Think inflation worries are over?

Wookster

tomterm8 wrote: »

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.

Actually the CPI is 3% (http://www.timesonline.co.uk/tol/money/consumer_affairs/article5779403.ece). This is what the B0E is supposed to target. It is still significantly above the targeted range.

tomterm8 wrote: »

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.

There is no proof, as you say that QE worked in Japan, just your guess. The facts are that billions (maybe trillions) of YEN were lent abroad to attract better rates of return then there would under the nil interest rate regime in Japan. Japan happens to be one of the biggest creditors of Western economies. Don't you think that their money might have caused asset price inflation here?

tomterm8 wrote: »

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.

Do you agree that houses are overpriced in the UK? If the answer is yes, how is QE going to help them reach an equilibrium?

dervish

MrFonzerelli wrote: »

A high petrol price is better for the environment and the UK trade balance.

The NHS is a good cause.

I htink most sensible people would consider that people's costs and expendtiture are HIGH enough.

People first - envorimment second.

MrFonzerelli

dervish wrote: »

I htink most sensible people would consider that people's costs and expendtiture are HIGH enough.

People first - envorimment second.

It is simplistic to think of the two as mutually exclusive. Nice sound bite though.

StevieJ

dervish wrote: »

I htink most sensible people would consider that people's costs and expendtiture are HIGH enough.

People first - envorimment second.

People first, what about the future of the kids :eek:

Wookster

StevieJ wrote: »

People first, what about the future of the kids :eek:

They have enough debt to pay off, thanks to Crash :rolleyes:

Rochdale_Pioneers

dervish wrote: »

about 30-40p too much.

Why should we have the most expesnive petrol in the world?

Poorly, the answer is that thats so the Labour Party can squander the tax revenues on chav scum and other so called 'good causes' etc...:mad:

We don't even have the most expensive petrol in Europe. According to the AA's survey we're 10th most expensive behind Belgium Denmark Finland Germany Netherlands Italy Norway Portugal Sweden.

You were saying?

Wookster

Rochdale_Pioneers wrote: »

We don't even have the most expensive petrol in Europe. According to the AA's survey we're 10th most expensive behind Belgium Denmark Finland Germany Netherlands Italy Norway Portugal Sweden.

You were saying?

Don't pay much attention to Dervish - I think he's a member of the BNP judging by some of the crap he sprouts.

lostinrates

I don't consider myself a rabid environmentalist, I drive a car, I get planes....and then someone says 'environment second' and I realise I actually am probably a rabid environmentalist.

tomterm8

Wookster wrote: »

Actually the CPI is 3% (http://www.timesonline.co.uk/tol/money/consumer_affairs/article5779403.ece). This is what the B0E is supposed to target. It is still significantly above the targeted range.

Please read what I posted again. The figure you are quoting is an annualised figure, based on price increases over the entire previous year. It's been plummeting over the last three months, because what is happening currently is that agregate prices have been reported as falling for each of the last three months.

Prices have been falling at a very fast rate.

Monetary policy, including interest rates and QE, is set for roughly 6 months in the future, and if prices continue to fall at the current rate, we will be in significant undershoot of the target in six months.

Wookster wrote: »

There is no proof, as you say that QE worked in Japan, just your guess. The facts are that billions (maybe trillions) of YEN were lent abroad to attract better rates of return then there would under the nil interest rate regime in Japan. Japan happens to be one of the biggest creditors of Western economies. Don't you think that their money might have caused asset price inflation here?

1. All economics is based on guesswork. Nevertheless, I have never seen any convincing argument that QE in Japan did not create inflation. I mean, come on, saying otherwise is contrary to the entire theoretical foundation of central bank economics for the last forty years.

2. I have never seen any evidence that QE in Japan caused asset price inflation in the UK. I have heared a lot of supposition that this was the case. If you want to provide me with some actual evidence, I am all ears.

If you look at the actual currency data, I don't see that Japan's capital position abroad (i.e. savings) is actually significantly different to what it was prior to qualitative easing or ZIRP.

The big elephant in the room is China, not Japan, and depressions often follow the rise of a new superpower.

Wookster wrote: »

Do you agree that houses are overpriced in the UK? If the answer is yes, how is QE going to help them reach an equilibrium?

I agree solely to the extent that the ratio of house price to income is too high. This can be solved by reducing the price of the house, or increasing income. The second is generally preferable.

Sir_Humphrey

tomterm8 wrote: »

Please read what I posted again. The figure you are quoting is an annualised figure, based on price increases over the entire previous year. It's been plummeting over the last three months, because what is happening currently is that agregate prices have been reported as falling for each of the last three months.

</p>
Your wasting your breath (fingers?) mate. I posted a time series of MoM CPI figures the other day, and he didn't pay any notice.