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Uk Inflation Falls To 0.5% In December

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http://www.bbc.co.uk/news/business-30794673

UK consumer price inflation fell sharply to 0.5% in December, down from 1% in November, official figures show

This breaking news story is being updated and more details will be published shortly. Please refresh the page for the fullest version.

Time to increase interest rates to combat falling inflation....

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Serious question.

If we have really low inflation why not just print loads of money and distribute it to all UK citizens?

£500 a head would do nicely.

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The largest downward contributions to the change in the CPI 12-month rate between November and December 2014 came from:

  • housing & household services: prices, overall, remained unchanged between November and December this year, compared with a rise of 2.3% between the same two months a year ago. The majority of the downward contribution came from price movements for gas and electricity, where there were price rises from a number of the main suppliers a year ago but no price rises this year. There was also a small downward contribution from price movements for kerosene.

  • transport: prices, overall, fell by 0.2% between November and December 2014, compared with a rise of 1.0% between the same two months a year ago. Almost all of the downward contribution came from the falling price of petrol and diesel. The average price per litre has fallen to 116.8p for petrol and 122.9p for diesel. This is 24.8p per litre below the peak average prices of 141.6p and 147.7p per litre for petrol and diesel respectively in April 2012.

The only upward contribution of note to the change in the CPI 12-month rate between November and December 2014 came from:

  • alcohol & tobacco: prices, overall, fell by 0.2% between November and December 2014, compared with a larger fall of 1.2% between the same two months a year ago. Alcohol prices always fall in the lead up to Christmas. This year, the majority of the fall came in November which is earlier than usual. The ensuing December fall was smaller than usual.

http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/december-2014/stb---consumer-price-indices---november-2014.html

And so the core rate, ex energy and other stuff, rose from 1.2% to 1.3% yoy.

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And yet both conventional and index-linked gilts continue to rise day after day.

Are those in the know expecting (lots?) more QE?

I am surprised to read ILs are rising.

But Fixed Gilts are soaring because market sees no QE and does see DIS/DEflation. Govt Bonds do not rise with QE.

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Saw a bit of the item on this on BBC News this morning.

One good thing - the presenter was parroting the "deflation is a bad thing because people might put off purchases" line and the guest pooh-poohed that as (if I remember right) "a theoretical risk", twice.

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Saw a bit of the item on this on BBC News this morning.

One good thing - the presenter was parroting the "deflation is a bad thing because people might put off purchases" line and the guest pooh-poohed that as (if I remember right) "a theoretical risk", twice.

Oh dear, someone at the beeb slipped up there and invited someone outside the "acceptable guest" pool of the usual handpicked shills. Heads will roll no doubt, right after the huge golden hand shake payoffs at the public expense of course. :)

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EVERY TIME a BBC person says defaltion bad I immediately tweet then and the show and ask for the evidence and did they not fill up their tank bcos oil fell 50%?

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EVERY TIME a BBC person says defaltion bad I immediately tweet then and the show and ask for the evidence and did they not fill up their tank bcos oil fell 50%?

Youd have to be a muppet if you did (fill up today when its cheaper tomorrow)

Its exactly what the oil majors are doing. Cancelling investment by the $billions due to lower prices tomorrow.

Edited by R K

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Saw a bit of the item on this on BBC News this morning.

One good thing - the presenter was parroting the "deflation is a bad thing because people might put off purchases" line and the guest pooh-poohed that as (if I remember right) "a theoretical risk", twice.

Listened to 5live....the muppets on there were talking in the same vein....both their guests said it was not a bad thing....staff at the BBC must have some kind of vested interest,one only wonders.

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Serious question.

If we have really low inflation why not just print loads of money and distribute it to all UK citizens?

£500 a head would do nicely.

How about HPC, and liquidation of your parents-in-law's BTL/investment property, and then renewed velocity of lending after the HPC, bringing about real company productive activity, to the younger buyers, in a position to do better after the position of the malinvestors is taken down.

Not more money printed for the young to pay to their landlords in rents, and them to continually go on about forever HPI.

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Youd have to be a muppet if you did (fill up today when its cheaper tomorrow)

Its exactly what the oil majors are doing. Cancelling investment by the $billions due to lower prices tomorrow.

Not if your tank is empty, I think is the point.

Edited by shindigger

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Not if your tank is empty, I think is the point.

Exactly if you need something you'll buy it.

If you need a new laptop you'll buy one. You don't think if I wait 6 months I can purchase one for less that will do more. Utter nonsense that all spending will stop with prices falling. And when it gets to 6 months time you think the same again....

The problem with deflation is that debt to income ratios explode and debt becomes unserviceable. More and more income gets sucked into servicing the debt which stops purchases. The idea that consumers chose to stop spending today because it will be cheaper tomorrow is just b0110cks.

Edited by interestrateripoff

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I want to start a company pritnting brochures.

What I really want is very high cost for my business premises, cripplingly expensive printer and expensive paper and ink to go with that.

You can see how the Central bank inflation game takeover has destroyed business. I suppose I am supposed to think that I borrow a really nice large amount of money that is unpayable and hope that inflation wipes it out - that is a shit way to run the economy.

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I want to start a company pritnting brochures.

What I really want is very high cost for my business premises, cripplingly expensive printer and expensive paper and ink to go with that.

You can see how the Central bank inflation game takeover has destroyed business. I suppose I am supposed to think that I borrow a really nice large amount of money that is unpayable and hope that inflation wipes it out - that is a shit way to run the economy.

Keep to dry powder. Wait for deflation to do its work on overleveraged malinvested positions of the forever boom and forever HPIers, and buy at distressed price. The process was stopped in 2009 via rates cuts to 0.5% and QE. Only a few got found out, and it was a joy as they did (below). My brother has had talks about buying a pukka little company where owner retiring.. (lovely house paid off many years ago, life of luxury, but in fairness the owner worked hard with a great client list).. but not many people around with any money to buy it, and actively run it, like a younger owner with incentive would. And loads of similar companies with heavy debt. Wants it at lower price.

My old printer pal on the scanners, later retouching, is not earning much more than in 1999. His small house bought for around £65K in 1997-98, may be worth £240K today, but HPI prevented him trading up. Some periods of unemployment last few years, now at some debt-laden fashion company. At least mortgage free, and still wants to trade up to a semi, wanting hpc, for he has savings.

APRIL 2006

House prices are rising fast and both Paul and I think investing in a buy-to-let property is a good idea. Paul wants to retire at 60 and believes we need to make the next ten years really work for us in terms of earning money. He's always worked hard.

Until 2004, he had a senior position in a printing company, earning £65,000 a year. Then two years ago, in 2004, he set up a successful business supplying pre-paid phone cards. Now, that company is running itself and, to add to our savings, he wants to take on a new challenge.

We remortgage Richmond House to raise the £60,000 deposit and secure a low-rate mortgage on a £110,000 two-bedroom terrace. We're in it for the long term, planning to sell in ten years when the price will have gone up even more. There's a tenant already in it, and the rent easily covers the mortgage.

Meanwhile, to add to his business, Paul is on the lookout for a new company to buy.

MAY 2006

Exciting news. Paul and a business partner have found a printing company to buy. It's on the market for £700,000. It sounds a lot of money, but the turnover is £1.3million a year and it already employs 22 staff.

Together with some other investors, some savings and a loan guaranteed on our family home, he and his partner raise a £350,000 deposit to put down. The rest of the £350,000 business loan will be paid off monthly from the company profits.

I'm not worried, as I trust Paul's judgment completely - after all, he's been a high earner paying 40 per cent tax since he was 27, and he's never let us down.

Paul buys a new BMW Z4 plus a small Rover for our younger son Adam, who's joining him in the new business. That weekend we take both the boys out to a restaurant for a celebratory dinner.

in full http://www.dailymail.co.uk/femail/article-1089408/Diary-repossession-One-couple-describes-agony-losing-luxury-400-000-home-credit-crunch.html

Of course I have a fix on Richmond House.. waiting to see what new owner will want for it, should it ever come back to market.

James Montier remains skeptical. The value investor and member of the asset allocation team at Boston-based asset manager GMO: «To think that central banks will always be there to bail out equity investors is incredibly dangerous» , says the outspoken Brit. His source of wisdom in current markets comes from none other than Winnie the Pooh: «Never underestimate the value of doing nothing.»

Edited by Venger

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The classic view is that deflation is bad because people stop spending. This view stems from the 1920s and is probably wrong. We are used to deflation these days, consumer electronics has been deflating for decades. The longer you wait to buy the next gadget/PC/etc the better/cheaper it will be.

The other misapprehension is that inflation erodes debt so deflation is bad. True, WAGE inflation erodes debt, but we don't have wage inflation and haven't had that for about 8 years. We have only had PRICE inflation - which does nothing for the endebted.

So this "deflation" (actually, lower inflation, the number isn't negative!) should be a boost to the economy. People will have more disposable income and will spend it.

And note house price inflation is still running at 10%. That's still bubble territory.

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