Rise in consumer prices ‘would assist recovery’ – ESRI says → independent.ie/business/iris … 75784.html
GDP growth figures ‘misleading’ - → irishexaminer.com/business/g … 65035.html
You can see it clearly in the taxation system , rising house prices and rents.
OK
So where does that put is in relation to other indebted countries if we measure national debt vs GNP rather than GDP
An ESRI report does not equate to Irish government policy
Where does the ESRI get it’s funding? The fact is higher prices mean the tax take increases. Who is better off as a result and why do people who go shopping actively seek out deflation? Noonan has also previously stated he favours inflation as the preferred way to default on the debt. The choice is that or outright default - either way each policy has a cost and the price for us is the rising cost of living.
Common sense would be not to paddle in a pond full of leaches. Cost of living in Ireland isn’t an issue for those who don’t live in Ireland.
No the government will cherry pick the worst policies for the taxpayer and blame the ERSI for the advice
+1
Anyway, I thought inflation as a route out of debt was more workable when you had your own currency and denominate your debt in that currency. In that scheme, the inflation (or currency deflation) hits home and abroad. In the current scenario, inflation in Ireland on its own will have no real effect on external holders of debt (all € denominated anyway), and will drive competitiveness down.
Why would they do that? Why even suggest something so obviously wrong? To make the obligatory ’ the gubbermint is useless and evil’ point?
and when have they ever done that?
There is a case for saying that governments ignore the ESRI far too much. That’s about it.
The ESRI are talking out of their holes again.
Rising inflation in Ireland at a higher rate than eurozone = falling competitivenes
In the absence of increasing salaries, that means a lower standard of living for you and me. Increasing salaries in isolation (from the rest of the eurozone) would also mean falling competitiveness. So it is pretty much price gouging that is pushing inflation.
And where is the price gouging coming from? Health, education, legal, energy… state controlled or state protected prices…
The failings of GDP measurement in Ireland have been known for some long time. The ESRI response has always been “it is what it is”. Now that GDP is likely to decline or at best remain static (pharma patent cliff, for example), they want to switch measuring growth to GNP. But not measuring debt. Cherries? I’ll pick some of those.
Eurostat need to get a grip on this as this is picking statistics to make the economy look good at a time when it is good in places, but distinctly patchy in others and where there are serious headwinds (local price inflation being one of them).
Spot-on Yoganmahew.
Once again it’s another cart-before-the-horse government economic strategy.
Rising prices lead to prosperity.
Sure isn’t Zimbabwe the world’s richest nation !
[off topic]
The accuracy of Irish GNP figures are questionable. The CSO do all right right stuff for GDP; count, measure and estimate across all the 4 categories - Consumer Spending; Investment; Government Spending on Goods & Services; Balance of Trade (including all the accounting trickery foreign companies use to locate revenues in Ireland). From that figure, they work out GNP by factoring out a out of the exports-imports category any ‘foreign’ firms and add back in the activity of Irish firms overseas. There problem is … which of the ‘Irish’ companies used to hold revenues of foreign companies, both here and overseas are counted out and which remain in the GNP numbers.
Personally, I’ve always suspected official Irish GNP levels are overstated. Now, it’s just a suspicion … I’ve not checked.
[/off topic]
As for rising cost of living … Why work to get your debts under control when you can just inflate your way out of them.
Blue Horseshoe
“For people who have debts, their incomes would rise. . . which would reduce the burden of their debt.”
Where can I subscribe to John Fitzgerald? His out of the box thinking is unique for an economist.
INFLATION = WEALTH = POWER = WOMEN
So he’s saying increased incomes for people who have debts. Probably that means flat or falling incomes for those without debts. To each according to his (debtors’) needs and all of that, regular socialist by all accounts.
This is pure voodoo stuff, no question. Has to be part of a political/media/marketing campaign to convince people things are on-track: cooked-stats, rising property prices, narrative to cast the rises in a positive light. etc.,
The voodoo comes from the assumption that inflation = rising incomes. Incomes, though, are falling. So where does that leave us? You can’t have my paddle.
This is japtastic stuff - all the inflation in Japan has been price driven. Wages have barely budged in years.
tradingeconomics.com/japan/wages
Change the scale back to the eighties - there are peculiar spikes, I think this is down to bonuses paid at different times of the year, but you can see the base trend - base wages unchanged or falling since 1998 or thereabouts, ‘bonuses’ reduced.
edit: an article that says it better - businessweek.com/articles/20 … nese-wages
Fully agree that there’s a misrepresentation. But the most voodoo-tastic bit for me is that even if somehow wages were to rise as part of inflation, that’s going to lead to loss of competitiveness overall (both labour costs, and general cost-base) and overall will stymie economic growth and more than likely lead to reducing employment.
Oh, absolutely. In a global economy, excessive local wage inflation is disastrous.
My only hope is that they are only saying this for electoral advantage, not that they really believe it.
But then … this is Ireland ! 
No, no competitive loss cause wages rise with inflation, so we’re just as competitive. It’s all equal. That’s how it all works, Fitzy for president.
Except executive wages of course.
Why is it generally accepted that inflation of the incomes of the working classes leads to disastrous outcomes and so must be fiercely resisted at all social costs but inflation of the incomes/wealth of the top few % is just one of those unhappy but unavoidable side effects of the capitalist system that we can’t fight for fear of collapsing the system?
The US, for instance. Huge corporate profits and concentration of wealth in the top few % has come about on the back of exploitation of a slack labour market to suppress ordinary wages. As a consequence, the real economy is moribund because the real economy is driven by consumption by ordinary people.
Inflation is the transfer of wealth from the poor to the rich
Or should I say the saver to the debtor
Or the ordinary Joe to the corporations
Not the richo’s/corporations fault though, the only reason central banks have rates so low at the moment is to accomodate governments debt being so high. Raise the rates and government debt becomes unservicable, they try to tax more, economy slows down, recession bites, 2007-2008 hits again.
Government intervenes to save the day with a bit of QE. Rinse and repeat. Until it doesn’t.