Monday, January 22, 2007

Exclude energy, and inflation in December would have been 2.1%

Why the rate rise? We haven't got a runaway economy

Mr Brown didn't cure boom and bust. Our crazy mortgage system gave him a boom that obscured the structural problems being created by the rapid expansion of the non-competitive economy. Unfortunately, by following the same monetary rules that gave us a boom, the Bank is now in danger of giving us a bust. But I'm sure it will say it's for our own good.

Posted by sold 2 rent 1 @ 12:53 AM (570 views)
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12 thoughts on “Exclude energy, and inflation in December would have been 2.1%

  • “Mark Tinker is a global fund manager for Axa Framlington. The opinions expressed are his own”

    After I read that bit I stopped taking this seriously. Trouble is, of course this comes right at the end of the article (in small writing).

    VI claptrap.

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  • Of course.. anything information hat may suggest rates shouldn’t be raised is VI claptrap!!! Everybody has a VI. If you are not for a property market crash then you probably want it to boom. So take all the articles including ones in favour of your cause with a pinch of salt.

    The point of the article is that it doesn’t make any sense to increase interest rates for price inflation of things which people MUST buy. I don’t see how anybody can argue with this. For example increasing interest rates is not going to stop people from taking the train to work . Hopefully people will not be so wasteful of energy and fuel but this is not the goal

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  • tyrellcorporation says:

    Exclude sunlight and the surface temperature of the Earth would be -88 degrees – a pointless argument IMHO.

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  • waitingfor hpc says:

    Well this is just wrong.

    Food? – Furniture? All goods from China with prices 12 months old? Council Tax, General Taxation…. Train Fares…….. Hair cuts due to raising of minimum wage = inflation. The list goes on and on and on……. excluding energy which i have not included.

    In my industry mnfr which supply retail – 25% increase in my prices so far in 12 months. some raw materials up 70%!!!!!! All good i buy from China up 20% in 12 months.

    I find it totally ridiculous when people claim inflation is not real!

    Get in the real world – the USA , Europe, they are all seeing inflation. A pointless argument which is grabbed by anyone like Nohpc who is still looking for free booze at the party which ended 2 hours ago!!!!

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  • NOHPC – surely the exact opposite is true. Inflation on goods people DONT need to buy can be ignored as people simply wont buy them and therefore not be affected by the inflation.

    Besides, if they can justify not raising rates when utility bills are soaring on the basis that DVD players are reducing in price then they can’t change their tune when the reverse is true. That would be blatantly engineering low IRs.

    They’ve had it their way on the way up, and now they have to face the consequences. The article is nonsense.

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  • People seem to accept the idea that fiddling with interest rates is a good way to control inflation, but the artcle points out a few flaws in this argument. Certainly interest rates are a blunt instrument, but they also might be ineffective. I’m sure any number of economics dissertations have been written on the subject, and one day we may look back and think how stupid we were, thinking we were in a new paradigm of economic stability.

    When you think about it, the MPC has only been around in the good times, and theis latest round of inflation may be it’s undoing. Maybe we’ll find out that the emporer has no clothes.

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  • Nohpc, is Axa Framlington supposed to be providing unbiased opinion on the future of their leveraged assets now?

    If you respect such “independent” advice, have you considered a career as a financial advisor?

    (Don’t think I’d fall for your advice though).

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  • inbreda,

    here here.

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  • I fail to understand his logic, basically he’s saying if you ignore certain parts of the equation then everything is great. Inbreda I think your correct in what your saying, if people don’t want to pay inflated prices for things, it will be the things they can do without, and judging by this Christmas people can still afford to buy plenty of usless tat, which I presume will only fuel inflation.

    If I was shown some maths that made any sense I might actually take some interest.

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  • Nohpc, you seem to be missing the important element of cynicism in your economic education. Why do we have inflation? Because people are demanding higher wages? Because goods, including energy, cost more? Well, yes and no. Banks have to play a careful balancing act between pumping excess cash into the economy (thereby robbing people who save of their labour), and not pumping too much cash into the economy so that it creates a crisis of confidence in paper money. The BoE HAVE to raise interest rates not to fight inflation (they want to inflate), but because if they don’t people will abandon cash in favour of the thing bankers despise most – gold. Now isn’t that ironic.

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  • But energy prices are not affected by interest rates. They are affected by Britain going to war with Iraq and instability in the Middle East. C’mon people try and think about the bigger picture and not just your beloved houseprice crash and highly taxed savings when you ask for a rate rise.

    Even the RPI is low in my opinion. 4.x % rise a year in prices INCLUDING mortgages(which have only risen in line with raising BoE rates so this is unavoidable) is acceptable. 2.5 percent just seems too low to me. And Europe does not have satisfactory inflation they are below 2%.

    Also I have read the Employment is on the way up again and interest rates should come back down toward the end of the year. Lots of bullish news along with all the bearish news this week. Looks like any houseprice crash will probably only wipe out the gains made in 2007!

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  • dohousescrashinthewoods says:

    There is an argument that says if Gordon hadn’t raised taxes the index wouldn’t have jumped.
    The implicatin is that when it looks more positive in the next report he will pat himself on the back and ask for the keys to number 10?

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