Britain faces deflation !!!

Sapphire

Mr_Matey wrote: »

In my world deflation has already happened in the last few months. It may not be true of the entire economy, but my money sure goes a lot further these days than even 2 months ago.

A few examples:
* Lower petrol prices
* House prices falling
* Rental prices falling (although not for me)
* All the shops are desperately offering massive discounts - I've bought quite a bit of stuff lately! This includes grocery stores.

(edit) Oh and forgot to mention the reduction in VAT.

The only worry is the falling pound. Please recover before I go on holidays. I'll be ever so good... :A

And gas and electricity charges have risen by a huge amount. :mad:
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You forgot mortgage rates have fallen - 3% Child benefit is going up too

I've never had it so good

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Mortgage rates had certainly not fallen for everyone – Standard Life did not reduce their SVR with the last BoE rate cut, and have not done so with the latest one, either.

Child benefit – paid for by taxpayers like me – does not affect a large proportion of the population.

dopester

baby_boomer wrote: »

“The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost,” he said........"

That article was mostly utter-rubbish.

Too much inflation wipes out more of the economy, and damages more people overall, than accepting the deflation.

Do you really want to be working with £100, or £1,000 notes to be buying a can of soup? Or £5,000 and £10,000 notes for the same soup a couple of months after?

You submit to the deflation and the market will assist in reorganising.

Allow the deflation to liquidate the bad debts, the bad money, to take over the assets at distressed prices from badly run businesses who assumed the boom was permanent and expanded in to it.

Let businesses that could only survive in crazy credit-expansion conditions go to the wall. Don't bail out all the people who gambled everything on the boom continuing - and allow the market and the sound and smart money come in to reorganise.

If stopping deflation were as simple as turning on the presses, then a question immediately arises: "Why was there ever deflation?"

Printing presses are an invention of the fifteenth century. Every country in the 1930s had access to high-speed presses that could have cranked out paper money in any denomination.

It would have been just as cheap and easy to print ten-thousand-dollar bills as it were one-dollar bills. Yet deflationary depression swept the world. Why?

To understand the danger of deflation you need to pose the right question.

It is not whether governments have the power to print money. It is: When do the benefits of printing money exceed the costs?"

If political authorities could benefit only from inflation, and not be harmed, they would obviously print more in higher denominations that they do.

Mr_Matey

Sapphire wrote: »

And gas and electricity charges have risen by a huge amount. :mad:

Yes I said that in my second post. It's peanuts in comparison to house prices and rent.
:beer:

StevieJ

dopester wrote: »

That article was mostly utter-rubbish.

Too much inflation wipes out more of the economy, and damages more people overall, than accepting the deflation.

Do you really want to be working with £100, or £1,000 notes to be buying a can of soup? Or £5,000 and £10,000 notes for the same soup a couple of months after?

You submit to the deflation and the market will assist in reorganising.

Allow the deflation to liquidate the bad debts, the bad money, to take over the assets at distressed prices from badly run businesses who assumed the boom was permanent and expanded in to it.

Let businesses that could only survive in crazy credit-expansion conditions go to the wall. Don't bail out all the people who gambled everything on the boom continuing - and allow the market and the sound and smart money come in to reorganise.

More importantly, have you not voted yet

dopester

StevieJ wrote: »

More importantly, have you not voted yet

Vote? Just got home and can see some event has obviously happened here to do with moderation. Give me an hour to read up on those threads - if that is what you mean Stevie.

dad-of-4

would i be correct in thinking if we hit deflation we will see falls in wages? seems logical, as i presume somewhere along the lines our personal purchasing power would need to be restricted somehow. obviously this could be worying for all these house lovers who hope to take advantage of falls in property values.
or does deflation just take us to a point where our purchasing power leads to us out stripping supply and prices inflating to take account of this supply and demand senario where demand outstrips supply.

setmefree2

Here's another good one:T

WTF?_2

dad-of-4 wrote: »

would i be correct in thinking if we hit deflation we will see falls in wages? seems logical, as i presume somewhere along the lines our personal purchasing power would need to be restricted somehow. obviously this could be worying for all these house lovers who hope to take advantage of falls in property values.
or does deflation just take us to a point where our purchasing power leads to us out stripping supply and prices inflating to take account of this supply and demand senario where demand outstrips supply.

Deflation would mean falls in average wages. It doesn't mean that peoples wages would be cut, although that may happen in some cases. More probably you'll see new jobs advertised at lower salaries and contracts negotiated downwards at renewal time (if renewed). That will have the effect of lowering average wages.

baby_boomer

Has the argument just ended in favour of inflation?

The Bank of England's pension fund has just gone 70% into index linked gilts according to the Times.

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I believe deflation was a manufactured consequence of the government policy to reduce IR's to close to zero, to stop a repo catastrophe, and in turn has allowed them to sart QE, all this is just kicking the problem further down the road, and making the situation much, much worse.

When inflation does start to kick in, people think it will reduce their debts, it won't, it will make them worse, as unlike the 70's, wage inflation will not follow, causing everyone to get poorer.

Then we have the 'small' problem of the tax tsunami, to add to higher interest rates when inflation starts to rise............ and some people think the property market is going to stablise this year, I suggest that will only happen in their dreams.