Inflation

[osymandus]

:thump: sigh well you see that ... thats you that is that .....

sorry but we all know what a useless tosser he was !!!:whistling:

 

[fatshrimp]

Copy of the letter has been published.

That Mervyn King has got a potty mouth. Don't read it if you're easily offended!

http://www.thedailymash.co.uk/opinion/columnists/inflation?-i-****-it-200806171028/

 

[Billy Bests boot laces]

I am concerned about the price of my grocery bill to the point that I am considering switching from Herta Frankfurters to Ye Olde Oak tinned hot dog sausages.

Too right, the price of the Herta packs has gone up from £1.59 to £1.98 in the last year at Sainsburys. As i enjoy my hot dogs for breakfast on a saturday mrs. BBBL has had to change her Gin brand from Gordons to Sainsburys own brand to save a few pennies. Any more increases on other items and she will have to drink it neat.

 

[McNasty]

Too right, the price of the Herta packs has gone up from £1.59 to £1.98 in the last year at Sainsburys. As i enjoy my hot dogs for breakfast on a saturday mrs. BBBL has had to change her Gin brand from Gordons to Sainsburys own brand to save a few pennies. Any more increases on other items and she will have to drink it neat.

If water prices hadn't rocketed she could dilute it.

 

[Andyhsufc]

Is there a problem with high inflation ? as long as it is matched with wage inflation (and the interest rate does not go up)we will all end up better off.
If your salary increases with inflation and you are spending an element of it on a mortgage (which will not be going up as long as interest rates are pegged) you get ,for example, a 5% increase in disposible income yet a 5% increase on only (say) 60% of your spending (the rest being the mortgage)

Where the problems arise in my mind is when the Interest rates are hiked up to prevent inflation, therefore the mortgage rate rises dramatically yet, as inflation is pegged , the salaries don't.

The main problem with high inflation is that it devalues the currency and that we would lose business as we would be uncompetitive which would lead to higher unemplyment as our GDP would go down. You would then have the problems of a higher social security bill with less tax returns.

 

[Hotman]

It's all getting a bit concerning, isn't it? I've been watching the storm gather for a while now and I've spent the last few months diverting every spare penny at my remaining debts. All clear now, I'm in credit this week for the first time since 1996, but with no assets at all and only a month-to-month contract as security.

Wibble.

The biggest concern is that it all seems linked to the rising price of oil. This wouldn't be so much of a problem if we had loads of it left, but apparently it's starting to run out. That drives up the price of everything, because you've got to drive a product to the shop if you want to sell it, and everything follows suit.

Now, I'm not nearly clever enough to figure out we get oursleves out of this mess, but if someone here is, would they mind awfully having a word with Alistair Darling because he strikes me as the kind of chap who drinks his own bath water, if you know what I mean.

In my eyes it is simple (but I am a simple bloke).

Allow inflation to increase and lower interest rates so that people can afford their mortgages.

Bear in mind that our inflation will not affect imported commodities which are already subject to large inflation, but will force employers to increase prices, and in turn wages.

This will then in turn increase the housing market, as homes become "affordable" again, and the nations mortgage debt is eroded by virtue of inflation.

At which point we then try and control inflation

 

[Andyhsufc]

In my eyes it is simple (but I am a simple bloke).

Allow inflation to increase and lower interest rates so that people can afford their mortgages.

Bear in mind that our inflation will not affect imported commodities which are already subject to large inflation, but will force employers to increase prices, and in turn wages.

This will then in turn increase the housing market, as homes become "affordable" again, and the nations mortgage debt is eroded by virtue of inflation.

At which point we then try and control inflation

Sounds good in principle but as I have said above, there are two problems with this sort of approach. Firstly, we would become uncompetitive with the rest of the world which would mean less gdp produced which would lead to job losses. Also, we are finding it near impossible to control inflation at 1.3% above target so imagine how bad it would be if it was 5/6/7% above target! It would be like the 1970's (when inflation was 25%!) all over again!

 

[Hotman]

Sounds good in principle but as I have said above, there are two problems with this sort of approach. Firstly, we would become uncompetitive with the rest of the world which would mean less gdp produced which would lead to job losses. Also, we are finding it near impossible to control inflation at 1.3% above target so imagine how bad it would be if it was 5/6/7% above target! It would be like the 1970's (when inflation was 25%!) all over again!

To be honest we are not a competitive nation for exports anyway, our population is supported by either imported goods or home grown services. We have most nations by the goolies by virtue of the fact that we have prestigious professional bodies and the world works in English. It won't work forever, but I think we can carry it off for a short period.

For example, legal work can be outsourced to India, but have you ever heard of anyone using an Indian based solicitor to move house? I know this goes against theories such as "The World is Flat", but the market forces of services from the UK are ultimately determined by us.

As I said, it won't affect half the stuff Tesco's sells.

 

[RobM]

:O My pay "increase" this year was 0.6%. That's help, won't it?

 

[Andyhsufc]

To be honest we are not a competitive nation for exports anyway, our population is supported by either imported goods or home grown services. We have most nations by the goolies by virtue of the fact that we have prestigious professional bodies and the world works in English. It won't work forever, but I think we can carry it off for a short period.

For example, legal work can be outsourced to India, but have you ever heard of anyone using an Indian based solicitor to move house? I know this goes against theories such as "The World is Flat", but the market forces of services from the UK are ultimately determined by us.

As I said, it won't affect half the stuff Tesco's sells.

What i would say to that, though, is that this country relies on the finance/banking industries for employment and if we became uncompetitive in terms of wages, you can bet that all the big companies based in the docklands and the city would be out like a flash and move to a more competitive environment, This, in turn, would lead to rising unemployment, a huge cut in tax revenues due to the taxes the big companies pay and "big hitters" pay. Also, you may lose your debt but any savings you had would evaporate in value and pension funds etc you may have set up would also depreciate!

 

[Hotman]

What i would say to that, though, is that this country relies on the finance/banking industries for employment and if we became uncompetitive in terms of wages, you can bet that all the big companies based in the docklands and the city would be out like a flash and move to a more competitive environment This, in turn, would lead to rising unemployment, a huge cut in tax revenues due to the taxes the big companies pay and "big hitters" pay.

Tax revenue will be increasing dramatically due to inflation, allowing government to introduce tax cuts, and reduce "green" spending. This will then entice business to stay in the UK.

They will also need a presence in the City, although I concede that there may be job cuts. More likely bonus cuts...!


Also, you may lose your debt but any savings you had would evaporate in value and pension funds etc you may have set up would also depreciate!


Cash will devalue, but pension units held in stock markets etc will increase as the value of companies increase in line with inflation. Savings will be boosted later on by the increase in interest rates after the event to control inflation.

 

[Andyhsufc]

- Tax revenue would increase due to inflation but as everything would cost more to buy anyway i.e. wages more, hospital/schools more etc, that wouldnt allow government to tax cut
- Also the value of companies will all be rising as fast as the pound devalues, therefore pensions/ company values wont be worth anymore physically i.e. spending power will be the same

 

[Einstein]

Sell it in euros i say :D

No, thank you. I'm quite happy with my Euro's and effectively a 25% gain against the dollar and 20% against the sterling in the past two years... big factor in not moving back at the moment!

 

[Einstein]

The biggest concern is that it all seems linked to the rising price of oil. This wouldn't be so much of a problem if we had loads of it left, but apparently it's starting to run out.

Don't believe everything you read in the papers. There is without a doubt enough to go around for your lifetime and your childrens as well.

It's scaremongering by the press... and it's a factor that is driving up the price of oil.

 

[* ORM *]

No, thank you. I'm quite happy with my Euro's and effectively a 25% gain against the dollar and 20% against the sterling in the past two years... big factor in not moving back at the moment!

And long may that continue :D

 

[osymandus]

Don't believe everything you read in the papers. There is without a doubt enough to go around for your lifetime and your childrens as well.

It's scaremongering by the press... and it's a factor that is driving up the price of oil.

Ive been noticing this , and yes i am in favour of moving away from petrolim based technologies . However had we all had more sense and not listened to marketing idiots and loud speaking suits we propably wouldnt be in this mess.

The world is an enviromental problem but scare mongeroing of both sides isnt going to help