It’s much too early to feel triumphalist about the defeat of inflation

[hughjass]

Venezuela is a very interesting place, cant believe the West (US UK EU) havent gone in with a deal to sort that place out havent they got the greatest oil reserves in the world? 

The Saudis are putting the West at risk with their siding with Putin.

 

[Dreamcasting]

13 minutes ago, hughjass said:

So Dreamcasting , therell be tumbleweed blowing down Downing Street , folks huddled round braziers similar to Berlin 1945?

I don't know. All I can envisage is a massively reduced standard of living for the majority.

To answer the other question in an earlier post - the US aren't doing great, but are in a much better position relatively speaking. Yes, there's a lot of corruption over in the states and their inflation figures are a complete lie. The country is a political cesspit, but they are a global power and are also quite self sustainable. 

[Aidan Ap Word]

5 hours ago, Stewy said:

Wholesale gas/elec markets have cratered again today. November deliveries are down over 6%. This will be baking in deflation in the not too distant future. 

Deflation ... because of this?

I would consider your point having some merit if there was a meaningful correlation between inflation and gas prices:

But there isn't.

And you claim causation, a step even further.

You accused a number of folks in another thread just today of grabbing at straws ... when you grab haplessly at the stumps of grass on the cliff face that you claim will be (or is) a plateau.

I would include the facts around oil price in a 25yr chart ... but then you wouldn't read it anyway.

[Flat Bear]

23 minutes ago, Flat Bear said:

I do know what you are saying and yes there are changes all the time. I do not know for sure if I am right in this but I would suggest that we will not see QT being able to start in any meaningful amount as the BOE have put themselves in an impossible position by overdoing the QE. QT could see the economy collapse as nobody wants the UK debt propt up by this newly created source of liquidity. I do not know what the answer could be for the BOE as they are forced to put interest rates up so high. A base rate of 10% could well be much to low to satisfy the market and protect the pound. Our economy is not as robust as many others and a base rate closer to 20% than 10% could well collapse the fragile economy. Money used to be the most expensive comodity of all and it again may become valuable again. We can not be too arrogant as a nation to believe it will be different for us as our economy is special as the markets do not have sentiment.

A major external factor, the biggest external factor, is China. So I would agree the collapse in China will have a really big impact on our inflation going forward. I would suggest that the Ukraine conflict has very little overall affect on UK inflation. The Ukraine conflict as well as OPEC decisions have put prices of certain comodities up generally short term but is used as a convienient excuse for inflation by the BOE.

The end result of what I am trying to say is that the BOE will be forced to raise the base rate much higher than they or most people want. They will have no say and no matter how many meetings or how vigilant they want to be they are powerless. Retoric only goes so far. As they fail to raise, as they did at the last meeting, they will be punished and it will get worse.

As a side note this has already seen house price inflation stall and could well see major falls in prices as a result. This will not be the main concern of the BOE but will be to many especially on this site.

Unfortunately you can not have a house price crash without the accompanying pain.

[Dreamcasting]

1 minute ago, hughjass said:

Venezuela is a very interesting place, cant believe the West (US UK EU) havent gone in with a deal to sort that place out havent they got the greatest oil reserves in the world? 

The Saudis are putting the West at risk with their siding with Putin.

 

The US is putting the rest of the entire world at risk, but when bad times call, you do what you gotta do to protect yourself. The US has already positioned itself. The UK and EU have been strategically weakened.

[A.steve]

In the 1920s, a 'recession' sounded bad to people - so it was re-branded a 'depression'.  After the great depression, people thought a 'depression' sounded bad - and preferred the word 'recession' again.

I think that co-ordinated central bank action between ~1992 and ~2020 did kill 'inflation' - if we interpret the word as meaning the traditional way in which prices rose in past decades.  I think we need to re-brand 'inflation' to better capture the idea today.  I propose we refer to anything relating to the devaluation of currency as 'dilation' - in order to make clear we're talking about "inflation 2.0".

[scottbeard]

45 minutes ago, Flat Bear said:

I do know what you are saying and yes there are changes all the time. I do not know for sure if I am right in this but I would suggest that we will not see QT being able to start in any meaningful amount as the BOE have put themselves in an impossible position by overdoing the QE. QT could see the economy collapse as nobody wants the UK debt propt up by this newly created source of liquidity. I do not know what the answer could be for the BOE as they are forced to put interest rates up so high. A base rate of 10% could well be much to low to satisfy the market and protect the pound. Our economy is not as robust as many others and a base rate closer to 20% than 10% could well collapse the fragile economy. Money used to be the most expensive comodity of all and it again may become valuable again. We can not be too arrogant as a nation to believe it will be different for us as our economy is special as the markets do not have sentiment.

A major external factor, the biggest external factor, is China. So I would agree the collapse in China will have a really big impact on our inflation going forward. I would suggest that the Ukraine conflict has very little overall affect on UK inflation. The Ukraine conflict as well as OPEC decisions have put prices of certain comodities up generally short term but is used as a convienient excuse for inflation by the BOE.

I do agree at least the the effect of Ukraine war has been a bit overplayed 

really I just wanted to make the point that I’m not taking the BoE at face value, but rather coming to some similar conclusions from what I see.  The main way in which I differ from the BoE is I cannot realistically see falling interest rates or 2% CPI any time in the medium term 

[scottbeard]

17 minutes ago, Flat Bear said:

The end result of what I am trying to say is that the BOE will be forced to raise the base rate much higher than they or most people want. They will have no say and no matter how many meetings or how vigilant they want to be they are powerless. Retoric only goes so far. As they fail to raise, as they did at the last meeting, they will be punished and it will get worse.

As a side note this has already seen house price inflation stall and could well see major falls in prices as a result. This will not be the main concern of the BOE but will be to many especially on this site.

Unfortunately you can not have a house price crash without the accompanying pain.

Do you not think though that the very mountain of debt which has amongst other things blown up house prices is exactly WHY rates  DONT need to go so high?

A base rate of 8% today probably achieves what 12% or even 15% would have been needed to do in the 1970s

[Fishfinger]

50 minutes ago, Dreamcasting said:

I wish that was the answer, but sadly it isn't. Gold is heavily manipulated for one. You might do better outside the UK with your gold, well outside the west at least. Staying in the UK with gold won't help one bit as there won't be an economy to participate in.

I'm well up even in a manipulated market.

The BRICS are leading the dedollarisation which means only one thing - there's a gold standard on its way which means all countries will eventually (in the BRICS or not) have to peg their own currencies as well.

In a malfunctioning economy Gold will always be king. Checkout Germany during their 1920's hyperinflation and see what gold could buy there.

[Dreamcasting]

4 minutes ago, Fishfinger said:

I'm well up even in a manipulated market.

The BRICS are leading the dedollarisation which means only one thing - there's a gold standard on its way which means all countries will eventually (in the BRICS or not) have to peg their own currencies as well.

In a malfunctioning economy Gold will always be king. Checkout Germany during their 1920's hyperinflation and see what gold could buy there.

Yes, I've heard all that before and talked about it before so won't repeat it again.

All I will say is: good luck.

[Fishfinger]

7 minutes ago, Dreamcasting said:

Yes, I've heard all that before and talked about it before so won't repeat it again.

All I will say is: good luck.

Thanks - luck has not been factored into my decisions in any way at all but I won't turn it down either😁

[Flat Bear]

54 minutes ago, scottbeard said:

I do agree at least the the effect of Ukraine war has been a bit overplayed 

really I just wanted to make the point that I’m not taking the BoE at face value, but rather coming to some similar conclusions from what I see.  The main way in which I differ from the BoE is I cannot realistically see falling interest rates or 2% CPI any time in the medium term 

One of the reasons I post on this forum is from feedback from posters like yourself who are not afraid to say what they think and say it as it is. 

The truth is I do not know. What I do know is that Bailey has been wrong on so many occasions. I was convinced he was wrong and when it came to pass he then had the gall to say "no-one could have seen that coming". Well many of us did and it was obvious.

50 minutes ago, scottbeard said:

Do you not think though that the very mountain of debt which has amongst other things blown up house prices is exactly WHY rates  DONT need to go so high?

A base rate of 8% today probably achieves what 12% or even 15% would have been needed to do in the 1970s

Again I don't know for sure but it seems to me the bigger the debt the bigger the problem and the more difficult it is to keep the situation contained. Interest rates need to be much higher for much longer than if the debt was smaller. Governments have a lot of power and can change the rules to suite their agenda but as many nations throughout history have found you have to stick to basic economic principles or the wheels can come off the economy very quickly. I think we are at such a pivital situation. The BOE have to do what they have to do, they have no choice.

Don't know which of us will be right with my inflation rate prediction of "well over" 10% and the base rate north of 8% next year, or, IIRC, your prediction of inflation and base rates around the 5% mark. There is a possibility you are right but I do not give any credance at all for @Stewy prediction of deflation with negative interest rates.

We will find out in due course.

[Stewy]

8 hours ago, Aidan Ap Word said:

Deflation ... because of this?

I would consider your point having some merit if there was a meaningful correlation between inflation and gas prices:

But there isn't.

And you claim causation, a step even further.

You accused a number of folks in another thread just today of grabbing at straws ... when you grab haplessly at the stumps of grass on the cliff face that you claim will be (or is) a plateau.

I would include the facts around oil price in a 25yr chart ... but then you wouldn't read it anyway.

You can definitely see the spike lining up 2020 onwards - but it's tricky as one is an absolute price level and the other is the derivative rate of change. That's a bit disingenuous. 

Back in the early part of the chart we also had lots more coal units which were influential on elec prices...now practically none. 

In other news, food inflation turned negative in September. ✓✓✓

https://www.bbc.co.uk/news/business-66981036

 

[dpg50000]

2 hours ago, Stewy said:

 

In other news, food inflation turned negative in September. ✓✓✓

https://www.bbc.co.uk/news/business-66981036

 

On an annual basis, it's still up 9.9%. Some deflation.

[Stewy]

30 minutes ago, dpg50000 said:

On an annual basis, it's still up 9.9%. Some deflation.

Those are just the legacy increases. In the here and now, food is in deflation. 

[Gigantic Purple Slug]

On 02/10/2023 at 15:08, Dreamcasting said:

The problem is those rate rises are - so far - not good enough. UK base rates need to be at least 1% higher than the US. I reckon unless the BoE start to get back on track with those rate increases soon, we'll be looking at USD parity or below inside a few months. Same goes for EUR, another basket case currency which had previously already tested below parity with the USD about a year ago.

Inflation is going to get real ugly soon in both the UK and EU.

 

 

On 02/10/2023 at 15:13, Gigantic Purple Slug said:

I don't see UK rates going 1% higher than US any time soon.

Therefore in a few months by your prediction we should see parity or less for USD vs. GBP.

I'm saying that won't happen even if we are 1% behind. Let's see how it pans out by Xmas.

OK so it is now about Xmas. We are 6c up on the dollar from the early October minimum and 2.5 months on from the prediction.

GB rates are not 1% above US rates and there is no sign of dollar GBP parity.

[scottbeard]

2 minutes ago, Gigantic Purple Slug said:

OK so it is now about Xmas. We are 6c up on the dollar from the early October minimum and 2.5 months on from the prediction.

GB rates are not 1% above US rates and there is no sign of dollar GBP parity.

I am glad you are on board too with calling out all the nonsense outlandish predictions we get on HPC.

Day in day out people rant on about hyperinflation, collapse of the pound to $1, Britain being a third world country,  crashes worse than 2008, doom gloom and more doom.

Yet actually what happens is inevitably something much more normal - things go up a bit, or down a bit etc.

People need reminding that when they read an outlandish prediction the chances are well north of 99% that it won't happen based upon past evidence.

[hotblack42]

4 hours ago, scottbeard said:

actually what happens is inevitably something much more normal

I favour mundane.

Most people experience banality for most of their life. Despite the mathematical certainty of this, almost everyone hopes that they will be in the tiny minority with interesting lives. It’s one of the tragedies of humanity.

Mundanity is highly underrated. No stress 😎 

[Bob8]

On 02/10/2023 at 15:29, Gigantic Purple Slug said:

Don't think the UK government have ever been that interested in fighting inflation.

They have kept rates low, despite it being high. They have been forced to raise them when the Fed raises because of the dangers that an increasing spread between US and UK rates present.

That's why last month they didn't raise - it was an opportunity for them to hold off without widening the spread and they took it.

Then of course next time when they are forced to by the Fed they will claim the political capital.

I do think though they are tiptoe-ing through it at the moment in a fairly clever way. Despite all the rises, we are still not negative on GDP, although people are complaining about mortgage rates there is not a massive crisis. I think this has something to do with the way mortgages are fixed nowadays. Because not everyone comes off the fix all at once, there is less opportunity for political momentum to build by angry mortgage holders.

I took that as s sign that the economic outlook was far more grim than they were willing to concede. This meant they thought it would come down anyway and measures to limit inflation would have a massive impact on people/voters. I am in Denmark, where inflation is about 0% without extreme interest rates, so it might not have been that unreasonable (though clearly wrong).

[winkie]

On 02/10/2023 at 15:45, Stewy said:

Wholesale gas/elec markets have cratered again today. November deliveries are down over 6%. This will be baking in deflation in the not too distant future. 

When global manufacturing is stagnant, building new homes on a downer, steel not so much of a demand, more renewable energy sources being used, people trying to cut down on energy costs, greater supply of oil not being used and the big oil suppliers still want money they reduce the cost hoping more will then turn the heating on or up and travel somewhere....often only a temporary measure but who knows.

Edited December 15, 2023 by winkie

[regprentice]

todays ft - Household Eergy debt increases 15% in one month to £3Bn... the highest its ever been. 

Energy inflation is still punishing for normal people. I got an email on tuesday telling me my gas and electricity costs were rising £200 a year next from month, then in todays paper i see they want the customers actually paying their bills to pay even more to cover those who dont pay.

Ofgem is now consulting on plans to allow suppliers to recover higher debt costs from all household bills, which would trigger an increase of about £16 on a typical household’s annual bill from April.

Tim Jarvis, Ofgem’s director-general for markets, said suppliers need to be able to “recover their reasonable costs”.

Edited December 15, 2023 by regprentice

[scottbeard]

12 hours ago, hotblack42 said:

Mundanity is highly underrated. No stress 😎 

Absolutely

I remember an interview with a man whose daughter had recently sadly been killed in an accident.  He said "I used to think living a normal life was easy.  Now I realise it's hard."

It has stuck with me for a long time.  If you have a normal life there is a lot to rejoice in that, because most varieties of non-normal are much worse.

[msi]

10 minutes ago, scottbeard said:

Absolutely

I remember an interview with a man whose daughter had recently sadly been killed in an accident.  He said "I used to think living a normal life was easy.  Now I realise it's hard."

It has stuck with me for a long time.  If you have a normal life there is a lot to rejoice in that, because most varieties of non-normal are much worse.

True.

[Bob8]

Yes, we spend most of our lives thinking things will be good when they are back to normal, yet very little of our lives in that state of "normal".