Wednesday, February 25, 2009

Something fishy about inflation

Petrol prices rise more than inflation

I find it hard to accept that in this time of collapsed global demand that fuel, of all things, is rising more than the stated inflation figures. I worry about a sudden and unpleasant end to deflation, and a discovery that actually inflation was worse. I looked to see if the UK basket of goods has been moderated recently and I can't find anything, however, if car manufacturers are running down their production facilities, then people are -not- buying cars and so the price of cars for example, should receive a lower weighting than previously. Zimbabwe didn't include flat screen hd tvs in their basket of goods because nobody was buying them. Similarly now, most expensive goods are being studiously avoided by the consumer (..cont..)

Posted by stillthinking @ 08:04 PM (1050 views)
Please complete the required fields.



9 thoughts on “Something fishy about inflation

  • stillthinking says:

    Similarly now, most expensive goods are being studiously avoided by the consumer and so their weighting, like cars, should be reduced. I have looked and I can find no articles about any changes to the BoE basket of goods.
    Further, one of the main arguments for deflation is that it is debt deflation leading to defaults. Obviously we can see the defaults from companies failing, but as the UK government has made abundantly clear, there are no defaults as far as the banks are concerned, and there will be no reduction in the money supply. I do believe that what is happening is deflationary, but at the same time, deflation is a temporary event. Just because it lasted so long in Japan does not mean it lasts so long everywhere.
    Lest we forget, the hyper-inflation in Germany came from a deflationary period as gold flowed out of the country ( reminiscent of bank runs) for WW1 reparations, and after the Allies occupied their industrial region, the workers refused to work ( something getting familiar…) and the German authorities began to print money so they didn’t have to (printing for expenditure).
    The argument for deflation in the UK seems to be solely that people are refusing/being refused new loans, which actually is a rate of increase.
    Prices are dropping now because of the temporary phenomena of over-production, something Japan did not have because the rest of the world took up the slack. As production is reduced, agressive pricing will finish. We are in a big global closing down sale at the moment but the sale will finish. Our inflation measurement at the moment must contain goods that are from a closing down sale. That is a pretty big difference from usual. Sold at a loss but included in the inflation measurement…
    phew.. a bit lengthy but recently I am having doubts about deflation. the german example is meant to represent the public sector (of course!).

    Reply
    Please complete the required fields.



  • I just don’t see the argument for deflation. I have always thought it overstated….inflation is going to be the real shocker.

    Reply
    Please complete the required fields.



  • Regarding the current prices of petrol and derv.
    If there is currently no price fixing going on then I seriously am a monkey’s uncle. The current prices completely defy logic.

    Reply
    Please complete the required fields.



  • little professor says:

    The basket gets changed on an annual basis, next change is due next month.

    Petrol prices are going up because Sterling has collapsed by 25% in value. It’s surprising it hasn’t gone up by even more. Deflation is a red herring. Destruction of credit does not necessarily mean deflation (a decrease in the money supply)

    Reply
    Please complete the required fields.



  • stagflation.

    Reply
    Please complete the required fields.



  • Stillthinking if the market thought it was inflation stocks would be rising in price, gold would be exponential and there would be no bond bubble. I’m not saying the market is always right but i wouldn’t readily dismiss this information. I also think that after the closing down sale you get rid of excess but sack the staff and kill demand.

    I’d add since I’m in a cantankerous mood that the arch inflationists on this site tend to be reactionary and poorly informed. Doesn’t mean they are wrong but it makes it more likely.

    Wednesday, February 25, 2009 08:22PM

    Reply
    Please complete the required fields.



  • hmmmm….I suppose we shall see in the end. I realise that the drop in sterling affects the petrol price. just wobbling on my view. I don’t think that we will be in deflation the same as Japan though.

    Reply
    Please complete the required fields.



  • The people that did not buy oil at $35 missed a big trick.
    Some things are so obvious.
    Sitting back with my feet up.
    Something always goes off with oil sooner or later. IMHOpinion.

    Reply
    Please complete the required fields.



  • Why does a post about petrol going up, which was inevitable get 8 posts and NOTHING about the FSA’s perfomance at the TSC today!

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>