Merv....."reasonably confident"

HAMISH_MCTAVISH

Graham_Devon wrote: »

They still import everything the same as we do though, and apparently most of ours is imported inflation.

ILW wrote: »

But we keep getting told that our high inflation is due to imported fuel, food, etc prices. Surely that is the same for iIeland. Or are their imports cheaper because they have a failing economy?

The inflation figure is calculated from a basket of goods.

Ireland will be suffering from the same imported inflation that we are for imported goods.

They will however also be suffering from significant deflation in other goods due to demand destruction from the smoldering ruin that used to be their economy.

So the question you should be asking is not why Ireland has lower inflation, but whether suffering an economic collapse like Ireland is a price worth paying for lower inflation in the UK.

Obviously the UK government thinks not....

ILW

HAMISH_MCTAVISH wrote: »

The inflation figure is calculated from a basket of goods.

Ireland will be suffering from the same imported inflation that we are for imported goods.

They will however also be suffering from significant deflation in other goods due to demand destruction from the smoldering ruin that used to be their economy.

So the question you should be asking is not why Ireland has lower inflation, but whether suffering an economic collapse like Ireland is a price worth paying for lower inflation in the UK.

Obviously the UK government thinks not....

What type of goods are suffering significant deflation in Ireland?

Or to put it another way, are we overpaying here?

Thrugelmir

Graham_Devon wrote: »

Can I just ask anyone who understands...

Howcome the Ireland rate of Inflation is 1.1%, yet ours is 5%?

All to do with whats measured? Or more to do with the currency?

Food and drink has risen 28% in the UK since 2007 , in Eire it has fallen 0.7%.

Unemployment in Eire is at 14.3%.

Couple this with zero pay rises and far higher taxes.

Eire is suffering a real squeeze.

HAMISH_MCTAVISH

ILW wrote: »

What type of goods are suffering significant deflation in Ireland?

You'd have to look at the composition of the Irish RPI/CPI basket and track changes over time to answer that.

Or to put it another way, are we overpaying here?

Do you understand how demand destruction works?

Here's a clue.....



Ireland have paid a heavy price for lower inflation than the UK.

If they had a choice, I think they'd swap a few percent of higher inflation for 6% lower unemployment in a heartbeat.:cool:

ILW

Your logic does seem a bit hit and miss. Are you saying that low inflation is a direct cause of high unemployment?
If so what is the link?

the_flying_pig

HAMISH_MCTAVISH wrote: »

The inflation figure is calculated from a basket of goods.

Ireland will be suffering from the same imported inflation that we are for imported goods.

They will however also be suffering from significant deflation in other goods due to demand destruction from the smoldering ruin that used to be their economy.

So the question you should be asking is not why Ireland has lower inflation, but whether suffering an economic collapse like Ireland is a price worth paying for lower inflation in the UK.

Obviously the UK government thinks not....

by "obvious economic collapse" i assume you mean more house price falls, eh?

on a relevant note I spotted this morning that US GDP has nudged to al all-time high, whilst ours remains comfortably below peak. this despite far higher average house price falls in the US.

if it wasn't already obvious the key things that are holding the UK economeh back are back are debt, debt, and more debt. we've got far, far, too much private sector debt. i know you're only some bloke on a message board who doesn't want the value of his house to fall but i very soon we surely have to get beyond suggestions that more debt can somehow be our saviour?

here's a good article from yesterday on debt.

http://www.cityam.com/news-and-analysis/allister-heath/uk-set-decade-deleveraging

HAMISH_MCTAVISH

ILW wrote: »

Your logic does seem a bit hit and miss.

The logic is irrefutable.

That rising unemployment destroys demand, and that demand destruction lowers inflation from the point it would otherwise have been, cannot be argued with.

Are you saying that low inflation is a direct cause of high unemployment?

No.

so what is the link?

Once unemployment gets above a certain point, the resulting demand destruction lowers prices in enough categories of goods and services that it outweighs the increased prices from imported goods, and overall inflation falls.

HAMISH_MCTAVISH

the_flying_pig wrote: »

by "obvious economic collapse" i assume you mean more house price falls, eh?

Nice rant and all, but actually by obvious economic collapse I was referring to unemployment at 14%, business failures on an epic scale, and nominal terms pay cuts for a large section of the population.

ILW

HAMISH_MCTAVISH wrote: »

The logic is irrefutable.

That rising unemployment destroys demand, and that demand destruction lowers inflation from the point it would otherwise have been, cannot be argued with.



No.



Once unemployment gets above a certain point, the resulting demand destruction lowers prices in enough categories of goods and services that it outweighs the increased prices from imported goods, and overall inflation falls.

Germany has inflation at around 2% and unemployment at around 5%. Which would tend to indicate that the two are not linked in the way you explain.

I get the impression that most of Irelands woes stem from an unsustainable property bubble caused in part by too low interest rates and an overabundance of available credit over the last decade or so.

HAMISH_MCTAVISH

ILW wrote: »

Germany has inflation at around 2% and unemployment at around 5%. Which would tend to indicate that the two are not linked in the way you explain.

Not in a healthy economy, where demand destruction isn't an issue.

German levels of unemployment are not high enough to have significantly destroyed demand within their economy.

If German unemployment rose substantially, Germany would almost certainly be looking at deflation.

That demand destruction lowers inflation is not really debatable, it's the cornerstone of established economic theory.

So I'll ask you again, do you understand how demand destruction works and how it impacts inflation?

I get the impression that most of Irelands woes stem from an unsustainable property bubble caused in part by too low interest rates and an overabundance of available credit over the last decade or so.

Well you would, wouldn't you? Given that it's your answer for everything.:cool:

Seriously though.....

How does Ireland's current rate of 14% unemployment NOT destroy demand?

And how is it you think lower demand does not translate into lower prices and hence lower inflation?