Friday, May 25, 2007

Rumour Drives Prices Lower

Killer banana rumour grips China

"A rumour spread by text message has badly hit the price of bananas from China's Hainan island.....The messages claim the fruit contains viruses similar to Sars". It reminds me of a rumour I heard about how you can get AIDS from having a mortgage - so, don't buy property!

Posted by royston @ 01:34 PM (770 views)
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10 thoughts on “Rumour Drives Prices Lower

  • japanese uncle says:

    To be honest I will never buy any food or drink made in China. Their society is probably more than 100 years behind in terms of consumer protection/safety, while clothing, etc is absolutely fine. But you may wish to avoid an electric kettles made in China, as they could cause fire, as I learned the hard way in my personal experience.

    Incidentally immiment HPC will inevitably generate enormouse amount of bad debt on the side of banks and building societies with poor lending practice. Some of them could go bust. Credit cruch will prevail. Credit cards will be withdrawn from students and workers with lesser income, or with poorer credit records/status. Confidence either corporate or consumers will be gone. Unemployment could reach 8%. Salary will be going down year after year. Disposable income will plummet. Feel goods factor will be replaced by feel bad factors. People will start shopping around for goods and services cheaper by a penny. The answer is D for deflation.

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  • Can you really get aids from a mortgage? How?

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  • sold 2 rent 1 says:

    JU,

    You’re right.
    Too many people on this site can’t see the deflation behind the inflation though.

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  • Oh how little we learn from others’ experience.

    I’m not sure many people really understand what deflation is.

    It’s always assumed that in an inflationary economy, prices will be static or rise gradually, but of course that’s only an assumption. Reverse it and we expect that prices will only be static or fall, and because then there’s no incentive to for companies to invest (because the price they get tomorrow for their goods will be less than the price today), companies don’t grow. For consumers there’s a high incentive to save (not spend) because the buying power will increase with time relative to prices. People will only buy bare essentials.

    When companies stop investing in capital goods over here, the bottom will fall out of the UK economy.

    I will have moved with the missus to Japan (perversely enough) by then …

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  • Oh and the communist party in China probably spread that rumour, to hit dissident islanders.

    Hell, if they could spread a rumour that Taiwanese electronics give you brain cancer they would.

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  • talking rot says:

    Greed and avarice will always cause people to ask for more for their goods and services. Inflation is the natural order of things; saving goes against human nature. If you save something, there is a risk you’ll loose it. If you enjoy it now, it’s used and can’t be lost. Deflation is extremely destructive but I can’t see it lying well with human nature. I recall The Economist ran a readbale article called “Dial D for Deflation” in 2002. While Deflation never occurred in the UK, its effects where still felt by lower inflation levels. Greed and averice can clearly saved us from destructive deflation!

    Sorry – I can’t buy these extreme positions.

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  • Possibly the problems with the appliance were due to faulty capacitors!

    Remember the laptop batteries!

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  • “The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.”

    “Inflation and credit expansion, the preferred methods of present day government openhandedness, do not add anything to the amount of resources available. They make some people more prosperous, but only to the extent that they make others poorer.”

    “Inflation is essentially antidemocratic.”

    “Inflationism… is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time. Just as the sound money policy of gold standard advocates went hand in hand with liberalism, free trade, capitalism and peace, so is inflationism part and parcel of imperialism, militarism, protectionism, and statism”.

    And with particular relevance to the above debate:

    “But the certain fact about inflation is that, sooner or later, it must come to an end. It is a policy that cannot last.”

    My bet’s therefore with deflation… if it was good enough for Ludwig von Mises, it’s good enough for me.

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  • TR, do you think the BofJ ever intended for deflation to become a reality?

    Think about that …

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  • talking rot says:

    Paul

    A good thought – thank you. I should have added a caveat to my text stating it applied to the UK only. There again, some would argue that people are not really very different around the world.

    I’ve always had the perception that the UK typically faces a higher rate of inflation then that found in heavily industrialized or trading continental countries (France, Germany, Netherlands- not Italy) and the US. I’ve never understood why. Has the UK faced higher levels of inflation then France, Germany, Netherlands and the US and if so, why?

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