Stagflation: Batten Down The Hatches ... here it comes (allegedly)

Conrad

Deflation is another possible outcome as Japan can attest to. Low spending, ultra low interest rates, receeding incomes, failing Banks.

fimonkey

In a nutshell, what's 'stagflation' ?

PasturesNew

fimonkey wrote: »

In a nutshell, what's 'stagflation' ?

When you have inflation with diminishing economic growth. Unemployment rises, prices go up. Generally a recession.

After that it gets more complex ... and you said in a nutshell.

tr3mor

fimonkey wrote: »

In a nutshell, what's 'stagflation' ?

Stagnation + Inflation = Stagflation

:money:

orange_gerbera

To quote Wikipedia...

Stagflation is a period of inflation combined with stagnation (that is, slow economic growth and rising unemployment), generally including recession.

fimonkey

Oh I see. I heard on the news this morning that a slow period of economic growth is NEEDED in order to take inflation out of the equation however, and thus not put any more pressure on interest rates, .... how would that work? Would that be an attempt to avoid stagflation?

tradetime

fimonkey wrote: »

Oh I see. I heard on the news this morning that a slow period of economic growth is NEEDED in order to take inflation out of the equation however, and thus not put any more pressure on interest rates, .... how would that work? Would that be an attempt to avoid stagflation?

It tends to work best in it's simplest form, when inflation is a localized problem, so in our case we would want to see inflation existing in the UK but not widely elsewhere, thus through a period of weak economic growth, spending, and thus demand for products and services fall off leading to a fall in prices.
That's the theory, the problem however is that inflation currently is a global phenomenon, this means that a slowdown or recession in the UK will be insufficient to stall the surge in prices, as for it to work properly in this situation we need widespread global slowdown, which may happen.

Also ideally one would like their currency to be fairly strong as this curbs the costs of imports, something we require a lot of, unfortunately the pound is generally weak against most currencies, the exception being the US dollar, but that is more a function of dollar weakness than pound strength. The implication of this, is that unless we are in a position to aggressively raise interest rates, or other countries aggressively cut, the pound will continue to weaken from already weak levels and thus fuel inflation. That's how I see it anyway, others with a better grasp of econimics may see it differently.

jamescredmond

neas wrote: »

isnt the railway privatised? When people can't afford to pay the higher fuel rises.. and walk to work or loose their job.... railways will run less.

Nobodys job is really 'recession proof'. everything hurts everything. Less commuters means less revenue for your company... less money to give you pay rises.... less need for people to do X Y Z job... its cyclic.

the freight side of the industry will undoubtedly get hit during a recession.

the passenger is a different animal. each train operating co. undertakes to run a min. level of service when it bids for a franchise. of course, it's possible that renogotiations could take place to reduce service if life got bad.
but on Planet UK Railways, nothing is ever straight-forward. TOC'c don't own the trains. they hire them from a ROSCO (rolling stock co.) at exorbitant cost, with long leases. effectively a 'lock-in'.

I could drawl on about the state of UK rail but it's boring.

suffice to say that British Rail was the only UK industry not to impose compuls. redundancies in the early '80's. AFAIK, there has been no lay-offs to speak of since the early 60's (the days of beeching).

I doubt if there will be any P45's for operating staff this time.

small pay rises will be the only indication to staff that a recession has bit.

Treadmill

neas wrote: »

isnt the railway privatised? When people can't afford to pay the higher fuel rises.. and walk to work or loose their job.... railways will run less.

Nobodys job is really 'recession proof'. everything hurts everything. Less commuters means less revenue for your company... less money to give you pay rises.... less need for people to do X Y Z job... its cyclic.

Less commuters does not mean less money for my company, I work for Network Rail and we sell train paths which are paid for regardless of how many people are on the trains.

The Railway will never go bust so its about as close to reccession proof as you can get.

jamescredmond

I sat next to some older commuters last week who discussed the state of UK rail and all agreed that the 'bad old days' of british rail were worth having!!

God bless privatisation.