Inflation watch


#321

That’s mad!

If he told you that they would be 1% or even 2% cheaper if you came back next year would you still have bought them?

No answer required!


#322

If your wages were being cut as a result of deflation maybe?


#323

Falling prices doesn’t necessarily mean falling margins for businesses, just like increasing prices doesn’t always mean better margins. Take this article from the Japan Times, which I found to be very interesting.

‘Bad inflation’ shadows Japan

japantimes.co.jp/news/2014/0 … 6IA2j8xPSg

That says to me that demand falls when price increases (odd!) and businesses suffer as a result. They try to cut costs to remain competitive and wages (and probably job cuts / hiring freezes) are one of the first things to get hit…

There’s two forms of deflation in terms of falling prices, one occurs when bubble-esque prices drop to realistic levels (Ireland post Celtic Tiger) and that definitely hurts businesses, but the other is falling prices driven by efficiencies and improvements in production (Electronics industry) and that definitely does not hurt businesses.


#324

Always remember to look at the elephant in the room, the coat of fossil fuel has been rising relative to wages in recent years due to the lack of supply of cheap fuel.
As almost all manufacturing is dependent to some extent on fossil fuel then those costs can only go up. Increased efficiency & cheaper labour (outsourcing to China and the like) can reduce the costs of manufactured goods but food prices are more tightly tied to the costs of the fuel needed to process the food from farm to fork.


#325

japantimes.co.jp/news/2014/0 … 6IA2j8xPSg

That says to me that demand falls when price increases (odd!) and businesses suffer as a result. They try to cut costs to remain competitive and wages (and probably job cuts / hiring freezes) are one of the first things to get hit…

No mention of price increases there, merely falling incomes and demand.

Fine if you are in one of those industries and your income and savings are untouched by deflation.

Your signature is ridiculous BTW.


#326

Did you even click the link to read the article? All it talks about is the effect of increased prices!

Again with a personal insult?


#327

:laughing:


#328

Irish consumer prices 18% higher than EU average

irishtimes.com/business/sect … -1.1838207


#329

Out of interest, how much higher than the European average were we in 2007?

As in, what we’re really interested in is the RATE of CPI increase or decrease. (And by extension, the direct relationship or otherwise to ‘animal spirits’, as I understand it anyway…).


#330

You might remember that I also said that the US was different as they were doing asset purchases… (proper money printing). Or you might sit in your box with your fingers in your ears singing la-la-la…


#331

Lol, but you’re still of the opinion low interest rates are deflationary?


#332

On their own in a globalised market for labour? Yes, they will do nothing to raise wages and will likely lower consumption as they direct spending to unproductive activities like property speculation.

Really, I’m not sure you’ve been paying attention for the last 12 or so years.


#333

So we’re kind of in agreement. But the market dictates wages. People in construction earned a fortune in 05, in 10 probably earn 30% less. Supply and demand

So what caused these people to earn a fortune, a property bubble, what caused the bubble, low interest rates. Low interest rates push the price of assets up. This has a snow ball effect or a “trickle down” effect.

Similar to what CBs are trying to brew up at the mo.


#334

Its a biflationary environment with some asset classes rising and other falling simultaneously. The actions of central banks makes it very difficult to predict where the liquidity will flow or if it will flow at all. The inflation Vs deflation argument is fraught with error because in a biflationary environment people can point to this and point to that and say there you see prices are up or down. It also manages to distract from the fact wealth continues to flow to the upper levels in the distribution curve leaving more and more people less well-off than before.

From a personal standpoint I see the purchasing power of my pay packet diminishing over reasonable periods of time and of that there is little doubt. Sure if you exclude energy, rent or food you can say there is very little inflation.


#335

It’s not surprising that the purchasing power of my pay packet is diminishing the government keep dipping into it.


#336

Right and if you look at what components of the CPI in Ireland (in particular) are rising, many of them are effectively taxes.


#337

Who cares about the CPI? Its a worthless indicator.


#338

Yes, it’s biflation all right, stuff we want is getting cheaper, but stuff we need is getting more expensive.
In simple terms, more and more people are effectively on subsistence levels of income. In other words after buying the essentials there is nothing left for the desirables.


#339

An alternative opinion coming out of Bloomberg who are usually one of the biggest cheerleaders for higher inflation.

**How to Beat Inflation: Skip Kids, Cars, Getting Old **

bloomberg.com/news/2014-06-2 … g-old.html

Come back roc, and explain why these higher prices are good for us!


#340

https://www.bloomberg.com/image/i74d7KlGfy6c.jpg
Dont think anyone would think higher education costs are good but thats the private sector for ya