Inflation rises to 4%

[Selekt0r]

What company? That's insane.

Cheltenham & Gloucester. I was on a 0.49% over Base Rate 2-year tracker before that, and it expired just as C&G (and a number of other lenders) were offering very attractive lifetime tracker deals. I was very lucky, as I think those deals were pulled within a few weeks after I snapped it up.

 

[MatteH Oxford]

4%, even 5%, is hardly going to lead to people starving to death; especially as most of it is down to the record high prices of oil and petrol which are about as price inelastic as is possible. Economic growth is the main concern for the UK at the moment and the easiest (but by no means the best) way to increase demand for goods and services is by keeping interest rates low.

Low interest rates and low inflation are very nearly mutually exclusive and it was inevitable that inflation was going to increase with the base rate at 0.5%, even without major increases in oil and petrol prices. I'm more concerned with the shrinking economy and can't see interest rates rising above 2% until there is 4+ quarters of growth over 0.5%.

Interest rate settings depend on the method used to record inflation. If you 'do a Gordy' & switch from RPI to CPI back in 2003 (excludes housing costs), when house prices are bubbling up over 20% per annum, then they never have to go up!. So they are not 'mutally exclusive' with inflation in the slightest, if you include all the costs of living that is.

Anyway, how can an economy have perpetual 'growth'?. Given that the resources on this planet are finite, that is totally impossible.

 

[Biohazard]

Interest rate settings depend on the method used to record inflation. If you 'do a Gordy' & switch from RPI to CPI back in 2003 (excludes housing costs), when house prices are bubbling up over 20% per annum, then they never have to go up!. So they are not 'mutally exclusive' with inflation in the slightest, if you include all the costs of living that is.

Anyway, how can an economy have perpetual 'growth'?. Given that the resources on this planet are finite, that is totally impossible.

Capitalism is totally impossible in the same breath.

It relies on a system of continuous growth for ever.

 

[scorza]

What happens to debts such as mortgages in a Zimbabwe like situation where so much money is introduced (printed) into the system, and there's hyper inflation?

eg you have a mortgage and there's massive inflation, do you get your house on he cheap?

Yes - no-one is saying it publicly, but the powers that be don't mind a bit of inflation at the moment because the massive debts that governments, banks, businesses and people are in are being inflated away slowly but surely.

Obviously Zimbabwe is an extreme example that is very detrimental to not only an economy but to a society - we are not even close to approaching that situation however. IIRC we had 20% inflation in the '70s, we won't get close to that either, I'd be surprised if CPI is allowed to go above 5%.

 

[MatteH Oxford]

Capitalism is totally impossible in the same breath.

It relies on a system of continuous growth for ever.

Yes exactly, what usually happens when the limits are reached is either economic collapse, war (or both). Well, historically anyway!

It'll be interesting to see if current the 'system' resets or not, a new currency (eurodollar MKII?) perhaps?. Of course, this will have significant impact on wealth, be it capital or assets.

Interesting & scary times we live in.

 

[Dj_Jestar]

Capitalism is totally impossible in the same breath.

It relies on a system of continuous growth for ever.

And there lies the problem

 

[Participant]

Cheltenham & Gloucester. I was on a 0.49% over Base Rate 2-year tracker before that, and it expired just as C&G (and a number of other lenders) were offering very attractive lifetime tracker deals. I was very lucky, as I think those deals were pulled within a few weeks after I snapped it up.

That's who I'm with. Good for you!

Got to meet with them soon to see if they'll lend me enough for the house I want next actually. Could be a fun meeting.

 

[DanTheMan]

Interest rate settings depend on the method used to record inflation. If you 'do a Gordy' & switch from RPI to CPI back in 2003 (excludes housing costs), when house prices are bubbling up over 20% per annum, then they never have to go up!. So they are not 'mutally exclusive' with inflation in the slightest, if you include all the costs of living that is.

If there was actually any forethought by the previous government in terms of how we as a country were going to move forward and start producing things that people want again then it might be a different story. Instead, they just lured us into a false sense of security, borrowed a lot of money and invested it badly; seemingly without any thought for 10 years down the line.

Now were stuck in a position whereby any supply sided policies are going to take time to show significant effects in terms of growth and time isn't something that we have the luxury of at the moment. The only effective way for us to boost our economy quickly is to keep demand high, which obviously increases inflation faster than usual.

Once we show some stabilisation in the economy and people stop worrying about a double dip recession, interest rates can be normalised without running the risk of us ending up back where we were 2 years ago.

Anyway, how can an economy have perpetual 'growth'?. Given that the resources on this planet are finite, that is totally impossible.

Oh don't get me wrong, I agree 100%. The whole idea of capitalism is only going to become increasingly more difficult and I wish I could see an alternative method that would actually work but until then, I would at least like to see us as a nation keeping up with the Jones' in terms of 'growth'.