Wednesday, Nov 25, 2009

Watch out for that deflation!

Reuters: Ford to raise UK prices, blaming weak pound

Ford Motor Company in Britain will raise its prices by an average of 2.7 percent because of the continued weakness of the pound. The price hike, across most of its UK range, will be the fourth this year, and will be introduced from the start of December. The rise has been "driven entirely by the continued weakness of the pound", which has fallen in value by more than 30 percent since 2007, it said. "The drop in the value of the pound ... is a fundamental business concern for all UK-based businesses whose costs are incurred in euros," Nigel Sharp, Ford of Britain managing director, said in a statement.

Posted by drewster @ 03:18 PM (1739 views)
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21 Comments

1. mark wadsworth said...

*ahem*

"Ford to raise UK prices, blaming extension of car scrappage scheme"

*/ahem

Wednesday, November 25, 2009 03:29PM Report Comment
 

2. Crunchy said...

Who could have guessed commodity prices would go up in the free market economy of the UK and that the pound would and will get a further pounding.

Oh boy!

Wednesday, November 25, 2009 03:30PM Report Comment
 

3. Brucemcaaw said...

Shame, will have to buy a Honda then, plenty of other car companies will happily take our money.

Wednesday, November 25, 2009 03:36PM Report Comment
 

4. str 2007 said...

I pointed out the other day that the new model VW Gold is about 25% more thn the 2006 model.

I think we'll get wacked with imported inflation next year.

Wednesday, November 25, 2009 04:43PM Report Comment
 

5. jack c said...

@str 2007 - I also think we'll get wacked with imported inflation next year however I cant see Salaries/Wages keeping pace - your thoughts?

Wednesday, November 25, 2009 04:52PM Report Comment
 

6. hpwatcher said...

The whole deflation argument was rubbish.

Wednesday, November 25, 2009 07:14PM Report Comment
 

7. mr g said...

jack c @3 " I also think we'll get wacked with imported inflation next year however I cant see Salaries/Wages keeping pace - your thoughts?"

I agree entirely with your comment, imported inflation will rise and I just cannot see pay keeping pace.

In the private sector firms will simply go out of business if faced with excessive wage claims as they struggle to climb out of recession.

The public sector unions will be too preoccupied fighting the inevitable cuts to push for excessive pay increases and if they do, it will only increase government debt and accelerate state bankruptcy.

Wednesday, November 25, 2009 07:33PM Report Comment
 

8. mr g said...

I forgot to mention @5, in my eyes this is a pretty dumb move by Ford in the present climate.

Wednesday, November 25, 2009 07:35PM Report Comment
 

9. shipbuilder said...

2. str 2007 said...
"I pointed out the other day that the new model VW Gold is about 25% more thn the 2006 model."

Of course it is - don't you know Gold only goes up in price? ;)

Wednesday, November 25, 2009 08:24PM Report Comment
 

10. str 2007 said...

Oops, very good shipbuilder, clearly I meant Golf.

Jack C
I can't quite believe wages would go up, it seems anything is possible though under Gordon Brown. The only way he'll inflate away debt is with wage increases. If he stays in power perhaps he'll give all civil servants a huge pay rise on some other form of borrowed money to pave the way for the private sector to follow suit.

Seems unlikely though, so I think 2010-2012 will be the years of the big squeeze.

Wednesday, November 25, 2009 09:02PM Report Comment
 

11. str 2007 said...

PS shipbuilder

You can actually spend upto about £40k on a Golf now with all the extras, so perhaps VW Gold would indead be more apt.

Wednesday, November 25, 2009 09:03PM Report Comment
 

12. jack c said...

str 2007 - whoever is elected to run UK Plc from 2010 has very little room for manouvre - Tax rises are the only thing to be a certainty. I attended a very informative presenation today and will send you the slides (off line) once I have them - gives a good realistic insight of what lies ahead.

Wednesday, November 25, 2009 09:47PM Report Comment
 

13. bellwether said...

HPW@4 pretty much like your constantly suboptimal contributions over the past couple of years. I can think of few posters from whom I expect less. The irony of being long on inflation, while inhabiting a site like this, is unsurprisingly lost on you.

Wednesday, November 25, 2009 09:54PM Report Comment
 

14. drewster said...

bellwether,

Firstly, HPW might simply be too poor to get on the housing ladder. For example if you live in London, earn £25k, and have no deposit, you probably can't buy anything. Equally if you have some kind of credit blemish you might be locked out of the mortgage market. A person could easily find themselves in that situation, yet equally be of the opinion that inflation is coming.

Secondly, inflation in the price of goods doesn't necessarily translate to house price inflation. The opposite may well hold: over the last decade, car prices plummeted while house prices rocketed. If the price of cars, oil, and food rises; then people have less income left over to spend on housing.

Wednesday, November 25, 2009 10:45PM Report Comment
 

15. str 2007 said...

I look forward to their arrival Jack.

Thanks.

Wednesday, November 25, 2009 11:52PM Report Comment
 

16. Millaise said...

HPW@4
Couldn't the decrease in money supply as loans are called in, and debts paid down, without new ones being issued have the potential to dwarf any money created by the Government? So deflation was never improbable, just, for debtors, undesirable.

Thursday, November 26, 2009 12:40AM Report Comment
 

17. hpwatcher said...

HPW@4 pretty much like your constantly suboptimal contributions over the past couple of years. I can think of few posters from whom I expect less. The irony of being long on inflation, while inhabiting a site like this, is unsurprisingly lost on you.

Nothing ironic at all. House prices will drop, whilst there will be a lot of inflation in other areas.

It is so *you* to engage in insults, when someone doesn't follow your misguided deflation argument.

Thursday, November 26, 2009 06:11AM Report Comment
 

18. bellwether said...

HPW the deflation argument is merely that we are in a deflationary environment ie one where credit is contracting rather than expanding.

We can agreed on that.

The moderate inflation argument is that central banks will print enough notes to recapitlise bankd and kick start irrational levels of lending. The extreme inflation argument is that central banks will just bypass the usual credit mechanism and mainline the money to debtors via eg write off of debt, wage increases and various other forms of handouts.

In the UK both are possible and the later kind of probable because the former is doomed to fail - we have already had our multi decade credit binge, the patient can digest little more.

Thinking of expensive imports being the same as inflation as classically defined is a muddle for various reasons. I trust by now everyone here is aware of the differences.

Thursday, November 26, 2009 09:50AM Report Comment
 

19. nomad said...

JackC@12. "Tax rises the only inevitability".

I read an article in Money Week a while ago where the columnist was making the interesting point that Tax Freedom Day (the day in the year after all our taxes are paid and our money truly belongs to us) has barely moved since the Wilson era in the sixties.

Despite all the efforts of government, in particular the current crazy incompetent bunch and all their stealth taxes - and I'm going from memory here - they cannot get out of May. Presumably this means that collectively we can be taxed just so much before successfull avoidance kicks in. Could be by moving our money abroad or ourselves. Could be simply not bothering to work. Probably means most of all that we redouble our tax avoidance efforts.

If this continues to be the case then damage will continue to be done until the penny drops and it will then be cuts, cuts and more cuts.

Thursday, November 26, 2009 10:43AM Report Comment
 

20. jack c said...

@nomad - thanks for the feedback, a rise in indirect taxation is the Tories favourite, but in any event the current bunch have future tax (NI)rises on the statute books now.

@str 2007 - you should have info now.

Thursday, November 26, 2009 11:10AM Report Comment
 

21. hpwatcher said...

HPW the deflation argument is merely that we are in a deflationary environment ie one where credit is contracting rather than expanding.

If I may say so, it isn't what I am seeing. Interest rates are low, house prices are continuing to rise.....I am continuing to be out bid on the houses that I have put offers in for.

Even the small drops that I saw in certain items in Sainsburys, have corrected upwards.

we have already had our multi decade credit binge, the patient can digest little more.

I am seeing more and more spending.

Thursday, November 26, 2009 11:22AM Report Comment
 

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