UK inflation

[morganist]

I found this table. Look how similar the inflation rate is in the late 80's to now just before the jump to 10% in the early nineties. Is this an indicator of how much inflation will be in the next year or two?

http://www.watsonwyatt.com/europe/pubs/statistics/render2.asp?ID=1#hicp

There seems to be a constant rate of higher than average inflation for a year or two before a big jump up. I would argue we have just had or are just having that. To me it indicates that soon inflation will rise.

I know they expect inflation to fall due to lack of consumption. However I think they will get scared and print money. They just added 50 billion in QE.

Also note the CPI below is much lower. I wonder what inflation would be now if the measure was still RPI as they changed it to the CPI a few years ago.

Any thoughts?

 

[kashirin]

77 countries eased just this month
how do you think it will end?

although we might not see such extreme numbers like 1975 RPI in developed countries as there is just not enough room for wage growth and government already are in debt to pay higher wages for government workers

so what would happen EM and China will burn in hyperinflation and developed world standard of living just will fall off the cliff because of high food and energy but core inflation will be below 5% so government will continue to print into oblivion saying all is OK

 

[morganist]

Quote from kashirin:

77 countries eased just this month
how do you think it will end?

although we might not see such extreme numbers like 1975 RPI in developed countries as there is just not enough room for wage growth and government already are in debt to pay higher wages for government workers

so what would happen EM and China will burn in hyperinflation and developed world standard of living just will fall off the cliff because of high food and energy but core inflation will be below 5% so government will continue to print into oblivion saying all is OK

I was looking at it more in the fact the purchasing power of the currency would fall if they QE. So regardless of domestic demand the cost of purchasing foreign goods would make inflation rise.

 

[kashirin]

Quote from morganist:

I was looking at it more in the fact the purchasing power of the currency would fall if they QE. So regardless of domestic demand the cost of purchasing foreign goods would make inflation rise.

everybody prints so exchange rates won't change much
corporate margins will experience some pressure world wide but given recent record profits and limited demand I doubt companies will raise prices

 

[morganist]

Quote from kashirin:

everybody prints so exchange rates won't change much

Some will have to print more depending on their debt. The UK is the worst in Europe even worse than Greece.

 

[kashirin]

Quote from morganist:

Some will have to print more depending on their debt. The UK is the worst in Europe even worse than Greece.

Japan significantly worse than UK and Greece combined
and they print a lot
still they have deflation and Yen appreciated 50% in the last 5 years

there are currently no economic models which can properly assess economic situation mid to long term and predict what will happen

 

[piezoe]

Quote from kashirin:

everybody prints so exchange rates won't change much
corporate margins will experience some pressure world wide but given recent record profits and limited demand I doubt companies will raise prices

This is a key point. In a world economy of fiat currencies, some countries will be more successful than others in manipulating their currency relative to that of their trading partners. In this regard, as long as the U.S. dollar can retain its status as the reserve currency the U.S. has a distinct advantage.

In the U.S. , however, wages are not rising, so living standards are declining with inflation. Much of what would have been a greater decline in living standards has been temporarily masked by increased personal debt. Eventually, however, living standards will decline to a significant extent. This is the indirect, surreptitious way the U.S. has chosen to pay for its continuous wars.

The money made in these wars does not flow evenly to the population. The burden of paying for the wars, via lowered living standard or increased personal debt, falls mainly on the middle class while the profits of war, such as they are, flow mostly to the upper income brackets, who are little bothered by increased prices.

Since the monied class controls government, this arrangement is not likely to change much in the foreseeable future -- though it seemingly can't go on forever.

In the meantime one reaches the inescapable conclusion that the U.S. will handle its debt burden mostly through a combination of inflation and lowered living standards, rather than through harder to achieve increased productivity. It will pay its creditors with dollars that have less purchasing power than the dollars borrowed.