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Gavin

Inflation Rampant.

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If you are like me, and you earn an ok wage, yet can't afford the same things as your parents (decent house on one wage allowing kids) this leads me to think that inflation must show up in the stats soon.

i.e. I keep waiting to see that the CPI or RPI go higher.

Yet actually mega inflation is all around us.

Take property (as was, or more realistically compare prices with 2000)

Take petrol.

Take Gas

Take electricity. (read fuel/petrol/gas)

Take steel

Take copper

Take gold

Are these themselves not measures of inflation? AM I BEING TO SIMPLISTIC?

Does the price of copper not feed through to the price of wire and tv sets?

Does petrol not feed though to the price of delivering supermarket goods?

Why are the BoE not reacting now like the Fed?

Why is everyone just thinking that China will keep the world deflationary? (with its own wage pressures and astronomical asset prices to handle).

Are we as HPCers not just putting down sandbags because we can see the river is going to burst its banks?

Please someone explain to me why we keep waiting for official confirmation of what we already know: lax credit has made everything more expensive.

AM I BEING TO SIMPLISTIC? I really want to know others views.

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AM I BEING TO SIMPLISTIC? I really want to know others views.

In a way, yes. The theory is that if the price of diesel goes up then the price of "the basket" of goods also goes up.

Of course this isnt always the whole picture. A baker raising the price of a loaf of bread does not always account for the impact of a rise in diesel when you thats what you need to get to work everyday.

So in a way, no.

But governments have always and do always understate inflation.

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Guest muttley

Did Noah become famous because he knew it was going to rain?

.....or because he built an Ark?

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Yet actually mega inflation is all around us.

Gavin, I think there was a survey recently which said household costs had actually gone up by 16% over the past couple of years.

That's more like the true inflation rate, and I don't think people are blind to it. They know that they're being hit in the pocket and that the official statistics are a lie.

However in general people don't seem that educated about Interest Rates and the economic relationships between IRs and inflation etc. That's why people are still stretching themselves to buy because they've been fooled into believing IRs will be low forever, Amen.

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Guest wrongmove

Gavin, you describe largely asset inflation, where the indexes measure consumer or retail inflation. Asset inflation is indeed high - look at the Haliwide indices, for example.

I think that fuel prices will eventually feed through to CPI, but the effect is muted in UK by the levels of tax on fuel - we only see a small proportion of the rise in the price. Also, fuel has risen from stupidly low levels IMHO. Even in UK, with our high tax, it is still cheaper than mineral water at service stations.

There is not much copper in a tv, these days. However, plumbing parts have rocketed - for example Advanced Fluid Connectors recently went into recievership because they didn't hedge their copper.

Perhaps what we need is a true "cost if living" index, rather than just CPI/RPI. This isn't going to happen though, as it's effect would be inflationary, via wage demands. <_<

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What I am trying to say is that the asset prices are PROOF of inflation and the need to raise rates.

We shouldn't be waiting for the official measures to prove it! Inflation is defined as prices rising with no real fundamental reason, so we HAVE it now.

Is this the real reason the Fed is raising, becuase it doesn't seem to have any reason based on economic success compared to say 2003 when rates were low?

Maybe the Fed HAD to drop rates in 2001 to keep things from collapsing, now they have to raise rates because its safer to do so and in fact imperative to future stability.

Could the Fed be doing this to actually induce a recesssion because we need one?

Is this just theoretical claptrap?

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Guest wrongmove

I think that central banks fear deflation much more than inflation, and this dictates the policy. Inflation is bad news, but we have been there before and survived.

Deflation in a vicious circle - prices drop, so people spend less (better to wait) so prices drop more, and people continue to wait etc. etc.

I don't think that the Fed would engineer a recession. I think they are worried about asset bubbles. If assets deflate, then we will surely have general deflation close behind. They know that they cannot inflate assets forever without grave consequences (deflation) so they are trying to engineer a GSD. In UK, you have to say that so far, this strategy has been successful.

Perhaps what we need is a true "cost if living" index, rather than just CPI/RPI. [wrongmove]

I read that the cost of burials has increased a lot too. There's no way out.

:lol:

So even the "cost of dying" is rising - this is truly grave.

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Maybe your right.

I think many have been waiting for the twin deficit problem in the US to implode longer than we have been waiting for the crash.

I think the old proverb about the market being able to stay irrational longer than you can stay rational maybe appropriate here.

I am hoping to be the first to disprove this!

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Guest wrongmove

I think many have been waiting for the twin deficit problem in the US to implode longer than we have been waiting for the crash.

Well, they have a good track record here, which may be why they have got away with it for so long. Reagan turned the US from the world's biggest creditors to the world's biggest debtors, so they have been here before. But Clinton turned them back into the world's biggest creditors again. Now Bush has "done a Reagan" and here we are again.

There must be a limit to the patience of the markets, but I don't expect to see a major crisis (without an external trigger) until Bush has gone and the US has had a chance to dig itself out again.

Edited by wrongmove

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If you are like me, and you earn an ok wage, yet can't afford the same things as your parents (decent house on one wage allowing kids) this leads me to think that inflation must show up in the stats soon.

i.e. I keep waiting to see that the CPI or RPI go higher.

Yet actually mega inflation is all around us.

Take property (as was, or more realistically compare prices with 2000)

Take petrol.

Take Gas

Take electricity. (read fuel/petrol/gas)

Take steel

Take copper

Take gold

Are these themselves not measures of inflation? AM I BEING TO SIMPLISTIC?

Does the price of copper not feed through to the price of wire and tv sets?

Does petrol not feed though to the price of delivering supermarket goods?

Why are the BoE not reacting now like the Fed?

Why is everyone just thinking that China will keep the world deflationary? (with its own wage pressures and astronomical asset prices to handle).

Are we as HPCers not just putting down sandbags because we can see the river is going to burst its banks?

Please someone explain to me why we keep waiting for official confirmation of what we already know: lax credit has made everything more expensive.

AM I BEING TO SIMPLISTIC? I really want to know others views.

I have been thinking along similar lines. The price of long bonds should be reflecting this stuff but they just won't move (I know thaty've ticked up recently but we have been through many false dawns). I just can't see how producers can hold back and NOT pass these rises on - but they do. Perhaps a few more need to fall by the wayside before they have pricing power.

I continue to watch long bonds (which will fall well before CPI rises) !

Having said that, when it does come, it will be rapid IMO.

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I think that central banks fear deflation much more than inflation, and this dictates the policy. Inflation is bad news, but we have been there before and survived.

Deflation is bad for those with debts, not those with money. The biggest debtors are governments, hence their desire to keep inflation rising at a sustainable rate.

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Deflation is bad for those with debts, not those with money. The biggest debtors are governments, hence their desire to keep inflation rising at a sustainable rate.

OTOH these things seem to go the way that benefits the boomer generation most (look at the high inflation as they were all paying their mortgages). A spot of deflation just as all their cash is going into low risk investments or being turned into annuities; and they're going onto their fixed pension incomes would be just the thing.

Terrible for the government as you say but government debt is quite a bit different to personal debt (in the way that they can continually reschedule it, their more favourable IRs and they way they can finance it by issuing government bonds and then force pension funds to buy them, that sort of thing).

Or perhaps I am succumbing to the 'it's all a boomer conspiracy' school of HPC :)

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Maybe your right.

I think many have been waiting for the twin deficit problem in the US to implode longer than we have been waiting for the crash.

I think the old proverb about the market being able to stay irrational longer than you can stay rational maybe appropriate here.

I am hoping to be the first to disprove this!

Yes the twin deficit problem!...........this offset by the flow of capital going the other way as the Chinese and Japanese especially buy US debt both public and private.......They're happy to do this as it keeps the dollar high and therefore and their own exports cheap in dollar terms....

No-one knows how long this can be sustained.......

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  • 302 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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