King warns of too-low inflation

WTF?_2

purch wrote: »

I'm sorry but that is utter rubbish !!!

Deflation of prices cannot include the Tax.

Just because consumers won't bother to differentiate between the price of the goods and the tax charged, it doesn't mean that you can therefore say that because the total amount paid has reduced then that is deflation of the price of the actual goods.

I'm talking about consumers.

The guff posted in the press has been about the dangers of lowering prices causing an expectation of even lower prices amongst consumers and causing said consumers to stop spending.

Kind of hard to see then how lowering a consumer tax to make consumed goods even cheaper is going to combat consumer price deflation.

IveSeenTheLight

dopester wrote: »

ISTL even Gordy recently in House of Commons said the danger for next year was "deflation" before quickly changing his mind to very low inflation.

Deflation being a danger, hence they are taking steps to try and stop it happenening.
Only time will tell if they succeed or not.

While you and !!!!!! etc were calling for interest rate rises to curb inflation, they would appear to have seen further ahead and reduced interest rates.

Are you still calling for higher interest rates?

dopester wrote: »

Deflation... glad I've not got a fat mortgage or debts.

dopester wrote:

If we didn't borrow vast sums more.. and accepted some deflation, and let the bad debts be liquidated, we could still make it back to shore alive.

I'm confused. In one post you are saying that deflation is required to let bad debts be liquidated, yet in another you are saying that with deflation.... you are glad you dont have a fat mortgage or debts.

Which should it be?

Rightly or wrongly, house prices are not taken into account when calculating the inflation figure, therefore have n bearing on the inflation / deflation figure.

Even Mervyn King has stated he is willing to reduce interest rates to 0% if required to try and stop deflation from happening.

Central bank Governor Mervyn King said last week that the economy is probably in a recession, and policy makers will cut borrowing costs as low as needed to stave off deflation. The bank forecasts inflation will slow below the government's 1 percent lower limit unless it reduces the benchmark interest rate from the current 3 percent. ...................


King said on Nov. 12 the bank is ``prepared to cut bank rate to whatever level is necessary,'' to keep inflation at the target, and didn't rule out putting the benchmark at zero. The bank's 1.5 percentage point reduction this month was the biggest since 1992.

penguine

dopester wrote: »

The average consumer with any disposable income is increasingly likely to be thinking "Why buy now when its likely to be cheaper next month." Or have an eye on their job safety.

I did a bit of shopping yesterday. Came back after several hours having bought nothing but some thermal underwear, so that we can keep the heat turned down. I figured there wasn't much point in buying much now, as it's going to keep getting cheaper in the months to come.

IveSeenTheLight

!!!!!!? wrote: »

I'm talking about consumers.

The guff posted in the press has been about the dangers of lowering prices causing an expectation of even lower prices amongst consumers and causing said consumers to stop spending.

Kind of hard to see then how lowering a consumer tax to make consumed goods even cheaper is going to combat consumer price deflation.

Let us understand, the 2.5% reduction of VAT is not for the benefit of consumers.
It's for the benefit of businesses.

I do not believe that the VAt reduction will be passed onto the sale price

WTF?_2

penguine wrote: »

I did a bit of shopping yesterday. Came back after several hours having bought nothing but some thermal underwear, so that we can keep the heat turned down. I figured there wasn't much point in buying much now, as it's going to keep getting cheaper in the months to come.

You damn, dirty deflationista! Get out there and SPEND dammit!

Really2

!!!!!!? wrote: »

I'm talking about consumers.

The guff posted in the press has been about the dangers of lowering prices causing an expectation of even lower prices amongst consumers and causing said consumers to stop spending.

Kind of hard to see then how lowering a consumer tax to make consumed goods even cheaper is going to combat consumer price deflation.

VAT is not a consumer TAX it s a TAX on all goods and services.

Do you know the difference between Net and Gross prices.

The NET price is the price of the goods tax is irrelvent on NET prices.

If you cant understand that you really need to know how business's work to get a better grip on the economy as this is the Basics.

dopester

IveSeenTheLight wrote: »

Even Mervyn King has stated he is willing to reduce interest rates to 0% if required to try and stop deflation from happening.

That won't be enough. And it comes with other problems as well.

Most of the measures they are taking are only reinforcing and strengthening the deflationary powers that have been unleashed due to massive credit expansion that was unsupported by the real economy.

The deflation coming can not be stopped - unless you are willing to destroy the financial economy - which would be even worse than deflation.

IveSeenTheLight

dopester wrote: »

That won't be enough. And it comes with other problems as well.

Most of the measures they are taking are only reinforcing and strengthening the deflationary powers that have been unleashed due to massive credit expansion that was unsupported by the real economy.

The deflation coming can not be stopped - unless you are willing to destroy the financial economy - which would be even worse than deflation.

But you guys were saying Interest rates need to go up to stop inflation running away.
Are you also saying interest rates need to go up when deflations is looming.

I guess it must be high interest rates all the way eh?
We'll until you buy a property

Really2

!!!!!!? wrote: »

It matters not a jot what part of of the price consumers pay is tax - if that price goes down then it's still deflation of prices. The average consumer doesn't sit down with a calculator when they get home and worry about how much cash went in taxes on each purchase.

:rotfl:
How can the net price remain the same and cause price defaltion.
It is tax deflation that is all. The price of the goods as not changed!
Go on a business course or somthing as you knowladge of how pricing works is very poor.

TAX IS NOT USED TO PRICE GOODS. VAT IS A TAX CLAIMED ON THE GOVERMENT BEHALF BY THE SELLER.
YOU OF SET THE VAT YOU CHARGE AGAINST THE VAT YOU HAVE BEEN CHARGED.
THAT IS WHY YOU DO NOT USE IT TO WORK OUT PRICING AS IT IS A TAX NOT SOMeTING YOU MAKE A PROFIT OR LOSS ON.

purch

I'm talking about consumers

No you are not !!!

You are talking about DEFLATION OF THE PRICE OF GOODS

Don't just change tack once it has been pointed out you are talking complete drivel !!!

VAT is added to the price of goods. The price of that good stays the same, whatever happens to VAT.