Inflation in a recession?

saveonarola

As I understand it, we have 'biflation' at the moment: inflation of everyday purchases and deflation of discretionary or debt-based assets like houses. If the economy began to shrink (again), would inflation necessarily fall back, at least while the economy was contracting, or is it possible to have inflation, even in the teeth of a recession?

purch

Yes............see the 1970's & 1980's

Phelpsie001

See Japan for a serious case of 'stagflation'. If food and fuel prices continue to rise, then inflation may do so. As the chancellor recently said ...."we now live in a truely global economy". Long gone are the days when we could 100% control our own inflation.

MFW_10Yrs_3

You can control your own personal inflation, to a certain extent. I bought a 12 month rail season ticket before prices went up in Jan 2011, which helped greatly. We also grow a lot of our own food on the farm and we try to walk as much as possible, cutting down our petrol costs. We also invested in a heating system that allows us to incorporate a wood burner, mains gas and solar into our water and space heating which we are hoping will reduce our gas costs. Our electricity useage has also gone down due to investment in A, A+ and A++ rated white goods (which we needed to replace anyway).

Anything that people can do to reduce their outgoings also reduces their exposure to inflation. The knock on effect for us is that we can invest these savings into our mortgage overpayments, reducing our outgoings and allowing us to further increase our overpayments in a beautiful spiral of debt repayment.

Graham_Devon

MFW_10Yrs wrote: »

You can control your own personal inflation, to a certain extent. I bought a 12 month rail season ticket before prices went up in Jan 2011, which helped greatly. We also grow a lot of our own food on the farm and we try to walk as much as possible, cutting down our petrol costs. We also invested in a heating system that allows us to incorporate a wood burner, mains gas and solar into our water and space heating which we are hoping will reduce our gas costs. Our electricity useage has also gone down due to investment in A, A+ and A++ rated white goods (which we needed to replace anyway).

Most normal folk sat in flats or housing estates simply can't do the above.

You still suffer rail ticket inflation, you are just a year behind the curve. The 8% will just hit you later, rather than now.

The farm is great, but not everyone has a farm or space to grow stuff, especially in newer homes.

The investment in fuels is great, but not everyone can do that either, infact only a very small percentage of people could.

Most people cannot control inflation themselves.

olly300

Graham_Devon wrote: »

You still suffer rail ticket inflation, you are just a year behind the curve. The 8% will just hit you later, rather than now.

The ticket staff themselves have always advised people to buy their yearly tickets early, or have calculated what ticket works out the best value for you.

Not sure they are suppose to in the privatised railway industry.

MFW_10Yrs_3

Graham_Devon wrote: »

Most normal folk sat in flats or housing estates simply can't do the above.

You still suffer rail ticket inflation, you are just a year behind the curve. The 8% will just hit you later, rather than now.

The farm is great, but not everyone has a farm or space to grow stuff, especially in newer homes.

The investment in fuels is great, but not everyone can do that either, infact only a very small percentage of people could.

Most people cannot control inflation themselves.

Friends of my parents live in retirement flats and have allotments. Another one of their friends adds to his pension by maintaining other people's garden, some of whom have veggie patches and share them with him. Plenty of people with gardens would like to have them maintained for free in return for a corner of a plot to grow veggies on.

I bought the season ticket in Dec 2010 and received an inflation pay rise in Jan 2011. The same will happen in 2012, so I am more than 1 year ahead of the curve. By getting a 12 month season ticket I get the equivalent of 12 months travel for 10 months money due to the discounted nature of this product.

A lot of people are looking at installing wood burners, most older properties that had an open fire can fit a woodburner. New builds are also installing woodburners, you don't even need a chimney, just an external wall and a flue pipe.

Most people can choose to defer the purchase of a 3D TV, IPOD and other consumer items that are subject to inflation. Most people can choose to shop at discounted clothes, furniture shops and grocers. Most people can choose to control their own inflation if they have the will.

Clearly you don't, but that doesn't mean that everyone else isn't prepared to search out bargains, get free things and generally do all the things that Martin advocates on this website. I realise that you pretty much live in here and DT but there is a wider forum out there with lots of great ideas to get things cheap or free. Why not try it?

hallmark

I think you're missing the point. What you're doing is cutting/avoiding spending. That's not the same as controlling inflation.

If something doubles in price it's 100% inflation whether or not you buy less of it or not.

Graham_Devon

MFW_10Yrs wrote: »

Friends of my parents live in retirement flats and have allotments. Another one of their friends adds to his pension by maintaining other people's garden, some of whom have veggie patches and share them with him. Plenty of people with gardens would like to have them maintained for free in return for a corner of a plot to grow veggies on.

I bought the season ticket in Dec 2010 and received an inflation pay rise in Jan 2011. The same will happen in 2012, so I am more than 1 year ahead of the curve. By getting a 12 month season ticket I get the equivalent of 12 months travel for 10 months money due to the discounted nature of this product.

A lot of people are looking at installing wood burners, most older properties that had an open fire can fit a woodburner. New builds are also installing woodburners, you don't even need a chimney, just an external wall and a flue pipe.

Most people can choose to defer the purchase of a 3D TV, IPOD and other consumer items that are subject to inflation. Most people can choose to shop at discounted clothes, furniture shops and grocers. Most people can choose to control their own inflation if they have the will.

Clearly you don't, but that doesn't mean that everyone else isn't prepared to search out bargains, get free things and generally do all the things that Martin advocates on this website. I realise that you pretty much live in here and DT but there is a wider forum out there with lots of great ideas to get things cheap or free. Why not try it?

No need for the personal stuff.

The majority of the nation cannot escape inflation. Inflation will be added whatever you buy. You can cut costs, by simply not buying something. But that's not escaping inflation. That's merely not buying something.

Your train analogy still does not hold up. You will still need to buy a train ticket at the end of this year, at the new 8%+ price. You haven't escaped inflation, just delayed it slightly, as your 2010 ticket would have been higher than 2009 prices.

hillcats

MFW_10Yrs wrote: »

My 3Yr 50% Equity Challenge (May 2010 -May 2013)
Date........Valuation...Mortgage..Equity.....Equity %
May 2010..£450,000....£300,000....£150,000...33.33%
May 2011..£450,000....£270,000....£180,000....40.00%
May 2012..£450,000....£253,000....£197,000..343.00%
May 2013..£450,000....£----,----...£----,---....--.--%

How come you have never altered your valuation from 450k which would affect your equity figures also when it is suggested that most homes have actually lost value?

DervProf

MFW_10Yrs wrote: »

Most people can choose to defer the purchase of a 3D TV, IPOD and other consumer items that are subject to inflation.

3D TVs and iPods are probably not the best examples of consumer items that suffer from inflation.