2011 - The Year of Inflation
Discussion
chimster said:
DonkeyApple. Stuff.
Many thanks for that. As a retailer the last 4 wks have been 'difficult' :-). Can't see any inflation in our selling prices..... Presumably the impact of those figs will be incorporated into the next set of numbers.
Many thanks for that. As a retailer the last 4 wks have been 'difficult' :-). Can't see any inflation in our selling prices..... Presumably the impact of those figs will be incorporated into the next set of numbers.
Edited by chimster on Tuesday 14th December 16:27
Edited by chimster on Tuesday 14th December 16:27
The problem for retailers is that the current inflation is not on what is in the shop window but in the cost of getting it into the shop window.
On the outside of the shop window you have almost deflation as increased competition for business keeps prices low.
Thus, margins are squeezed.
Raising rates won't bring this type of inflation into line, we are stuck with it.
The issue is that by massively increasing money supply we are building up a backlog of artificial and hidden spending power which will will be released like a blown dam when revenues increase, confidence turns and spedning increases. It is this which will trigger the type of inflation that only rate rises can curb.
The issue is that no one can possibly calculate the impact of this currently submerged effect, but we do know that it is significant. It will lead to strong rate hikes but this could be a steady rise to 4 or 5% which most could handle, or it may need to hit double that before it starts to reign in inflationary pressures.
The market is beginning to suspect that if the economic recovery continues this event could start next year, which would not be good.
The reality is that the Govt probably doesn't need to make the swhinging cuts it has planned to get the structural deficit under control but it needs to make them to try and delay the increase in spensding and inflationary pressure that will comewith the economic recovery.
The worrying this is simply that since 2008 we have been in new terratory and none of us really know how this is going to pan out.
You print money, you get inflation. It's happening now, and will get worse, therefore interest rates will go up, house prices will be forced down (no bad thing). Eventually we'll be back where we were before Brown & Blair deliberately inflated the UK economy, and perhaps common sense will kick in.
nightflight said:
You print money, you get inflation. It's happening now, and will get worse, therefore interest rates will go up, house prices will be forced down (no bad thing).
If we have high inflation and low interest rates why would house prices falls? You'd expect an asset price to rise in the example you provide.Fittster said:
nightflight said:
You print money, you get inflation. It's happening now, and will get worse, therefore interest rates will go up, house prices will be forced down (no bad thing).
If we have high inflation and low interest rates why would house prices falls? You'd expect an asset price to rise in the example you provide.Rates
The longer rates stay low the more low rates are thought of as normal. Over the last ten years the base rate has averaged less than 4 percent. A rise to much over 5 percent would be as devastating now as the double digit rates of twenty years ago were. The government dare not repeat this so will use anything except high interest rates as a control.
Inflation
QE plus an existing RPI of nearly five percent equals...
House prices
Going up slowly but don't kid yourself. Adjusted for inflation the early nineties crash took 12 years to go away. Everyone thought that they had equity in circa 96 so their house was worth what they paid for it... No, with inflation they were losing all they way until 2001. Home owners will be allowed to think that their homes are not devalued by much, only a few percent, but in reality the same price with five percent inflation will be a loss of 10K a year.
We're still borrowing money, The Con-Dems had the chance and they didn't dare make the fix. Next years budget might be their last chance as they won't want to upset anyone too much within three years of an election. That's one more chance and much bigger cut than we've just had to balance the books.
The longer rates stay low the more low rates are thought of as normal. Over the last ten years the base rate has averaged less than 4 percent. A rise to much over 5 percent would be as devastating now as the double digit rates of twenty years ago were. The government dare not repeat this so will use anything except high interest rates as a control.
Inflation
QE plus an existing RPI of nearly five percent equals...
House prices
Going up slowly but don't kid yourself. Adjusted for inflation the early nineties crash took 12 years to go away. Everyone thought that they had equity in circa 96 so their house was worth what they paid for it... No, with inflation they were losing all they way until 2001. Home owners will be allowed to think that their homes are not devalued by much, only a few percent, but in reality the same price with five percent inflation will be a loss of 10K a year.
We're still borrowing money, The Con-Dems had the chance and they didn't dare make the fix. Next years budget might be their last chance as they won't want to upset anyone too much within three years of an election. That's one more chance and much bigger cut than we've just had to balance the books.
DonkeyApple said:
The issue is that by massively increasing money supply we are building up a backlog of artificial and hidden spending power which will will be released like a blown dam when revenues increase, confidence turns and spedning increases. It is this which will trigger the type of inflation that only rate rises can curb....
The worrying this is simply that since 2008 we have been in new terratory and none of us really know how this is going to pan out.
Isn't the latter statement the issue.The worrying this is simply that since 2008 we have been in new terratory and none of us really know how this is going to pan out.
Ordinarily, printing money will cause a huge surge in credit, but in fact, at present, it has yet to manifest itself anywhere in the consumer and SME realm.
NoelWatson said:
cymtriks said:
Going up slowly but don't kid yourself
Aren't you?If you have your own prediction please tell us.
cymtriks said:
NoelWatson said:
cymtriks said:
Going up slowly but don't kid yourself
Aren't you?If you have your own prediction please tell us.
Brilliant,
So have I got this correct(know nothing of finance) in order to bring inflation down 'they' have o put interest rates up. Which means when my fixed mortgage finishes next year the building societies will bend me over?
Also probably a stupid question.
I have heard one of the reason prices of food has gone up is because farmers all over the world have stopped growing crops to grow heavily subsidised bio fuels instead as well as a bad year for crops in some countries.
so wouldnt it be better to stop these subsidies and a good year for crops will bring prices down anyway?
So have I got this correct(know nothing of finance) in order to bring inflation down 'they' have o put interest rates up. Which means when my fixed mortgage finishes next year the building societies will bend me over?
Also probably a stupid question.
I have heard one of the reason prices of food has gone up is because farmers all over the world have stopped growing crops to grow heavily subsidised bio fuels instead as well as a bad year for crops in some countries.
so wouldnt it be better to stop these subsidies and a good year for crops will bring prices down anyway?
Pesty said:
So have I got this correct(know nothing of finance) in order to bring inflation down 'they' have o put interest rates up. Which means when my fixed mortgage finishes next year the building societies will bend me over?
My friend Ramone (the pool cleaner) informs me that mortgages were stupidly cheap over the last decade (both in terms of base rates and margins), and anyone with half a brain would've planned accordingly. Do you think he is being harsh?NoelWatson said:
My friend Ramone (the pool cleaner) informs me that mortgages were stupidly cheap over the last decade (both in terms of base rates and margins), and anyone with half a brain would've planned accordingly. Do you think he is being harsh?
I have no idea as I do not know what he means by planned accordingly. 
He may well be correct. I have a modest house which is costing me quite a lot (however not being silly I have not over extended myself).
I have, however been forced to move houses with jobs due to redundancies which usualy meant I eneded up buying right at the top of the market
Something I don't think I could have planned for. I didn't realise cleaning pools was such a stable jobNot sure how I could have planned it any better with my below average inteligence.
Any advice apreciated
NoelWatson said:
Pesty said:
So have I got this correct(know nothing of finance) in order to bring inflation down 'they' have o put interest rates up. Which means when my fixed mortgage finishes next year the building societies will bend me over?
My friend Ramone (the pool cleaner) informs me that mortgages were stupidly cheap over the last decade (both in terms of base rates and margins), and anyone with half a brain would've planned accordingly. Do you think he is being harsh?
Digga said:
DonkeyApple said:
The issue is that by massively increasing money supply we are building up a backlog of artificial and hidden spending power which will will be released like a blown dam when revenues increase, confidence turns and spedning increases. It is this which will trigger the type of inflation that only rate rises can curb....
The worrying this is simply that since 2008 we have been in new terratory and none of us really know how this is going to pan out.
Isn't the latter statement the issue.The worrying this is simply that since 2008 we have been in new terratory and none of us really know how this is going to pan out.
Ordinarily, printing money will cause a huge surge in credit, but in fact, at present, it has yet to manifest itself anywhere in the consumer and SME realm.
NoelWatson said:
cymtriks said:
NoelWatson said:
cymtriks said:
Going up slowly but don't kid yourself
Aren't you?If you have your own prediction please tell us.
Ultimately, if we continue with five percent inflation 200K will be worth the equivalent of 60K in 25 years time but if this happens to house prices there'd be someone who would claim that their house was worth just as much as when they bought it.
I reckon that this blindness to the effect of inflation will greatly help this government. They'll be able to let inflation reduce their debts while at the same time counting on voters not to notice the loss in their main assets value because it is about the same number.
Beardy10 said:
2011 is going to be the year of inflation and a very tough one for business I think......input/raw materials costs are going up and it's going to be very hard to pass on those price rises to customers unless they're selling essential goods.
No wage rises and rising prices is bad for everyone. It's a failing economy. The UK is losing it's standing in the World.Does anyone remember how the UK used to be referred to as "The World's fourth largest economy". That wasn't that long ago. Where are we now?
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