King warns of too-low inflation

martinman3

Hasn't it gone quiet since !!!!!!? was proved correct that VAT is included in RPI/CPI and so the cut is deflationary ?

Really2

martinman3 wrote: »

Hasn't it gone quiet since !!!!!!? was proved correct that VAT is included in RPI/CPI and so the cut is deflationary ?

Well we have yet to see if it is aplied and not adjusted out as it only a tempory fix.
Also I think his point was accidental.
But in the real world it is neither.

A £100 Net item is still £100 Net.

RPI/CPI why not try RPIY they are only ways to doctor inflation to support a view.:D

WTF?_2

martinman3 wrote: »

Hasn't it gone quiet since !!!!!!? was proved correct that VAT is included in RPI/CPI and so the cut is deflationary ?

It's not a competition .... though sometimes reading here you'd think it was.

I note that the news right now is reporting that the govt. were in fact thinking of a VAT increase until recently. If the goal was to create inflation in the CPI (to 'fight deflation'), they could easily do so by announcing they'd jack up VAT to compensate for price drops and they'd raise tax as well.

IMO this whole 'deflation of consumer prices' scare is a complete red herring designed to cover up an attempt to inflate the debts away and get people back on the credit/consume bandwagon.

People need to buy consumables like food and even for the more expensive luxury class of goods they aren't going to hold out forever for the sake of saving a few quid. As a certain point of cheapness is reached, you'll find that lots of luxury goods like tellies and such become unviable to import/sell anyway so there would be a cut off point as supply restricts itself and a baseline price from the new supply:demand ratio is established.

If we followed the same logic then we'd say that houses will eventually go to zero unless someone does something - it's nonsensical. There will be a baseline price and when we hit it, prices will scrape along the bottom until confidance returns and demand increases thanks to increased wages/ ability to borrow more etc.

Generali

Really2 wrote: »

RPI/CPI why not try RPIY they are only ways to doctor inflation to support a view.:D

I've never bought this idea that the inflation figures are manipulated in some way. As much as anything else, if you understate the inflation figures by 5 percentage points (as I've often seen in the newspapers), you are overstating growth by a similar amount.

When all the fuss about that was going on, growth was about 2%pa. That would mean that instead of the economy growing at a reasonable if unexciting rate, it was shrinking at a pace reminiscent of the milder parts of the 1930s depression which clearly wasn't true.

!!!!!! is 100% correct about VAT feeding deflation figures FWIW. The direct effects will only be felt for a year as it equates to a one-off drop in the price level. It shouldn't feed the dangerous bit of deflation as it is a one-off fall rather than a persistent tendency for prices to fall month after month. People will see that in their experiences on the High Street which is really where they get their idea about where we are with deflation/inflation. The High Street experience is what drove the idea now held by many that inflation was being understated.

!!!!!!? wrote: »

If we followed the same logic then we'd say that houses will eventually go to zero unless someone does something - it's nonsensical. There will be a baseline price and when we hit it, prices will scrape along the bottom until confidance returns and demand increases thanks to increased wages/ ability to borrow more etc.

Ultimately as prices fall, companies will go bust as they are unable to support their debts. That will cut competition and so allow the survivors to raise prices eventually, halting deflation. It may be a long process though if ti happens. It's still not a certainty that we'll face deflation although it is looking increasingly likely.

WTF?_2

Really2 wrote: »

Well we have yet to see if it is aplied and not adjusted out as it only a tempory fix.
Also I think his point was accidental.
But in the real world it is neither.

A £100 Net item is still £100 Net.

RPI/CPI why not try RPIY they are only ways to doctor inflation to support a view.:D

Because CPI and RPI are the established 'measures of inflation' (even though I think they are doctored in favour of understating inflaton).

'CPI deflation' as spoon-fed to us by the media recently is just a bogeyman designed to cover up an inflationary policy aimed at inflating away debt and stimulating spending.

Really2

Generali wrote: »

I've never bought this idea that the inflation figures are manipulated in some way. As much as anything else, if you understate the inflation figures by 5 percentage points (as I've often seen in the newspapers), you are overstating growth by a similar amount.

When all the fuss about that was going on, growth was about 2%pa. That would mean that instead of the economy growing at a reasonable if unexciting rate, it was shrinking at a pace reminiscent of the milder parts of the 1930s depression which clearly wasn't true.

I don't mean it in a conspiracy way, but there are so many ones it is hard to see whic is the most accurate.
I just find it mad to include TAX in an inflation index. I know it effects the consumers wallet but in real terms as somone who runs a B2B company VAT could be anything it does not affect our purchase prices or sales prices.

Really2

!!!!!!? wrote: »

Because CPI and RPI are the established 'measures of inflation' (even though I think they are doctored in favour of understating inflaton).

'CPI deflation' as spoon-fed to us by the media recently is just a bogeyman designed to cover up an inflationary policy aimed at inflating away debt and stimulating spending.

I know what you mean but you must see what I mean in B2B terms it as no effect.
I am not trying to get one over on you but it is only the consumer will see any defaltion if it is passed on. For comanies it is as you were.

WTF?_2

Really2 wrote: »

I know what you mean but you must see what I mean in B2B terms it as no effect.
I am not trying to get one over on you but it is only the consumer will see any defaltion if it is passed on. For comanies it is as you were.

As noted by another poster, businesses that reclaim VAT on fuel are now worse off thanks to the excise duty increases to 'balance' the VAT cuts.

'Balance' for the consumer that is ... and it's not like those excise duty increases will be removed when the VAT goes back up either, so the consumer gets done in the end.


Way to go, Gordon.

Really2

!!!!!!? wrote: »

As noted by another poster, businesses that reclaim VAT on fuel are now worse off thanks to the excise duty increases to 'balance' the VAT cuts.

'Balance' for the consumer that is ... and it's not like those excise duty increases will be removed when the VAT goes back up either, so the consumer gets done in the end.


Way to go, Gordon.

But it is clearing a nice big area for rates cuts now.
Perhaps the drop was to cause further rate cuts. That will possibly bring more "free cash" for a good few more people.
Unfortunatly at the expense of savers etc,

PS increse in fuel duty should cause those affected to inflate their prices, most business's work on a %margin so if COGS go up so does the sale price.

neverdespairgirl

Really2 wrote: »

Most of the food items but they sell electrical items, blankets, tools etc have you not been to one in the last six years? they also have the online arm.
I don't think they could achive their figures on fruit veg and meat alone.

SImple answer - no. I haven't been to one in the last 6 years. I don't like Tesco, an ethical stance made easier by the fact that there isn't one near here, apart from one of the city-centre-corner-shop-type ones near Tottenham Court Road.