How Much Money Inflation?

[squall321]

Would you like to expand on why you expect this to change?

dude
you just listed a bunch of deflationary stuff in your post
now you are saying inflation??

the only inflationary thing mentioned was oil, which always goes up in summer anyway

 

[poborsky]

dude
you just listed a bunch of deflationary stuff in your post
now you are saying inflation??

the only inflationary thing mentioned was oil, which always goes up in summer anyway

Thats your opinion about what I posted. Official inflation in the UK is rising.

 

[N Rothschild]

for one the price of gold hasnt risin above its highs since the crisis started, imo thats a good of an indication as any that hyperinflation is not going to happen. gold being a hedge against inflation

 

[squall321]

BBC NEWS | Business | Further slowdown in UK inflation

does that look like rising?

 

[N Rothschild]

bah u beat me to it!!

 

[poborsky]

"The less-than-expected decline means the figure remains above the Bank of England's target of 2%."

It means the rate of increase is slower than before. It does not mean deflation.

 

[poborsky]

Also please remember that these are "official figures"

 

[Atilla]

BBC NEWS | Business | Further slowdown in UK inflation

does that look like rising?

According to BoE i touched 5.4% recently and subsequently started falling very quickly.

National Statistics Online

But CPI still above 2%. Moreover as oil has started rising again thus RPI also going up. If we are still in recession and oil hits $70 imagine the price of oil as recovery swings into full play???


Inflation is determined by the money supply and number of goods and services in circulation on one side of the equation coupled with number of goods and services multiplied by their price.

Σ M.Supply x Frequency of Exchange of Money = Σ Number of Goods x Price of Goods

In simpler form ----> Σ Ms x Fqexch = Σ GNP x Price

1. At the moment Ms has gone up.
2. Frequency of Exchange is down.(This is economic activity)

3. GNP is down as output of goods fall in a recession (This is also econ activity)
4. Price index (This is inflation is around 2%)


In summary as the economy recovers and 2 rises then to balance the equation GNP or price must rise. If the increase in goods and services & productivity do not match the Money Supply Ms, then inflation will have to rise to balance this equation.

This is a simple equation and doesn't include BoP or exchange rates but balancing principal will be the same.

The governments in question are talking about taking money out of Ms by taxing or cutting back on expenditure on public services to counteract economic activity as it takes off.

Either way imo Ms has expanded at such a high level with bailing out the banks - PSBR financing the debt and paying back renders government policy for the next 5-10 years in hopeless **** mess. You may be listening to this debate on the radio between politicians about who is going to be cutting back on public services and who is not etc etc.

1 - Ms - easy to increase but difficult to take money out of the system
2 - FqExch - economic activity very difficult to manage or control
3 - GNP - like point 2 difficult to manaage or control
4 - Price Index - Inflation THIS BECOMES THE KEY CONTROLLING FACTOR in determining the balance of this equation.

Not sure if this makes sense but at a simple level this is how inflation will be determined.

About a year ago or more ago I predicted stagflation. It hasn't materialised yet but I can foresee a situation where we will have high inflation and high unemployment if the money supply problem is not managed.

I also believe that our levels of debt - here and in the US and partially in Europe are so great that inflation will inevitably rise with economic recovery to absorb some of that extra increase in the money supply.

1. WHO IN THESE BLOGS BELIEVES ANY POLITICAL GOVERNMENT HAS THE ABILITY TO TAKE OUT THE EXCESS MONEY IN THE ECONOMY?

2. WHAT WILL BE THE CONSEQUENCES?


Another benefit of inflation will be to devalue our currencies and revalue Asian tigers exchange rates. Thus tilting the purchasing power of our goods and services to theirs and perhaps BoP absorbing some of this adjustment too.


Tough times ahead either way.

 

[poborsky]

1. WHO IN THESE BLOGS BELIEVES ANY POLITICAL GOVERNMENT HAS THE ABILITY TO TAKE OUT THE EXCESS MONEY IN THE ECONOMY?

2. WHAT WILL BE THE CONSEQUENCES?

No way. This is the usual crap from politicians who know the only way out of this mess is to inflate the debt away. We are going into an inflationary depression. if the true figures came out then we are already into it. Its not possible to run an economy like the UK govt, or the US without eventually running into problems and running out of options. Currency devaluation resulting in hyperinflation. The politicians know they have to create inflation but inflation is a beast that cannot be controlled easily. How many politicians have the stomach for double digit interest rates with massive unemployment?

 

[Atilla]

No way. This is the usual crap from politicians who know the only way out of this mess is to inflate the debt away. We are going into an inflationary depression. if the true figures came out then we are already into it. Its not possible to run an economy like the UK govt, or the US without eventually running into problems and running out of options. Currency devaluation resulting in hyperinflation. The politicians know they have to create inflation but inflation is a beast that cannot be controlled easily. How many politicians have the stomach for double digit interest rates with massive unemployment?

Yes I concur with your point of view.

I would add that - based on past UK recession, recovery was export led.

Perhaps part of the problem is the BRIC or emerging Asian tigers inclusive of the Big China purchasing power of the currencies need fundamental adjustment.

The discrepancies between the purchasing power of currencies have to be adjusted such that we lose and the BRIC-Emerging countries gain - thus leading to a more equitable and efficient distribution of world resources.

I won't mention global warming as the impending scenario out of this debt / inflation / exchange rate adjustment mess long term wise. :whistling

 

[poborsky]

Yes I concur with your point of view.

I would add that - based on past UK recession, recovery was export led.

Perhaps part of the problem is the BRIC or emerging Asian tigers inclusive of the Big China purchasing power of the currencies need fundamental adjustment.

The discrepancies between the purchasing power of currencies have to be adjusted such that we lose and the BRIC-Emerging countries gain - thus leading to a more equitable and efficient distribution of world resources.

I won't mention global warming as the impending scenario out of this debt / inflation / exchange rate adjustment mess long term wise. :whistling

The UK encouraged expansion of the financial services industry, retail sector and had north sea oil flowing to combat the effect of the last recession. Financial services are going where the money is being created in low taxation environments. The retail sector will only recover if the housing bubble can be re-inflated and north sea oil is drying up. Its going to be a very hard time for the UK.

There will be realignments in currency valuations, no doubt about it. Countries with balance of payment surpluses due to the strength of their manufacturing bases or export of natural wealth such as mineral resources will naturally have stronger currencies. Even if governments intervene, it will have to happen eventually.

Global warming has now been renamed "climate change" by our political leaders. Maybe its getting more difficult to sell this one. If the US senate pass the cap and trade energy legislation however, then the politicians have pulled off another huge scam.