Deflation Part III

tomterm8

Generali wrote: »

Well as you may be aware, I now live in Australia so I miss the annecdotal stuff like how much it costs to fill the car.

Fundamentally though, if prices are rising but the amount of money around to buy things is falling then surely all that can happen is that less stuff is bought(?) at the higher price..

Or the velocity of money is rising. Which wouldn't be a surprise at the moment, since IIRC the velocity of money plummeted in 07/08 during the panic, and it revert to trend.

Generali

tomterm8 wrote: »

Or the velocity of money is rising. Which wouldn't be a surprise at the moment, since IIRC the velocity of money plummeted in 07/08 during the panic, and it revert to trend.

An increase in the velocity of circulation should be seen by an increase of the M4 measure of money supply relative to the M0 measure. AFAIAA that isn't happening to a significant extent (given that M0 and M4 are noisy measures at the best of times).

Really2

lemonjelly wrote: »

I half agree and half disagree with pretty much everybody!

So does everybody. I think most do even with themselves

lemonjelly

Really2 wrote: »

I disagree fuel has risen. Gas and electricity are nearly 10% down on last year.

Petrol is up. But Diesel near me is £1.029 I think even at it lowest early this year £0.899 and that was there only briefley, for most of the time when oil was low it was around £0.929 - £0.959.

I think the rise in petrol as been higher but as a cost to business and price inflation diesel is the barometer not petrol.
Fuel stats below
http://www.theaa.com/motoring_advice/fuel/aa-fuel-price-review-2008.html
http://www.theaa.com/motoring_advice/fuel/index.html

Perhaps it is a perception thing? However petrol certainly seems to be creeping up consistently at the pumps to me. 104.9 is the cheapest I can find near me. & am seeing as high as 109.9.

Gas/electricity appears certain to be rising in the near future IIRC. Plus of course we are in the high fuel usage time of year.

Resources are also finite, so these costs are likely to increase (though in the downturn, there may be reduced demand for gas/electricity?) due to reduced business consumption, reduced trading hours etc.

Given the cost I am experiencing on a weekly basis to fill my petrol tank, I really can't agree petrol is cheaper though, as I'm making the same journeys, but am having to spend more each week. Indeed I'll travel home 1 day, & the next morning see the station has added 2p!

Don't take it personally though - see my post above

Really2

lemonjelly wrote: »

Given the cost I am experiencing on a weekly basis to fill my petrol tank, I really can't agree petrol is cheaper though, as I'm making the same journeys, but am having to spend more each week. Indeed I'll travel home 1 day, & the next morning see the station has added 2p!

Don't take it personally though - see my post above

I don't I agree I said petrol is higher. A lot depends on what oil does but also the £. Personally I think oil will sit between $70 -$85 a barrel for some time due to economic constraints.

It will only take the £ to gain some ground to make things come down again.

Generali

lemonjelly wrote: »

ISWYM.

This recession is really confusing for me. I half agree and half disagree with pretty much everybody!

TBH I have the same problem. The money supply is falling which is deflationary but the Government is printing money which is inflationary.

The Chinese are going to take over the world because their currency is going to replace the the US dollar but as soon as it does, the rise in the Renimbi will render a large proportion of exports uncompetitive and so wreck the basis of the rise of the Chinese economy.

Too many contradictions, too many complications. I am interested to see how things will pan out over the next ten or twenty years.

I started posting on this board to test some theories I have and I am still tweaking and fine tuning them. My broadest views remain the same however for the UK - pension promises are unlikely to be met by the UK Government and by businesses and house prices will fall as a result.

lemonjelly

Really2 wrote: »

I don't I agree I said petrol is higher. A lot depends on what oil does but also the £. Personally I think oil will sit between $70 -$85 a barrel for some time due to economic constraints.

It will only take the £ to gain some ground to make things come down again.

At risk of kinda repeating myself, I kind of agree.

The cynic in me though thinks "yeak right." I feel that the oil companies are unlikely to reduce pump prices if the £ recovers.

Really2

lemonjelly wrote: »

At risk of kinda repeating myself, I kind of agree.

The cynic in me though thinks "yeak right." I feel that the oil companies are unlikely to reduce pump prices if the £ recovers.

I kind of agree but also I think from the figures you can see how much of the "cost" is actually tax.

Oil was less than $40 a barrel yet diesel was still 89.9P
Now oil is nearly double that but diesel as only gone up around 15% from the low.
(so it gives the impression they don't pass on full cuts or indeed rises, tax kind of masks it)

My personal view is very low inflation with fuel and food increases off set against cheaper products caused by low demand, higher taxes and world wide slack in nearly every economy.
For some one classed as a bull I think that could be the case for up to the next few years (possibly 5)
I find that thought fairly scary.

lemonjelly

Really2 wrote: »

I kind of agree but also I think from the figures you can see how much of the "cost" is actually tax.

Oil was less than $40 a barrel yet diesel was still 89.9P
Now oil is nearly double that but diesel as only gone up around 15% from the low.
(so it gives the impression they don't pass on full cuts or indeed rises, tax kind of masks it)

My personal view is very low inflation with fuel and food increases off set against cheaper products caused by low demand, higher taxes and world wide slack in nearly every economy.
For some one classed as a bull I think that could be the case for up to the next few years (possibly 5)
I find that thought fairly scary.

Agree completely with the scary bit, & food & fuel increases.

Not sure about the rest yet...:D

Really2

lemonjelly wrote: »

Agree completely with the scary bit, & food & fuel increases.

Not sure about the rest yet...:D

I will give you a "nearlynew" 100% guarantee electrical goods will be cheaper next year compared to this year.

To give you an example some of the equipment we sell is now 20% cheaper than the start of this year.

A lot on manufacturers have now manged to cut costs deep enough now to lower the cost of goods and survive. Some will still be doing it next year so the pain that has happened over the last 1.5 years is now only started to show signs of correction.

Believe it or not imported electrical inflated a lot this year, that is why I find the CPI figure interesting.