UK inflation rate falls to 1.7%

AndyGuil

Thrugelmir wrote: »

That's an economic theory that may have come undone.

It's why borrowers are rewarded at the expense of those that save.

The USA suffered deflation for a 150 years before 1913. Did it no harm in terms of becoming an economic powerhouse for a century.

Good point. I don't think it will be acceptable or allowed to happen today.

kennyboy661

Thrugelmir wrote: »

That's an economic theory that may have come undone.

It's why borrowers are rewarded at the expense of those that save.

The USA suffered deflation for a 150 years before 1913. Did it no harm in terms of becoming an economic powerhouse for a century.

No it didn't.

It had periods of deflation and periods of inflation, some of which were quite large.

Deflation as high as 14% and inflation as high as 27%.

It had a civil war. You will struggle to find any examples in human history when a war resulted in deflation.

Overall there was very mild inflation in the 19th C - although statistics are hardly the same as today.

antrobus

AndyGuil wrote: »

That is low, but still not going to happen with inflation currently below target.

Once again, that's a different argument.

AndyGuil

antrobus wrote: »

Once again, that's a different argument.

It is one that dominates the BOE decision on the base rate amongst the many factors taken into consideration.

Thrugelmir

kennyboy661 wrote: »

No it didn't.

It had periods of deflation and periods of inflation, some of which were quite large.

Deflation as high as 14% and inflation as high as 27%.

It had a civil war. You will struggle to find any examples in human history when a war resulted in deflation.

Overall there was very mild inflation in the 19th C - although statistics are hardly the same as today.

Was commenting on the trend over the entire period rather than specific periods.

Since WW2 the UK, USA and Japan have adopted monetary expansion as a core economic policy. While others didn't. Hence the UK focus on GDP which in part measures spend. Rather than productivity and output which is where real growth in living standards will be generated.

CLAPTON

Thrugelmir wrote: »

Was commenting on the trend over the entire period rather than specific periods.

Since WW2 the UK, USA and Japan have adopted monetary expansion as a core economic policy. While others didn't. Hence the UK focus on GDP which in part measures spend. Rather than productivity and output which is where real growth in living standards will be generated.

gdp is the measure of the all the of goods and services produced
which equal the total spending in the economy
which equals the total income in the economy
always excepting the actual difficulty of making the actual measurement and clear definitions

Thrugelmir

CLAPTON wrote: »

which equal the total spending in the economy
which equals the total income in the economy

And if the spend is generated by ever increasing debt what then. Not least that the Government has no need to ever balance the budget. Brown thought that he had solved the riddle. With endless claims of the abolishment of boom and bust. Hardly surprising that Balls has kept a low profile sine the election given that much of the policy was his.

CLAPTON

Thrugelmir wrote: »

And if the spend is generated by ever increasing debt what then. Not least that the Government has no need to ever balance the budget. Brown thought that he had solved the riddle. With endless claims of the abolishment of boom and bust. Hardly surprising that Balls has kept a low profile sine the election given that much of the policy was his.

GDP is not a measure of debt

debt alone is neither good nor bad unless you consider savings to be bad (broadly savings equal debts)

are you for or against high levels of savings (i.e. debts)?

sabretoothtigger

savings dont match debts in this country. We cant assume anything any more ?
We had a trade balance deficit and liability from the debt, also USA. I will assume our currency is weak and getting weaker because of that.

That would raise costs most likely as we lose the comparative advantage of cheaper imports. So I'm for savings by UK people, if we use savings of the people who also import from its a problem if we lose both. That'd be a large difference between debt and actual savings

You will struggle to find any examples in human history when a war resulted in deflation

With a sound currency, losing millions of people should be deflation as production ability is also lost. Is this why we could not hold a gold standard after world war one, instead of defaulting they devalued but it would be deflation otherwise

Thrugelmir

CLAPTON wrote: »

(broadly savings equal debts)

In around 1970 perhaps. Since then the monetary policy has been progressively loosened. UK mortgage debt stopped being funded by retail deposits in around 2000. The boom of 2003-2007 (£600 billion) was primarily funded by selling securitised debt to overseas investors.

Hence why we've had endless liquidity schemes to keep the UK banks operational and give them breathing space to accord with Basle 3.