Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
18 January 2011
12:3389386#1
Inflation has just had its biggest monthly increase with the CPI rising to 3.7% and the RPI to 4.8%.
Lets be clear what we are talking about when we refer to inflation. Common parliance has led it to be used in reference to price rises and, yes, in this case we are referring to price rises.
Inflation though is one contributor to price rises and is in fact a reference to 'inflating the money supply' and the last government's quantative easing was just that and it threatens the value of our money, other factors in rising prices include world commodity prices and seasonal factors.
There is not much we can do about commodity prices and seasonal factors, that is why rising prices is tackled these days by addressing money supply using that very blunt instrument, interest rates.
Increasing interest rates has a number of effects:
. It can increase the value of £sterling and in so doing offset the rising cost of raw material imports
. It encourages more saving and in so doing reduces the amount of money in circulation
. It can 'cool' an overheating economy - something currently not a problem and that is why the BoE is split.
Even Labour apologist economist David Blanchflower says that we know now how to 'control inflation' through interest rates.
So should rates start to rise? Not much, a small blip upwards now would not harm the economy and might well start to put the brake on infl;ation. The old saying a 'stitch in time' is very relevant here, in that a small increase sooner will reduce the amount interest rates will need to increase later.
Me, yes, I do believe that now is the time for a quarter pc on rates with perhaps 3/4pc in all needed over the next 11 months.
The decision is one to be made by the Monetary Policy Committee of the Bank of England - but when will they grasp the nettle?
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
18 January 2011
13:1389390#2
apparently all a bit of a balancing act, i listened to a dosh expert on the news this morning and he said that a small rise now is essential.
he argued that if interest rates stay as they are, then eventually a series of rises will be necessary that would really hurt people with mortgages and small businesses.
Guest 640- Registered: 21 Apr 2007
- Posts: 7,819
19 January 2011
08:1089483#3
There is widely differing opinions on this one...as to whether interest rates should go up or not. But following the dire news yesterday that inflation has risen by 3.7% in one month you can see how the economy is in disarray. Some people argue for a small interest rise as mentioned by BarryW but others think that any rise in interest rates will take money out of the economy and halt our return to economic wellbeing.
A smll rise in interest rates clobbers people with mortgages for example..their monthly payment goes up considerably with every rise, leaving the family with less to spend on everything else.
The experts differ.
But with that 3.7% figure , the highest monthly rise in inflation of all time, people's standard of living will drop and no mistake.
This in turn will lead to strikes..you can count on it.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
19 January 2011
08:2089487#4
The economy is not is 'disarray', it is weak and vulnerable after the longest and deepest recession for 80 years.
It is indeed a finely tuned decision but one cause of price rises (inflation) is too much money in the system so, PaulB a small start must be made to extract some of that QE. A small increase in rates will have minimal impact now on mortgages and may stop much, much bigger rate rises later.
Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
19 January 2011
08:2389488#5
and the pound is worth 20% less than it was in 2009.with 20% inflation what do expect.
Guest 653- Registered: 13 Mar 2008
- Posts: 10,540
19 January 2011
08:3489496#6
We haven't had 20% inflation Brian.
Roger
Brian Dixon- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
19 January 2011
08:3689498#7
roger,we have acording to the news last night,every thing is 20% dearer now because of the pound being weak.
Guest 653- Registered: 13 Mar 2008
- Posts: 10,540
19 January 2011
08:4389503#8
That's to do with exchange rates, not the inflation rate that Barry mentions above, which is 3.7%
Roger
Brian Dixon- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
19 January 2011
08:4589504#9
roger,same differance.exchange rates fuels inflation in never ending circles.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
19 January 2011
09:0489510#10
Brian - the currency position is due to the fact that the UK economy was so weakened by Brown's Recession. We are fortunate to still have sterling so it could take some of the pressure out of the economy, unlike the weaker Euro countries who are locked into the Euro.
The currency exchange rate is one of several factors that contribute to rising prices as distinct from inflation which refers to the amount of money in the system.
The purchasing power of £sterling is down CPI 3.7% or RPI 4.8%, whichever measure you prefer - not 20%. Money is measured by what it can buy based on a basket of goods rather than against a different currency. On the positive side the weak £ means that our exports are cheap and that is helping keep people in work.
Guest 640- Registered: 21 Apr 2007
- Posts: 7,819
19 January 2011
09:1189514#11
I think what Brian is getting it..and they said it on Newsnight last night, is that the Pound£ has lost a huge amount of its value in recent years. they gave a more exact figure than that on Newsnight but I just cant remember it off the top of my head. This means that the buying power of the Pound£ is much lesser...ie you get less for your money overseas, so the cost of imports rise, and prices correspondingly rise in the shops. And being an island we do a lot of importing.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
19 January 2011
09:1989516#12
It is more complex PaulB. A lot of people owe their jobs to the £ being able to float and take some of the pressure thanks to our exports being cheaper.
Nevertheless the £ is measured for what it is worth by what you can buy for it in the UK. It will worth something different in the USA, different again in the Eurozone and so on.
Greece, Portugal, Spain, Belgium, Italy and Ireland would be in a better position now if they had their own currencies that could reflect better the strength (or rather weakness) of their economies rather that of Germany's.
Guest 698- Registered: 28 May 2010
- Posts: 8,664
19 January 2011
09:5289528#13
NB that3.7/4.8 figure is not a monthly increase, it is what the annual rate of inflation has risen to this month.
I'm an optimist. But I'm an optimist who takes my raincoat - Harold Wilson
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
19 January 2011
09:5589530#14
Correct Peter, it is an annual rate but it nevertheless is the result of one of the largest ever monthly increases.
Guest 671- Registered: 4 May 2008
- Posts: 2,095
19 January 2011
10:2589534#15
Question to Paul.
This thread is purely political, i thought you gave BarryW his own blog for politics?
"My New Year's Resolution, is to try and emulate Marek's level of chilled out, thoughtfulness and humour towards other forumites and not lose my decorum"
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
19 January 2011
10:4789537#16
Trying to shut up or limit views you dont agree with, eh Gary? - I find that is fairly typical of many on the left.
You will see many political threads in the members section, many no started by me.
This is actually about economics anyway, not party politics. There is a big difference.
Guest 640- Registered: 21 Apr 2007
- Posts: 7,819
19 January 2011
10:4889538#17
Ah shure Gary me oul friend whats to be done...
there is politics all over the place.
I must admit Im as guilty as anyone.
But hopefully there are enough threads without politics in em to keep everyone happy.
I hope so anyway. We got lots of history, lots of fun ones, lots of shipping and so on...and in the midst of all that...politics grrrr!!
Jan Higgins
- Location: Dover
- Registered: 5 Jul 2010
- Posts: 13,931
19 January 2011
11:3689541#18
There are many threads that are far more political than this one Gary
. I admit most political posts irritate me as I have said before several times but I know certain posters will bring politics into any thread so I have to put up with it
.
What about Keith's SPEAKING FROM THE HEART, have you complained about that one or is that ok because it is nearer to your political views?
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I try to be neutral and polite but it is hard and getting even more difficult at times.
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howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
19 January 2011
16:0389565#19
i cannot remember any thread staying on topic for long.
politics or otherwise, they just stray(vic's u.k.i.p. thread excepted).
Keith Sansum1
- Location: london
- Registered: 25 Aug 2010
- Posts: 23,948
19 January 2011
16:2489572#20
for a change i do believe barryw's right on this one, the problem is
barryw does have his own blog(thankfully) but politics comes into your everyday life, so very difficult to avoid.
the forum though is made up as paulb says with many interesting posts
ALL POSTS ARE MY OWN PERSONAL VIEWS
