bpw Posted March 27, 2006 Share Posted March 27, 2006 (edited) Does anyone have a link to data that shows the true rate of inflation, i.e. accounting for consumer price increases and inflation of the money supply. We have all agreed that one option for the FED and BOE is to use ‘real’ inflation to deflate the house price bubble so I wonder if this is already happening to some degree. I’ve seen a January figure of 3.6% for the US and wonder what the statistic is for the UK. There was talk of the FED hiding the M3 stats as well so I am wondering if that has happened and if not whether It’s still planned. No news yet of the Iranian Oil Bourse so perhaps that was all fluff? Edited March 27, 2006 by bpw Quote Link to comment Share on other sites More sharing options...
Justice Posted March 27, 2006 Share Posted March 27, 2006 inflation is already well over the 2% the BoE keeps quoting and inflation will continue to devalue the GBP. Yes mp3 player are cheap but the true cost of living is going sky heigh You may soon earn £1m p.a but you will need £3.m to buy a new car Quote Link to comment Share on other sites More sharing options...
paranoidmick Posted March 27, 2006 Share Posted March 27, 2006 Does anyone have a link to data that shows the true rate of inflation, Any govt figure is b&*%"*ks. I am not normally driven to profanity, but what the hell is going on. My gas bill has shot up, I am paying 94.9 per litre for fuel for the car my council tax has risen by a stupid amount , etc Everything seems to havce risen massively, yet, according to the govt, inflation is around 2 %. I am sorry, but if there is one thing more blindingly obvious than the fact that HPC has started, it is that inflation is far higher than the Govt would like you to think. Interest rates must rise to counter this and the BOE must act to deal with the rising dollar and the effect that will otherwise have on the pounds ability to buy, gas, and fuel for the car. This country is in deep doo doo. Rates must rise, recession will increase job losses, chancellors tax income falls, my council tax bill will rise. I thought that Brown was about prudence, low unemployment, stability and no boom and bust. For prudence substitute incompetence, for low unemployment substitute incapacity benefits fiddle of the figures, for stability it should be massive increase in non productive public sectort employment, and we all know that the biggest bust since the great depression is about to replace the great smoke and mirrors boom Right, got that off my chest, i'm off to listen to some soothing music. :angry: Quote Link to comment Share on other sites More sharing options...
AvidFan Posted March 27, 2006 Share Posted March 27, 2006 I suppose my related question is: Can the "powers that be" control the housing bubble by pinching off money supply using false inflation figures? Think about it: If inflation is false and dictates your pay rise (because your employer has something to point to) but doesn't dictate what can happen to fuel or energy bills, council tax, etc, then the money supply for housing will run out of steam "by stealth", averting the bursting of the bubble that would almost certainly be caused by admitting inflation and raising interest rates. Quote Link to comment Share on other sites More sharing options...
OnlyMe Posted March 27, 2006 Share Posted March 27, 2006 Can the "powers that be" control the housing bubble by pinching off money supply using false inflation figures? The only thing that seems to be on their mind is expanding the money supply whilst everyone (except a few) are looking the other way. It will end very very badly and the consequences are getting worse all the time. Quote Link to comment Share on other sites More sharing options...
Without_a_Paddle Posted March 27, 2006 Share Posted March 27, 2006 It's slooooowly dawning on people here what is happening. I've been pushing this for some time now. Low rates up to the election. Maintained consumer spending More govt borrowing More public spending = Economy propped up Bit more money supply ahead of the election = more money sloshing around between voters ..and bingo! Nu Labour aim for a 4th term with G Brown as PM. The long term picture on the economy (esp the £) can get screwed (along with the electorate when taxes and rates suddenly go up after the election) There is no way they want a HPC ahead of the election. It's going to be more of a 'traditional' (and slow) house price correction with little or no nominal falls in prices. Prices will only be seen to go down when corrected with (true) inflation. Time to ask for a pay rise. Quote Link to comment Share on other sites More sharing options...
jp1 Posted March 27, 2006 Share Posted March 27, 2006 (edited) ...Low rates up to the election. the next election??? It's less than a year since last one, and look how many wheels have started to wobble on NuLabs wagon since then? Unless Flash Gordon plans to get a 'mandate' from the people if/when he's takes control. IMO he hasnt got the bottle to go to the country Imagine the sulk that would follow him replacing TB, then getting kicked out of no 10 a couple of moths after I think your post describes Flash's plan in the run up to the last election! Edited March 27, 2006 by jp1 Quote Link to comment Share on other sites More sharing options...
Warwickshire Lad Posted March 27, 2006 Share Posted March 27, 2006 We have all agreed that one option for the FED and BOE is to use ‘real’ inflation to deflate the house price bubble so I wonder if this is already happening to some degree. Be very careful about what type of inflation you're talking about. The inflation that would bring about a HPC in all but name is only achievable through a period of high WAGE inflation. The inflation we're talking about in taxes and petrol are actually draining our salaries more than ever before, without wage rises to compensate. Should higher wage inflation rear it's head, the BOE have said they will raise Interest Rates... Quote Link to comment Share on other sites More sharing options...
Without_a_Paddle Posted March 27, 2006 Share Posted March 27, 2006 Be very careful about what type of inflation you're talking about. The inflation that would bring about a HPC in all but name is only achievable through a period of high WAGE inflation. The inflation we're talking about in taxes and petrol are actually draining our salaries more than ever before, without wage rises to compensate. Should higher wage inflation rear it's head, the BOE have said they will raise Interest Rates... Wages are currently rising at nearly 4% yoy. I thought the BOE set rates to meet the Consumer Price Index target set by the Treasury? Why will they raise rates in (direct) response to wage inflation? They target CPI not wages. I must have missed that bit in the rules... Quote Link to comment Share on other sites More sharing options...
Unexpected Posted March 27, 2006 Share Posted March 27, 2006 It's slooooowly dawning on people here what is happening. I've been pushing this for some time now. Low rates up to the election. Maintained consumer spending More govt borrowing More public spending = Economy propped up Bit more money supply ahead of the election = more money sloshing around between voters ..and bingo! Nu Labour aim for a 4th term with G Brown as PM. The long term picture on the economy (esp the £) can get screwed (along with the electorate when taxes and rates suddenly go up after the election) There is no way they want a HPC ahead of the election. It's going to be more of a 'traditional' (and slow) house price correction with little or no nominal falls in prices. Prices will only be seen to go down when corrected with (true) inflation. Time to ask for a pay rise. Seems to me that you might well be right. Time to buy more gold I think. Quote Link to comment Share on other sites More sharing options...
brainclamp Posted March 28, 2006 Share Posted March 28, 2006 Its clear that inflation for most working people is beyond the 2% CPI, 2.5% RPI. If you say food, retail inflation etc.. is rising at 2.5%, then just the utility bill increases, of 13% inflation as an average, hit hard as a proportion of wages - however this is dependant on income. People around the £10k after PAYE tax, (12.5k gross) mark will see 6-7% real unavoidable inflation, even if everything else rises by 2.5% - just because of utility bills eating up around 10% of thier income. People around the £22k after PAYE tax, (28k gross) mark will see nearer 3% unavoidable inflation as the weighing is less as a proportion of thier spending (around 4-5%). You can see that this is just utility bills, but we also know council taxes are continuing thier huge rises at 5-7%. In the example above, this would change the weighting for the 12.5k earner on a modest council tax D band avg of £773, to 18% of after tax spending at way above CPI inflation rates. And the £28k earner will be spending 10% of income at way above CPI inflation rates. So the real rate of inflation for a above average earner is above 3%, excluding travel costs, petrol rises, rents and everything else which doesn't seem to move the inflation measure. Quote Link to comment Share on other sites More sharing options...
Pablo-silver or lead? Posted March 28, 2006 Share Posted March 28, 2006 Let’s assume the members of the MPC are independent of political influence and have the intellectual capacity to understand what’s really going on in the UK/Global economy. If they believe that real inflation has increased or is increasing they should for the good of the country increase IR. They will probably have to wait for the fudged Gov figures to show this again before they act, say from 1.9 to 2.1/2.2%. Having lowered rates .25% last year, irresponsibly in my and the Gov BOE opinion, it has made it harder for them to make a reverse "stitch in time". If people keep on borrowing because interest rates remain artificially low and the lenders keep pushing a wall of debt at them. Whilst at the same time seeing their earning capacity (pay rises) shackled by low inflation headlines and their free cash flow getting squeezed by higher gas/elec/water/petrol and council tax. Then they and we are heading for a correction that will make last time seem mild. JMO Pablo Bread and Water? Quote Link to comment Share on other sites More sharing options...
Guest wrongmove Posted March 28, 2006 Share Posted March 28, 2006 I agree that the cost of living is rising at much more than 2% for most people. However, the CPI does not claim to measure the cost of living. It just measures consumer price inflation, which, thanks mainly to China, is low. The BoE does not target the cost of living, it targets consumer price inflation. The reason BoE targets CPI, and not the cost of living, is because the BoE realises that is has no influence over the price of things like fuel, council tax etc. If the BoE raised rates every time oil went up, it would not reduce the price of oil, it would just make most people and businesses even poorer. The same goes for council tax, for example. I think that a "cost of living" index is needed in addition to CPI. This isn't likely to happen though, as it would almost certainly lead to wage inflation. But constantly critising the CPI figures is unproductive IMHO. CPI is merely the inflation in things that the BoE can influence with interest rates, and it is genuinely low. Quote Link to comment Share on other sites More sharing options...
MarkG Posted March 28, 2006 Share Posted March 28, 2006 CPI is merely the inflation in things that the BoE can influence with interest rates, and it is genuinely low. So you're telling us that the BoE can affect the price of cheap Chinese DVD players, but not the price of oil? Back in reality land, if interest rates go up then the pound goes up and the cost of imported goods goes down. Believing that won't reduce the price of oil is silly. Quote Link to comment Share on other sites More sharing options...
Guest wrongmove Posted March 28, 2006 Share Posted March 28, 2006 (edited) So you're telling us that the BoE can affect the price of cheap Chinese DVD players, but not the price of oil? Back in reality land, if interest rates go up then the pound goes up and the cost of imported goods goes down. Believing that won't reduce the price of oil is silly. I am saying that the BoE can affect demand for things like Chinese DVD players, which should eventually effect inflation, whereas it cannot influence global demand for oil and oil prices. If oil is only expensive because the pound is weak, then I would agree with you. But oil has increased by a factor of 3-4x over the last months. Are you suggesting the BoE should aim for £1 = $5 to remove this price rise ? Reality ? I don't think so. Edited March 28, 2006 by wrongmove Quote Link to comment Share on other sites More sharing options...
ExeC Posted March 28, 2006 Share Posted March 28, 2006 (edited) inflation is already well over the 2% the BoE keeps quoting and inflation will continue to devalue the GBP. Yes mp3 player are cheap but the true cost of living is going sky heigh You may soon earn £1m p.a but you will need £3.m to buy a new car Does that mean a huge mortgage on a house would benefit if inflation shot up over the next 5 - 10 ? Edited March 28, 2006 by ExeC Quote Link to comment Share on other sites More sharing options...
MarkG Posted March 28, 2006 Share Posted March 28, 2006 Are you suggesting the BoE should aim for £1 = $5 to remove this price rise ? That would certainly be a good move . The price of oil is never likely to drop to the equivalent of $20 again, but it's not just supply and demand which has caused the price to go up: it's also the fact that the pound has dropped in value so much after printing around a hundred billion of the damn things every year since Brown took over. Does that mean a huge mortgage on a house would benefit if inflation shot up over the next 5 - 10 ? No. Prices would crash, because no-one could afford to pay that mortgage after the price of the essential items they buy inflated much faster than their wages. Quote Link to comment Share on other sites More sharing options...
CaptainClamp Posted March 28, 2006 Share Posted March 28, 2006 Does that mean a huge mortgage on a house would benefit if inflation shot up over the next 5 - 10 ? Well if wage inflation shot up and the mortgage holder managed to keep their job in the ensuing economic turmoil and if interest repayments on the mortgage remained manageable (probably implying a long term fixed rate) then Yes. Quote Link to comment Share on other sites More sharing options...
dnd Posted March 28, 2006 Share Posted March 28, 2006 They can mess with inflation figures all they want but when people start losing jobs in larger numbers because nobody is spending (real inflation combined with climbing debt repayment) - thats when the HPC will start GB wants us to get into more debt to support his 'golden rule' Quote Link to comment Share on other sites More sharing options...
dnd Posted March 28, 2006 Share Posted March 28, 2006 With inflation like that you'd better get your cash into the safety of property as fast as possible Yep, with property currently running @ 2-3% Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.