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A Question for Economists

patchwork_cat
Posts: 5,874 Forumite
I have a question for economists.
Inflation has averaged around the 5% mark for the last couple of years (aware it is not rising quite so quickly now) and in real terms for us as a family made of a public sector employee and a SAHM we are £300 approx worse off than 2 years ago.
Inflation however is still growing and yet we have significantly less available income and goods are only worth what people are prepared to pay for them.
We are continually being told that the public sector had it good and the private sector is much worse off with redundancies and massive pay cuts flying around.
So why is inflation still rising if there is less available money?:question:
Inflation has averaged around the 5% mark for the last couple of years (aware it is not rising quite so quickly now) and in real terms for us as a family made of a public sector employee and a SAHM we are £300 approx worse off than 2 years ago.
Inflation however is still growing and yet we have significantly less available income and goods are only worth what people are prepared to pay for them.
We are continually being told that the public sector had it good and the private sector is much worse off with redundancies and massive pay cuts flying around.
So why is inflation still rising if there is less available money?:question:
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Comments
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patchwork_cat wrote: »
So why is inflation still rising if there is less available money?:question:
We in the west had the world to oursleves for a long time, but unfortunately those pesky Chinese, Indians, Brazillians and Africans now want a share.
Example, China now sucks in huge quantities of rubber, meaning things like tyres are getting more expensive.
There is little a national Government can do to mediate this.
Celebrate. All the lefties wanted the rest of the world to become developed. Lets just consume every last part of the Earth until now't is left, hoorah.0 -
Because prices are going up. Inflation is a tool to work out the price index. things like energy and fuel prices have driven the large rise in inflation.
With reference to goods are only worth what people are willing to pay for them. Do you believe this with essentials like gas and oil?! Because so far i havent seen anyone refusing to pay for petrol or heating, cutting back yes but essentially paying the same as they did a couple of years ago.
Essentially inflation is rising because retailors (sp?!?) and wholesalers arent that willing to budge on price therefore were paying more than what we did a couple of years ago.
Sure someone will be along to explain it better than me, i failed economics0 -
patchwork_cat wrote: »Inflation has averaged around the 5% mark for the last couple of years (aware it is falling now)
.
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Inflation however is still growing
.
.
.
So why is inflation still rising if there is less available money?:question:
Does not compute - if you're aware that it's falling why are you asking why it's rising?0 -
patchwork_cat wrote: »I have a question for economists.
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Unless Generali shows up I don't think you will have much luck there.
In general, price inflation and monetary inflation are not necessarily linked.
The pound is weak and interest rates are very low, which makes it more costly for us to import things.
The fractional reserve system also relies on more debt being created to keep things moving, which is why we are having all the queasing, otherwise as debts are paid down pounds literally vanish!
If we ended up with the scenario that there were only £10 left in the entire country it doesn't necessarily mean that you'd be able to buy Norfolk with 3p.0 -
We in the west had the world to oursleves for a long time, but unfortunately those pesky Chinese, Indians, Brazillians and Africans now want a share.
Example, China now sucks in huge quantities of rubber, meaning things like tyres are getting more expensive.
There is little a national Government can do to mediate this.
Celebrate. All the lefties wanted the rest of the world to become developed. Lets just consume every last part of the Earth until now't is left, hoorah.
And there is me thinking that those leftys were all protesting against globalisation and it was the Capitalists who were promoting it to take advantage of cheap Labour and expanding markets. I got that totally wrong, thanks for putting me right'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
patchwork_cat wrote: »
So why is inflation still rising if there is less available money?:question:
In economics there is a concept called price elasticity of demand. When demand is elastic, as the price of a good rises, demand in theory reduces. However a lot of things that we pay for are relatively inelastic: in other words, you have to buy them even if the price goes up. This includes things like petrol, food, train fares etc. If for example you commute each month and your train fares go up you have two choices: to pay more or to look for what is called a substitute - a way of achieving the same effect more cheaply. So you might decide to try taking the coach instead of the train even though it takes longer, or buy own brand food instead of labels for the same reason.
Because so much of the stubborness with inflation is due to these inelastic issues - particularly over the past few years food and fuel - the cost of inflation has remained higher than you would expect.
To muddy the water further, because demand for some price inelastic goods such as fuel and food is global, it matters less what is happening to demand in this country as another country will also be looking to buy. This is not helped by what is called cartelling: the getting together of large companies or trade bodies to ensure that supply keeps price optimally high. This often happens with oil through OPEC.
That's my take anyway. Hope its useful.Please stay safe in the sun and learn the A-E of melanoma: A = asymmetry, B = irregular borders, C= different colours, D= diameter, larger than 6mm, E = evolving, is your mole changing? Most moles are not cancerous, any doubts, please check next time you visit your GP.
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ruggedtoast wrote: »Unless Generali shows up I don't think you will have much luck there.
In general, price inflation and monetary inflation are not necessarily linked.
The pound is weak and interest rates are very low, which makes it more costly for us to import things.
The fractional reserve system also relies on more debt being created to keep things moving, which is why we are having all the queasing, otherwise as debts are paid down pounds literally vanish!
If we ended up with the scenario that there were only £10 left in the entire country it doesn't necessarily mean that you'd be able to buy Norfolk with 3p.
So there is no one with a degree in Economics on this board? Oh dear.0 -
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Why does anyone pay £3.00 for a takeaway coffee from Starbucks?
That truly is a mystery to me.0
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