Covid 19 - Will it cause inflation or hyperinflation?

port_of_spain

Linton said:

Inflation happens for 2 main reasons:

1) There is insufficient supply of goods and/or labour to meet the demand. Therefore prices and wages increase leading to increases in price-linked guaranteed income and the demands of labour for increased wages.

2) Decreasing value of the £ raises the cost of imported goods leading to increases in price-linked guaranteed income and the demands of labour for increased wages.

(1) seems unlikely since the Government backed personal income at the moment is less than people were getting prior to Covid-19 and there is little opportunity to spend.  Once we start getting back to normal people are unlikely to have a lot of money for excessive spending and it would seem unlikely that insufficient labour would be a problem.

(2) seems unlikely since the UK is not in a significantly worse situation than other developed countries.

How dare you use logic to discuss the causes of inflation! You should know by now that "But Weimar!" or "But Zimbabwe!" or "But the printing presses!" beats any reasoned argument on this topic

McNinian

Shadowstats and the Chapwood Index track what the real US CPI inflation is year on year and their numbers are way higher than the phony official rate is because they factor in changes to food and energy prices and many other costs their citizens have to meet in order to live while government data ignore them in order to rob those on fixed income and provide cover for the Fed to continue pretending they are unable to generate inflation. What a bunch of crooks!

I've never been to the US but whenever I speak to anyone who has they always say the same words: "I can't believe how expensive everything is there."

kuratowski

@port_of_spain you missed the shibboleth "Fiat currency", which conquers all

To be fair, if inflation were that predictable and well understood, we wouldn't have had a decade of ultra low rates and anaemic growth.  Central banks have learnt that they do not actually have total control of inflation, nor inflation expectations, which have resisted all efforts to increase them.  The sensible thing is to acknowledge that we do not have any certainty about what happens next.

Meanwhile, markets have learnt you don't try to fight the Fed.  If this was a deathmatch, Fed beats traders, and Inflation beats the Fed.

EdGasketTheSecond

In the end the market wins; even against the FED.

BananaRepublic

EdGasketTheSecond said:

In the end the market wins; even against the FED.

The market beat the UK government as George Soros well knows. 

As regards the US and cost of living, 15 years ago I imported several camera lenses from the US, and even with shipping and taxes I saved money. Now the same items are about the same price when you add on VAT. Importing would lead to much higher prices than home bought goods. I also remember taking some holiday there during a business trip, and it was well cheap for motels and food.

kuratowski

Negative interest rates and now negative oil prices.  No one knows what is going to happen next.

Malthusian

As regards the US and cost of living, 15 years ago I imported several camera lenses from the US, and even with shipping and taxes I saved money. Now the same items are about the same price when you add on VAT. Importing would lead to much higher prices than home bought goods. I also remember taking some holiday there during a business trip, and it was well cheap for motels and food.

15 years ago one quid would almost buy you two whole dollars. I'm not sure you can draw too many conclusions about the cost of living in the US through Sterling-tinged glasses. The exchange rate doesn't generally come into cost of living (expats living off fixed pensions in another currency are a minority).