Ed Balls: Crisis more serious than the '30s

Generali

mbga9pgf wrote: »

No it doesnt. Prices in the shops rose around 4% according to CPI last year.

House prices fell 20%. Inflation can in fact lead to lower prices, as individuals have less disposable to spend as the essentials are now costing so much more.

Those are called Giffen goods. A good example is potatoes during the Irish Potato Famine.

As potatoes cost more, demand for potatoes kept rising as people could no longer afford bread and meat.

Under the Corn Laws, Ireland couldn't import wheat to substitute for potatoes.

A low point in British history and in the history of market intervention.

Andrew64

According to this article Balls' statement is generally silly, but there may be some truth in it:

http://www.ft.com/cms/s/0/a9397630-f7c7-11dd-a284-000077b07658.html

"Being charitable to Mr Balls, he might have been reflecting on the UK’s economic history, because the nation fared relatively well in the 1930s. According to British Historical Statistics by Brian Mitchell, the economy contracted by 5.6 per cent in 1931, after which there was a slow recovery. Output also fell by a similar amount in the early 1980s and it is quite possible that GDP will fall by more in this recession."

zarazara

the Giffen Goods example is a good one. Its what has happened to house prices over the last few years.The price kept going up and up and up yet people still kept buying, meanwhile putting other purchases ,like cars onto credit cards and the like. Now the birds are home to roost and everythings stuffed.