Mervin King blames high inflation on fuel prices
Discussion
http://news.bbc.co.uk/1/hi/business/7458209.stm
In his letter to Alistair Darling Mervin states that " Why Has inflation moved away from the target: Inflation has risen sharply this year, from 2.1% in December to 3.3% in May. The rise can be accounted for by a large and, until recently, unanticipated increases in the prices of food, Fuel, gas and electricity. These components alone account for 1.1 percentage points of the 1.2 percentage point increase. "
So while the economy suffers, One hugely obvious remedy to this situation is to slash the price of fuel, that would lower the 'Fuel and Food' aspect of Mervins findings significantly.
Can we rely on our highly competent government to take this much needed course of action? Can we hell!
If inflation continues to rise it's unlikely we will see any further drops in interest rates, which will compound the problem further for consumers.
In his letter to Alistair Darling Mervin states that " Why Has inflation moved away from the target: Inflation has risen sharply this year, from 2.1% in December to 3.3% in May. The rise can be accounted for by a large and, until recently, unanticipated increases in the prices of food, Fuel, gas and electricity. These components alone account for 1.1 percentage points of the 1.2 percentage point increase. "
So while the economy suffers, One hugely obvious remedy to this situation is to slash the price of fuel, that would lower the 'Fuel and Food' aspect of Mervins findings significantly.
Can we rely on our highly competent government to take this much needed course of action? Can we hell!
If inflation continues to rise it's unlikely we will see any further drops in interest rates, which will compound the problem further for consumers.
Edited by skymaster on Tuesday 17th June 11:41
Thing is, "real" inflation is a lot higher.
things like DVDs etc. are included, however these are non-essential goods.
things like utilities, petrol, food etc. people HAVE to buy. Things that are keeping inflation "low" are things that people will stop buying.
Currently people are re-adjusting what they pay for and prioritising. There's only so much that can be done so people have default on loans/mortgages (they still have to go to work and eat so can't cutback there etc.)
I foresee this getting very messy. People have been "refinancing" on their house, cheap loans etc. to get through times (hard or not) but this option isn't there anymore, certainly not to the degree that it has been.
No-one should be surprised at all this.
What made me laugh is our chancellor has said employers (public and private) should NOT give inflation payrises as it "undermines" rather than raises peoples living standards.
things like DVDs etc. are included, however these are non-essential goods.
things like utilities, petrol, food etc. people HAVE to buy. Things that are keeping inflation "low" are things that people will stop buying.
Currently people are re-adjusting what they pay for and prioritising. There's only so much that can be done so people have default on loans/mortgages (they still have to go to work and eat so can't cutback there etc.)
I foresee this getting very messy. People have been "refinancing" on their house, cheap loans etc. to get through times (hard or not) but this option isn't there anymore, certainly not to the degree that it has been.
No-one should be surprised at all this.
What made me laugh is our chancellor has said employers (public and private) should NOT give inflation payrises as it "undermines" rather than raises peoples living standards.
As was pointed out on another program on the wireless, we are dependent on oil for just about everything.
Food - both in the production, packaging and distribution
Domestic/Housing - heat & light, products within the home (anything made of plastic - or oil based - cosmetics, detergents, plus paints, furnishings etc..)
Transport - goes without saying.
And therefore Industry.
Don't forget that the "underlying rate of inflation" as the Politicrats call it, excludes mortgage repayments and food.
Real inflation is said to be somewhere around 8%, possibly rising to 12% before the year is out as things start to filter through.
That means that people will be demanding bigger pay rises, and then the viscous circle begins.
To control it, the Bank of England has to remain calm, and the Government has to act to get a grip on it. They have a buffer in the fuel price which we all know and love as "Road Fuel Duty".
Though even if they did away with it completely, the affect would only be short term as the oil price continues to rise. And they'd have to find the shortfall of taxation revenue which amounts for many £Bn - which would mean quite a few pence on income tax, or some other stealth tax which would cripple us financially.
Perhaps 1p/litre of Aviation Fuel Duty..... which will never work as the paraffin budgies will refuel where there is no duty on the stuff.
Food - both in the production, packaging and distribution
Domestic/Housing - heat & light, products within the home (anything made of plastic - or oil based - cosmetics, detergents, plus paints, furnishings etc..)
Transport - goes without saying.
And therefore Industry.
Don't forget that the "underlying rate of inflation" as the Politicrats call it, excludes mortgage repayments and food.
Real inflation is said to be somewhere around 8%, possibly rising to 12% before the year is out as things start to filter through.
That means that people will be demanding bigger pay rises, and then the viscous circle begins.
To control it, the Bank of England has to remain calm, and the Government has to act to get a grip on it. They have a buffer in the fuel price which we all know and love as "Road Fuel Duty".
Though even if they did away with it completely, the affect would only be short term as the oil price continues to rise. And they'd have to find the shortfall of taxation revenue which amounts for many £Bn - which would mean quite a few pence on income tax, or some other stealth tax which would cripple us financially.
Perhaps 1p/litre of Aviation Fuel Duty..... which will never work as the paraffin budgies will refuel where there is no duty on the stuff.
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