Sunday, June 13, 2010

Inflation back on the agenda now that MPC decision time has passed

We must force the inflation genie back into its bottle

It is staggering how naiive the newspaper editors are (or perhaps how naiive they think the public are). This monthly charade of highlighting rising inflation two weeks before (after) an interest rate decision and then completely forgetting about it two weeks later must have been going on for oooh about ... seven years now?

Posted by paul @ 12:03 PM (1759 views)
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7 thoughts on “Inflation back on the agenda now that MPC decision time has passed

  • If you don’t build things/manufacturing things where the slack capacity comes from?

    GROSS DOMESTIC PRODUCT

    GDP (Y) is a sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M).

    Y = C + I + G + (X − M)

    In Europe and UK, GDP is equated to G (Government Spending) since…………..

    Government Spending (G) = hope the ponzi scheme still work & foreigners keep on buying gilts to support UK Government Spendings.

    Consumption (C) = credit bubble has been burst & unemployment is high; so it must be reduction.

    Investment (I) = land costs/labour costs in UK is too high and it’s not conducive for investors to plough money for capital outlays.

    Net Exports = UK produces nothing & exports nothing; so it must be a net imports.

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  • markj69 str05 says:

    ‘But wage growth is picking up as the labour market stabilises and some firms start to recruit. In manufacturing, underlying pay growth is back to a pre-recession 4%-5%.’

    Not in the industries I know. I consult and supply automation solutions to a vast range of industries. Although we seem to have been unharmed (So far), many suppliers and customers have tightened their belts and made significant efforts to reduce costs – Redundancies, short working weeks, pay reductions, etc…

    Regarding inflation, I always thought that IR variation was the normal controlling factor. Seems that low IR is a requirement still, to minimise the 2nd half of the ‘W’ downward movement. Double-dip – I rather think of it as ‘V’, with the back-slash being long and slow.

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  • mark wadsworth says:

    “This monthly charade of highlighting rising inflation two weeks before (after) an interest rate decision and then completely forgetting about it two weeks later must have been going on for oooh about … seven years now?”

    That’s an excellent summary. Nothing to add, except they’ve got to keep them there house prices up somehow or other.

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  • markj69 str05 says:

    They’ll probably add house prices into the CPI equation. That’ll bring it down, for at least 3 years i’d say!

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  • “In manufacturing, underlying pay growth is back to a pre-recession 4%-5%.”

    Bullsh*t!

    In 45 years working in manufacturing, I never received a pay increase of more than 3.5% other than by changing jobs or during the period of 1970’s hyperinflation caused by yet another profligate labour government when, if I remember correctly, we received something like 6 monthly pay increases depending on the rate of inflation.

    Manufacturing firms, rightly, don’t do big pay increases.

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  • Don’t think you can bring down inflation. 14 provinces in China have announced to raise the minimum wage by 10% to 20% and 10% in each successive years. Cheap labor is not longer a term applicable to China. Exporting cheap products to the world has official end.

    I assure you that you will be paying a higher price for your Chinese products in pound shops, better tighten your belt.

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  • The 1 trillion pounds public debts together with 1.5 trillion household debts will have to be repaid whether through VAT or income/profits tax increase or stealth tax (hyperinflation)/pounds devaluation or combination of them. The burden will ultimately filter down to each UK family one way or another, so don’t think you can get away from it.

    http://www.debtbombshell.com/

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