all your other points. Interest rises are unlikely to rise (at least not high enough to cause a HPC) unless there was some sort of black swan event which would force the issue. Of course this event could well wipe out any cash savings we have so could be of little help! But a disorderly default/hyperinflation isn't a black swan event, it's the inevitable consequence of the economic path the UK has adopted. At some point in the near future the market will lose faith in the UK's ability to service its mountainous debts and a co-ordinated sell-off in sterling, equities, bonds will ensue. The BoE will be forced to raise rates to defend the pound and the housing market will collapse along with everything else - if the fiscal shock hasn't done the job already. Quote Link to comment Share on other sites More sharing options...
gf3 Posted January 17, 2014 Share Posted January 17, 2014 But a disorderly default/hyperinflation isn't a black swan event, it's the inevitable consequence of the economic path the UK has adopted. At some point in the near future the market will lose faith in the UK's ability to service its mountainous debts and a co-ordinated sell-off in sterling, equities, bonds will ensue. The BoE will be forced to raise rates to defend the pound and the housing market will collapse along with everything else - if the fiscal shock hasn't done the job already. Every thing will fall but fall against what? If everything falls everything stays the same. Quote Link to comment Share on other sites More sharing options...
winkie Posted January 17, 2014 Share Posted January 17, 2014 Every thing will fall but fall against what? If everything falls everything stays the same. If everything falls and wages stay the same we as consumers become better off.......the highly indebted become worse off, they become worse off still when confidence drops and interest rates rise. Quote Link to comment Share on other sites More sharing options...
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