Merv....."reasonably confident"

Graham_Devon

I'm not sure my question has really been answered.

The food point from Thrugel was useful, but again, i'm at a loss as to why their food prices have decreased, whereas ours have risen nearly 30%.

We eat the same food, imported from the same places?

ILW

HAMISH_MCTAVISH wrote: »

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?



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?

I do actually agree with you regarding demand and inflation in theory.

Where it all gets a little hazy is that for the last 2 or 3 years the BoEs excuse for inflation running at way over target has been that it is virtually entirely to do with outside influences such as imported food and fuel prices. Yet Ireland have had a fall in food prices (Do they import much less of their food than us?)

As far as the major cause of Ireland problems, I stick to my guns that many have been caused by a boom fuelled by IRs too low for their economy at the time.

the_flying_pig

HAMISH_MCTAVISH wrote: »

Currency is a bit of it, but the bigger issue is economic collapse.

Have you seen the state of the Irish economy?:eek:

I'm quite sure we could also have Irish levels of inflation if we were willing to pay the price of Irish levels of economic devastation.

Which no rational person would be when they have other options....

currency is pivotal. someone mentioned food inflation since 2007.

imagine that, oh, a piece of cheese made in Holland was selling for 1 euro in 2007 and also 1 euro in 2011.

in 2007 a pound was worth 1.45 euros.

in 2011 a pound's worth about 1.15 euros.

so the 2007 cheese would have cost 69p, the 2011 cheese 87p, i.e. 26% cheese inflation in the UK, zero cheese inflation in ireland.

although of course there is also a [kind of] very well established relationship between unemployment and inflation.

sheffield_lad

The issue will be keeping inflation anywhere near 2% by the end of next year. It will fall below this on zero-1% growth, don't forget a full 1% will come off after January when the vat rise of Jan 2010 is no longer accounted for in the annually adjusted comparisons. Looks to me as we need more QE now before we splutter out.

The_White_Horse

it is the fault of the public sector and leftie.

Southend1

howee wrote: »

The issue will be keeping inflation anywhere near 2% by the end of next year. It will fall below this on zero-1% growth, don't forget a full 1% will come off after January when the vat rise of Jan 2010 is no longer accounted for in the annually adjusted comparisons. Looks to me as we need more QE now before we splutter out.

Look where printing money led Europe to in the 1920s/1930s! More "QE" is the last thing we need IMHO. What we do need is diversion of tax from unproductive public spending to infrastructure works and investment in new tech businesses to cut unemployment and secure our long term future.

ILW

Southend1 wrote: »

Look where printing money led Europe to in the 1920s/1930s! More "QE" is the last thing we need IMHO. What we do need is diversion of tax from unproductive public spending to infrastructure works and investment in new tech businesses to cut unemployment and secure our long term future.

That is why the Germans are so opposed to it.

I have heard the in the Bundesbank, they have a framed 1 million Mark banknote to act as a warning to future generations.
Once the inflation cat is let out of the bag, it can be very difficult to stop.

HAMISH_MCTAVISH

ILW wrote: »

That is why the Germans are so opposed to it.

Irrationally so, in my opinion.

I have heard the in the Bundesbank, they have a framed 1 million Mark banknote to act as a warning to future generations.

They're like the person who was badly hurt in a plane crash, that refuses to ever fly again. Despite knowing that the chances of that happening to them twice are a million to one, fear trumps logic.

Once the inflation cat is let out of the bag, it can be very difficult to stop.

As can the deflationary death spiral.

andybenw

Regarding house prices though. The important thing is that interest rates are remaining low, allowing the slow deflation of what is remaining of the housing bubble. That way no-one gets hurt too badly by Negative Equity. And from a personal point of view, rents remain high so it is looking good for my future BTL.

ILW

HAMISH_MCTAVISH wrote: »

Irrationally so, in my opinion.



They're like the person who was badly hurt in a plane crash, that refuses to ever fly again. Despite knowing that the chances of that happening to them twice are a million to one, fear trumps logic.



As can the deflationary death spiral.

You may not agree with the German stance, but you do have to admit that their economy is doing pretty well compared to the rest of Europe. Possibly they do know what they are talking about.