Think inflation worries are over?

Really2

Wookster wrote: »

What we are seeing is not deflation. It is a correction of overblown asset prices.
.

So inflation is the correction of undervalued assets;)

Sorted nothing to worry about.

I still prefer to class prices going down as deflation and going up as inflation. Otherwise it looks like you are just making things up to prove a point.

poppysarah

LauraW10 wrote: »

I don't feel like my shopping has gone up 9%

Seriously, can someone explain to me why the BOE would reduce interest rates if inflation is on the rise? Surely this would just make them look stupid.

Go and read 1984.


If your shopping hasn't gone up then you're lucky. Bread is up, canned toms are up, carrots are up, spuds are up, onions are up.
You can get value ranges if you're canny but 33p for a can of tomatoes is insane. They were 7p a few years ago!

tomterm8

Wookster wrote: »

What we are seeing is not deflation. It is a correction of overblown asset prices.

Not true. We are on the verge of deflation, so far this has been held at bay by devaluing our currency. Those countries where they haven't been able to devalue their currency, such as the Latvia, the Ukraine, the US and Japan, are pretty clearly experiencing the start of a major deflation.

I don't think we can devalue our currency further, however, given the relative strengths of other countries.

Wookster wrote: »

QE did not work in Japan. All that excess liquidity was exported overseas to the UK, US and other Western countries (known as the yen carry trade) where it contributed to massive asset price (guess what?) inflation that is correcting now.

QE did work in Japan, once Japan actually started to implement it, it rapidly ended the period of deflation.

The period of house price rises we have experienced in recent years has rather more to do with the idiotic decision to disregard retail price inflation when selecting interest rates, and the decision to effectively remove the fractional reserve requirements on certain types of banks.

I don't understand how you can say that we don't have a period of deflation and then say " to massive asset price (guess what?) inflation that is correcting now".

Wookster

tomterm8 wrote: »

Not true. We are on the verge of deflation, so far this has been held at bay by devaluing our currency. Those countries where they haven't been able to devalue their currency, such as the Latvia, the Ukraine, the US and Japan, are pretty clearly experiencing the start of a major deflation.

But we are not talking about other countries. We are talking about the UK.
Other than house prices and energy, what is deflating? The UK has a negative trade deficit and a devaluing pound therefore all imports should be increasing in price.

I'd like to see where all this dreaded inflation is. Please can you point it out as I just can't see it, other than house prices.

tomterm8 wrote: »

QE did work in Japan, once Japan actually started to implement it, it rapidly ended the period of deflation.

The period of house price rises we have experienced in recent years has rather more to do with the idiotic decision to disregard retail price inflation when selecting interest rates, and the decision to effectively remove the fractional reserve requirements on certain types of banks.

I don't understand how you can say that we don't have a period of deflation and then say " to massive asset price (guess what?) inflation that is correcting now".

How do you figure that QE ended the period of deflation? How do you know that QE, not the other measures (zero percent interest rates) or the bottoming out of asset prices or the passage of time, was the silver bullet that ended the woes?

If you accept that house prices are over egged then surely you must see that pumping more cash into the economy is clearly not going to hasten the correction of asset prices, which is needed in order for normality to return and therefore could actually be counter productive.

Really2

Wookster wrote: »

But we are not talking about other countries. We are talking about the UK.
Other than house prices and energy, what is deflating? The UK has a negative trade deficit and a devaluing pound therefore all imports should be increasing in price.

I'd like to see where all this dreaded inflation is. Please can you point it out as I just can't see it, other than house prices.



How do you figure that QE ended the period of deflation? How do you know that QE, not the other measures (zero percent interest rates) or the bottoming out of asset prices or the passage of time, was the silver bullet that ended the woes?

If you accept that house prices are over egged then surely you must see that pumping more cash into the economy is clearly not going to hasten the correction of asset prices, which is needed in order for normality to return and therefore could actually be counter productive.

Your failure to admit that we are experience defaltion (and inflation is rampent) at the moment reminds me of another poster.:rolleyes:

I posted to you earlier my personal deflation so you have proof already.

Down
Mortgages down, rent down, cars down, fuel down, wages down or on hold, clothes down.

Up
food, electrical goods.

I think you could now see why deflation is happening a majority of our costs are child care costs and they are not going up so no inflation on that for 12 months.

You may have personal inflation it does not mean everyone does.

Wookster

Really2 wrote: »

Your failure to admit that we are experience defaltion (and inflation is rampent) at the moment reminds me of another poster.:rolleyes:

Are you stupid enough to think that because I remind you of another poster I might be the same person?

Really2 wrote: »

I posted to you earlier my personal deflation so you have proof already.

Down
Mortgages down, rent down, cars down, fuel down, wages down or on hold, clothes down.

Up
food, electrical goods.

I think you could now see why deflation is happening a majority of our costs are child care costs and they are not going up so no inflation on that for 12 months.

You may have personal inflation it does not mean everyone does.

I think we can agree that house prices are correcting. Why is this such a bad thing? By your rational this is deflation and a disaster to be avoided at all costs, if this is the case how on earth to over inflated assets ever correct?

itsnever2lateisit?

Really2 wrote: »

Your failure to admit that we are experience defaltion (and inflation is rampent) at the moment reminds me of another poster.:rolleyes:

I posted to you earlier my personal deflation so you have proof already.


You may have personal inflation it does not mean everyone does.

Exactly, just like there is no average familly of 1.8 children and a 0.4 of a Labrador, there's probably very few people experiencing either CPI or RPI exactly as the statistics show

For me personally I am experiencing inflation above the published numbers, due mainly to the fact that I have a fixed rate mortgage. Fuel while lower than 8 months ago, is still above a year ago, my shopping is going up every week:eek:

Really2

itsnever2lateisit? wrote: »

For me personally I am experiencing inflation above the published numbers, due mainly to the fact that I have a fixed rate mortgage. Fuel while lower than 8 months ago, is still above a year ago, my shopping is going up every week:eek:

Are you sure on fuel, 65L for me were around £70 this time last year now it is around £63.

So itmust have been around £1.10+ this time last year?

Really2

Wookster wrote: »

I think we can agree that house prices are correcting. Why is this such a bad thing? By your rational this is deflation and a disaster to be avoided at all costs, if this is the case how on earth to over inflated assets ever correct?

What are you on about house prices are falling but have nothing to do with inflation figures if they were we would be in very negative deflation.

tomterm8

Wookster wrote: »

But we are not talking about other countries. We are talking about the UK.
Other than house prices and energy, what is deflating? The UK has a negative trade deficit and a devaluing pound therefore all imports should be increasing in price.

I'd like to see where all this dreaded inflation is. Please can you point it out as I just can't see it, other than house prices.

Here's a question for you, then. Sterling has fallen by (very approximatly, I haven't looked the figure up) 30% in the last year, which really finished a month or so ago. Retail price inflation last month was -1.3%. Consumer price inflation last month was -0.7%. Note, the annualised rates are still positive, because of inflation earlier in the year. But that is the past. The most recent measurements show that prices over the entire economy are falling. And they are falling despite the fact that any time in the past where we suffered such a large devaluation in sterling we would be suffering massive inflation.

So, unless sterling continues to devalue, why would you expect suddenly to get inflation? At the moment, sterling is strengthening.

As i said, my opnion is that if we hadn't devalued our currency like crazy, we would be in outright deflation right now. Maybe I'm wrong, I just don't see how it is possible for us to keep on devaluing our currency given that all the other major economies are in a similar mess to us.

Wookster wrote: »

How do you figure that QE ended the period of deflation? How do you know that QE, not the other measures (zero percent interest rates) or the bottoming out of asset prices or the passage of time, was the silver bullet that ended the woes?

Well, Japan had 0% interest rates for a long time before it actually engaged in QE, and it was doing no good at all. Asset prices suddenly bottomed out very soon after QE was implemented. Of course, there is always debate, and it is just my opinion that it worked. Economics isn't a science.

I note, it didn't end the woes, I don't think that is possible. I do think that limited and low inflation is a necessary prerequisit to allow people to save money and rebuild their personal wealth. But Japan's problems were deeper than just deflation, they needed to rebuild their financial infrastructure, have too few social safety nets causing over saving and they have terrible demographics.

I don't think QE will end our woes either, but I believe that ensuring low but positive inflation will allow people to pay down debt and allow the economy to eventually recover.

Wookster wrote: »

If you accept that house prices are over egged then surely you must see that pumping more cash into the economy is clearly not going to hasten the correction of asset prices, which is needed in order for normality to return and therefore could actually be counter productive.

I do not accept your propositions.

Asset prices are only "over-egged" to the extent that the ratio of average house price to average wage is too high. This can be cured by either increasing the average wage, or by decreasing the house price, or both.

Allowing the economy to go into a general deflation would be disasterous, since the real cost of paying down the debt would rise and would force people to sell while at the same time further depressing prices. The point here is if house prices fall, but it is adequatly counteracted by other assets rising, there is no systemic problem. House price falls with a general deflation is a major problem. If we enter into a deflationary cycle it would be very hard to leave without taking very large risks with the economy. And, personally, I think we are right at the edge of a deflation.