Wednesday, March 18, 2009

The red herring of the millenium; deflation!

Petrol prices to rise again

Despite falling costs in the past few weeks motorists will be hit again by increases when the Government adds 2p to fuel duty from April 1. Between mid-February and mid-March the average UK price of petrol fell from 90.88p a litre to 90.56p, while The average cost of diesel went down from 100.79p a litre to 99.77p.

Posted by flintster1994 @ 09:42 PM (1017 views)
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6 thoughts on “The red herring of the millenium; deflation!

  • I agree, all this talk of deflation was absolute balls….

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  • japanese uncle says:

    Inflation is rampant, which is only too natural given GBP’s depreciation by 30%. But people cannot afford things that have become much more expensive during the past few weeks, exacerbating the depression even further.

    QE has already showing effect. Crash should stop the thing he and Merding are doing. Otherwise GBP will follow the nasty path of Zwimbabwean dollar.

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  • The deflation hype/fear was to make way for inflation, QE and low rates.
    There never was a sign of deflation on essentail goods.

    The BOE will ignore inflation (as usual) thinking that low rates will help the recovery. I personally think this will be a mistake.
    What’s new!

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  • On the same topic, here is a posting by the ‘Burning Our Money’ blog. It contains a lighthearted one minute video.

    http://burningourmoney.blogspot.com/2009/03/banana-deflation.html

    I also recommend the link to the 6 minute BBC ‘Today’ audio by John Humphreys given in the article (‘we may well be bonkers’)

    The government has a huge incentive to let inflation rip to reduce our national debt, never mind bailing out debt voters. Remember the old saying: How can you tell when a politician is lying …

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  • A lot of folk would appear to have their wires crossed!

    Price rises caused by an increase in demand with stable supply is inflation.

    Price rises caused by an increase in taxation are by definition deflationary!!

    Average pay is near to falling so people will simply buy less petrol!

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  • We did not and have not got deflation even by official statistics. However we do have disinflation – the rate of inflation has fallen recently, at least for my goods – I don’t drive, so don’t know about pump costs, but if this is rising faster now than 6 months ago then I would imagine it will be down to how the stuff is taxed and as a result of the removal of loss leader pump prices at supermarkets rather than the raw cost – my energy costs are not rising anywhere near as fast as they were in 2008, and it seems from uSwitch.com that there is more competition for my new business in the electricity & gas markets.

    The fear of a deflationary spiral has driven us toward allowing a pre-emptive strike on the blighter, which will, of course as it is it’s aim, increase inflation.

    Quiet Guy is correct in the observation that inflation would eat the value of government debt – it also increases the tax revenue and increases the incentive to invest in real capital projects (rather than leaving cash on account). However it is a double edged sword, there are negative effects in the governments eyes too – an inefficient market, hoarding, and most notably rising export prices. i think the government would want to aim to keep mild inflation (as per the BoE directive) rather than aiming for “letting inflation rip”, and certainly inflation over deflation.

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