Inflation, is it the elephant in the room?

[Black Swan]

Well we've had an on and off raging debate about inflation in the "Weimar" thread, so it's hardly the elephant in the room (being ignored) on this forum. And I guess the same people will tend to line up in the same sort of way.

There are both inflationary and deflationary pressures on the horizon, so I suppose as usual it will be a question of balance.

Using inflation to erode debt is an old trick, but I thought we were supposed to have come a long way since then.

What RPI and CPI measures as inflation does not necessarily reflect the actual increased costs as seen by "the man on the Clapham omnibus" or the couch potato watching the X-Factor.

Speaking of the X-Factor, I happened to see highly-paid Simon Cowell on Newsnight talking to (also highly paid) Kirsty Wark (for a highly paid lady, she had a shocking hairdo - dragged through a hedge backwards more like). Resisting the urge to throw a brick while vomiting, I listened to him and it was actually quite interesting. He is proposing a sort of political X-factor, where people could get to vote on political issues. Well, I've long been a fan of referendums. If it has to be done this way, well so be it. It's better than not at all.

As BB mac pointed out earlier, as many folk vote on x-factor as do in the general election...irrelevant anyhow, our parliament is now simply an irrlevant squawk box governed by Europe but kept alive to give an impression of leadership/inclusion..

I'm still of the belief that rates have to stay at 0.5% for the next five years, not sure where we're headed, but then again neither do the 2 main political deadwood parties...They have to raise rates to deal with the govt debt/issues in the bond market but they know it kills the false dawn of the illusory recovery, which won't be on the horizon for years to come...what an effin mess...

 

[Martinghoul]

I'm still of the belief that rates have to stay at 0.5% for the next five years, not sure where we're headed, but then again neither do the 2 main political deadwood parties...They have to raise rates to deal with the govt debt/issues in the bond market but they know it kills the false dawn of the illusory recovery, which won't be on the horizon for years to come...what an effin mess...

But what do the political parties have to do with raising rates? Do you believe rates are set by politicians? If that's the case, the UK is truly f*cked, that's for sure...

 

[Trader333]

Last week's PBR was a sham, a phoney nothingness. The cuts are coming soon, let's hope they are voluntarily and thoughtfully implemented rather than forcefully imposed by the market. We cannot sustain borrowing of 14% of GDP, investors/the market will not tolerate it.

I agree but so far there is no planned implementation of this.


Paul

 

[Trader333]

the cuts have to come from jobs, there is no alternative. 700K of government servants...

What about cutting benefits as 25% of all government spending is on this ?


Paul

 

[virtuos0]

I think there are pretty strong grounds to impeach Brown after what he did in the PBR.

I say we have an intelligence test that people have to pass before they are allowed to vote in the next election, it's our only hope.

 

[Trader333]

I think there are pretty strong grounds to impeach Brown after what he did in the PBR.

I say we have an intelligence test that people have to pass before they are allowed to vote in the next election, it's our only hope.

That would probably result in 95% of the current electorate being ineligible to vote.

Sounds good to me though


Paul

 

[Black Swan]

But what do the political parties have to do with raising rates? Do you believe rates are set by politicians? If that's the case, the UK is truly f*cked, that's for sure...

you don't really think the mpc/boe is independent do you?...come on...any semblence of independence (if it ever existed) was arrested last sept/oct...

 

[Black Swan]

What about cutting benefits as 25% of all government spending is on this ?


Paul

well they'd never tamper with family allowance, Cherie Blair and Sarah Brown wouldn't be able to spend it in Fortnums, that leaves those in real need of the pittance. Take it off those at the bottom rung of the social ladder and you'll have anarchy....both parties know this...They will go to any lengths to keep this down trodden section of society just about sedated. The most recent examples of kicking folk in the nuts when they have nothing left to lose; Toxteth riots and poll tax revolts, are still fresh enough in the minds of the decision makers...

 

[Martinghoul]

you don't really think the mpc/boe is independent do you?...come on...any semblence of independence (if it ever existed) was arrested last sept/oct...

I would be most curious to hear what your basis for this view might be...

 

[zambuck]

.....BOE Governor is just an 'Inflation Nutter'....!...That was his only independence...!

 

[montmorencyt2w]

I would be most curious to hear what your basis for this view might be...

I don't know what Black Swan's basis for this view is, but my view is that it is not truly independent, but more sort of "at arm's length".

The nominal independence was given by Brown (as Chancellor), and it could soon be taken away by Darling/Brown. Whether that would be a good move politically/financially is another matter. I think the nominal independence will stay, but I'm sure there is bags of scope for exerting pressure behind the scenes.

 

[Atilla]

Who decides on who becomes BoE leader?

I think the BoE is independent. They have to write a letter to the PM explaining why inflation is above 2% and what they are going to do about it. Not sure how that tallies up but it sounds good... :cheesy:

Inflation dip was purely managed by politicians giving the nod to energy companies raising rates couple of years ago to ease off on inflationary pressures.

The dip was calculated as prices would come down for the Labour party to claim good economic management.

In the worst recession / depression of the century to have inflation rising is significant.

Get real guys... Oil is at $70. Imagine when the full recovery goes on heat... :-0 Even all the oil in Iraq in full production will not dent the $100+


1. Inflation WILL erode reduce debt burden
2. Inflaiton has advantages as it supports entrepreneurs make bigger profits. By the time lapse between purchase and sale of goods and material in production you gain by rising prices. Thus profits higher.
3. People on fixed incomes lose. They earn income last month (fixed) and pay higher expenditure now.

People talk of conspiracies. It is a fact! Wake up and smell the coffee you doughnuts.

Yours truly and sincerely, the one and only...

 

[counter_violent]

Wot full recovery !
When Q E ends...and it will end...we will be lucky if theres a pot left to **** in.
Mark my words...public sector will be decimated after the election...this aint a fantasy belief..it will happen.
Oil was just another bubble...the proof was the fall down t'other side...back to $35.00

 

[Atilla]

Wot full recovery !
When Q E ends...and it will end...we will be lucky if theres a pot left to **** in.
Mark my words...public sector will be decimated after the election...this aint a fantasy belief..it will happen.
Oil was just another bubble...the proof was the fall down t'other side...back to $35.00

You are wrong, wrong and wrong again on three counts.

The recovery (global) will be much bigger than anything we've had in the past perhaps surpassing the post WWII recovery. Reason being is China and India have already started displacing US production.

The public sector will be what keeps the UK going. We can expect FA from the financial banking sector. They are the ones that need to be chopped up and nationalised as they obviously can't manage a ****-up in a brewery the incompentent highly paid and underskilled bunch of bankers that they are.

You haven't seen anything on oil prices yet? $150 will be a give away price in another couple of years.

 

[gooseman]

hey martin-these tax issues going to hit you?

seriosuly thinking about upping sticks and heading towards the eastern side of the alps.

 

[Black Swan]

You are wrong, wrong and wrong again on three counts.

The recovery (global) will be much bigger than anything we've had in the past perhaps surpassing the post WWII recovery. Reason being is China and India have already started displacing US production.

The public sector will be what keeps the UK going. We can expect FA from the financial banking sector. They are the ones that need to be chopped up and nationalised as they obviously can't manage a ****-up in a brewery the incompentent highly paid and underskilled bunch of bankers that they are.

You haven't seen anything on oil prices yet? $150 will be a give away price in another couple of years.

Whoah!! slow down there big fella...Can you just join the dots for me on how oil at circa $200 a barrel will be part of a 'recovery'? Thats akin to suggesting us mad Engerlunders should go back to earning average wage but paying 6 times that for a 3 bed new build terrace on some deity forsaken flood plain...economics of the nut house...
Next time oil goes up and stays up it's for fundamental factors, not speculative...and when that happens we are fooked IMO....

 

[Atilla]

Whoah!! slow down there big fella...Can you just join the dots for me on how oil at circa $200 a barrel will be part of a 'recovery'? Thats akin to suggesting us mad Engerlunders should go back to earning average wage but paying 6 times that for a 3 bed new build terrace on some deity forsaken flood plain...economics of the nut house...
Next time oil goes up and stays up it's for fundamental factors, not speculative...and when that happens we are fooked IMO....

Let's work it out...

About ten years ago oil averaged $16 - $36.

Why would you say oil ran up to $150 and now stable around $70?

 

[Dommo]

Memory is a little hazy, but I thought that the original BoE mandate was to control inflation. Then, during the crisis, following discussions between govt and BoE., the BoE cut rates out of expediency, overriding the inflation mandate. Ok, fair enough. But despite the new understanding, the governer was still required to send a letter to the Chancellor explaining why inflation was up! What? How about saying "Sorry, Darling, you made me do it - so no letter for you this month"?

 

[Martinghoul]

hey martin-these tax issues going to hit you?

seriosuly thinking about upping sticks and heading towards the eastern side of the alps.

Not me, not for now, that is... I am somewhat pessimistic going fwd, though.

 

[Martinghoul]

Memory is a little hazy, but I thought that the original BoE mandate was to control inflation. Then, during the crisis, following discussions between govt and BoE., the BoE cut rates out of expediency, overriding the inflation mandate. Ok, fair enough. But despite the new understanding, the governer was still required to send a letter to the Chancellor explaining why inflation was up! What? How about saying "Sorry, Darling, you made me do it - so no letter for you this month"?

Your recollection isn't correct... Nothing was special during the crisis. All the letters were sent, rates were cut on the basis of the same inflation mandate (inflation forecast to undershoot tgt over medium term), etc. Whether you read some sort of collusion/dependence into this is up to you.