Is rising inflation looming?

[GoSeigen]

If you had said "vastly fewer strikes" I wouldn't have bothered posting but since you saId "No Strikes" I felt it warranted correction with rail strikes due to take place and other talk of strikes. I'm sorry you seem to have taken umbrage at that.

I'm sorry you took umbrage at my use of "No strikes". Of course there are occasionally strikes. It's just that they are negligible compared to the 70s. I'm trying to identify roughly where we are in the cycle here which doesn't require documenting the evidence to high precision. "Is it low and rising?" is sufficient for my purposes.

Similarly, for my fellow pedants: "in the middle of" can mean "in the course of doing something" as in "I'm in the middle of a phone call". It doesn't have to mean that there remain precisely 50% of my words still to be uttered before reaching some unimaginable end of the phone call!


By all means post your own data to show how close current conditions are to the 1970s and how removed from the 30s, but let's not quibble about irrelevant minutiae -- I'll say up front I am willing to concede those details while defending the substantive point.


GS

[GoSeigen]

BoE/Lookingforclues has been saying this since at least 2009. One day he might be right!

Looks like now. Although we've had financial repression since the GFC so in many ways inflation has been a problem for more than a decade. Which kind of addresses your later point of inflation not appearing out of nowhere.

This is sophistry. Yes inflation has been a problem: it has been non-existent and resistant to all efforts to raise it to a mere 2%.

And "Looks like now" is begging the question. Let's give it a couple of years to see what happens, since we are dealing with predictions here...

Nonsense. https://commons.wikimedia.org/wiki/File:World_population_growth_rate_1950%E2%80%932050.svg

I assumed we were talking about the UK;

https://www.statista.com/statistics/281 ... opulation/

No, I certainly am not arguing that world economic conditions are driven by the UK with 3.5% of world GDP!! The UK is dragged along by the US, China, Japan and EU so will of course reflect what is happening there. There is an entire planet outside the borders of the UK...

Besides, as a linear chart of a naturally compounding quantity the chart is hard to interpret. How about posting a semi-log chart or one showing annual population change, then show how it is evidence that today is more like the 70s than the 30s (for the UK only with 0.75% of world population)?

Here it is. Eyes need to be open! https://www.economicshelp.org/wp-content/uploads/2011/08/us-debt-held-by-public-1790-2021-labels-2048x1311.jpg.webp
Debt rising now, as in 1930s/40s-- not falling as in 1970s.

UK household debt has come off highs and been off them for some years. It is household debt that restricts household spending;

https://www.nomuraconnects.com/focused- ... /#images-1

Agree about the spending bit. But where is the control? The data in the Nomura article doesn't even cover the 70s, let alone the 30s. My exercise here is to compare in some rough scientific manner, not just pull statistics out of context and try to interpret them. What was household debt doing in the 70s? What what was it doing in the 30s? Which is more relevant to today's situation? And why the focus on the UK? Inflation, like the GFC, is a worldwide phenomenon, not isolated to one country.


This to and fro distracts from the main point, which is that this is not 1970s redux: economic conditions are closer to the 1930s than the 1970s.

GS

[Bubblesofearth]

This to and fro distracts from the main point, which is that this is not 1970s redux: economic conditions are closer to the 1930s than the 1970s.

GS

So we should be looking for a deflationary spiral then?

Guess we'll see over the next few years.

BoE

[vand]

to demonstrate just how far we have to go on this... here's a random headline that just appeared in my newsflow. It literally says that Sunak is going to create more inflation to help with the effect of inflation:

"Rishi Sunak to give pensioners extra £850 to beat rising inflation and energy bills"

https://www.express.co.uk/finance/perso ... nergy-bill

[GoSeigen]

This to and fro distracts from the main point, which is that this is not 1970s redux: economic conditions are closer to the 1930s than the 1970s.

GS

So we should be looking for a deflationary spiral then?

Guess we'll see over the next few years.

BoE

Deflation is what I expected in the years following 2007-8. That era has passed. In the event we ended up with even lower yields than in the 1930s. Extraordinary. Somehow a severe and sudden depression was avoided.


The correct expectation in the 70s would have been for declining inflation. Over 30-40 years. The correct expectation in the 30s would have been for rising inflation. Over 30-40 years.


So my expectation is for inflation to be rising over the next 3 decades at least, at the end of which it might look a bit like the 1970s and BoE will finally be correct!. Hopefully I'll still be alive to witness it.

I daresay demographics could have a say in what happens. Maybe there'll be a baby boom again shortly, or at least the oldies will die out leaving a younger population on average?


GS

[Bubblesofearth]

So my expectation is for inflation to be rising over the next 3 decades at least, at the end of which it might look a bit like the 1970s and BoE will finally be correct!. Hopefully I'll still be alive to witness it.


GS

Haha, you and me both!

[Tara]

to demonstrate just how far we have to go on this... here's a random headline that just appeared in my newsflow. It literally says that Sunak is going to create more inflation to help with the effect of inflation:

"Rishi Sunak to give pensioners extra £850 to beat rising inflation and energy bills"

https://www.express.co.uk/finance/perso ... nergy-bill

Yes that is all they know how to do now.

More handouts, more freebies, and more printing of money.

And make sure the house prices never fall.

It is like a bad joke.

[Itsallaguess]

Interesting time-line video here from Interactive Investor, showing how inflation has developed in a number of areas since around January 2020 to the present day -

https://youtu.be/1xWQ32Oi1qY

Cheers,

Itsallaguess

[MDW1954]

to demonstrate just how far we have to go on this... here's a random headline that just appeared in my newsflow. It literally says that Sunak is going to create more inflation to help with the effect of inflation:

"Rishi Sunak to give pensioners extra £850 to beat rising inflation and energy bills"

https://www.express.co.uk/finance/perso ... nergy-bill

Possibly, yes. But possibly, no. It depends where the £850 comes from.

If it's taxes, then it's redistributed income -- the extra taxes generated by VAT due to rising prices, for instance. VAT receipts on fuel duty must be going through the roof.

Sure, if he's just wishing the money into existance, then you're right.

MDW1954

[GoSeigen]

I see in the Grauniad today its Economics Editor peddles the back-to-the-70's nonsense:

https://www.theguardian.com/commentisfr ... -inflation

The problem is, apart from the fact that he is obsessed with this tiny country on a little island in the Atlantic, any evidence he offers in support of his 1970s theory does nothing of the sort as far as I can see.

e.g. 1. Labour productivity. His claim that it is similar to the 1970s doesn't stand up. Finding data is not simple but in the 1970s productivity growth was high, if rather volatile. In contrast productivity growth in the past two decades has been very low. I can't see the similarity.

2.Industry's share of the economy. Yes, it was falling in the 70s and is still falling now, but the 70s followed a period with a relatively high share of industry in the economy (>20%). In recent years that share has been around the 10% level. Is he suggesting another 50 years of industrial decline until it represents 5% or less of the economy?

Honestly when people write this stuff I wonder if they have even looked at the data to see if what they are saying makes sense or are they just paroting their long-held prejudices?

The rest of that article is even more of a joke: Elliot's plan to fix the economy is to have a plan (and that's only the second point of his three-point-plan). And guess what we have to aim for: a bigger economy. Surprise!

I think the Guardian needs a plan to get more thoughtful and inventive business journalists.


GS

[Bubblesofearth]

If it's taxes, then it's redistributed income -- the extra taxes generated by VAT due to rising prices, for instance. VAT receipts on fuel duty must be going through the roof.

MDW1954

Fuel duty is per litre not a % of price.

BoE

[MDW1954]

If it's taxes, then it's redistributed income -- the extra taxes generated by VAT due to rising prices, for instance. VAT receipts on fuel duty must be going through the roof.

MDW1954

Fuel duty is per litre not a % of price.

BoE

Yes, but VAT isn't. And it was VAT to which I referred.

MDW1954

[Bubblesofearth]

Honestly when people write this stuff I wonder if they have even looked at the data to see if what they are saying makes sense or are they just paroting their long-held prejudices?

GS

Journalists, folk on this board (yes, including me!), and pretty much everyone else could do worse than follow the first part of this advice. Probably the second part as well;

https://www.youtube.com/watch?v=ihaB8AFOhZo

BoE

[Bubblesofearth]

Yes, but VAT isn't. And it was VAT to which I referred.

MDW1954

I stand corrected, didn't realise there were both taxes!

BoE

[Nimrod103]

If it's taxes, then it's redistributed income -- the extra taxes generated by VAT due to rising prices, for instance. VAT receipts on fuel duty must be going through the roof.

MDW1954

Only if fuel buyers have not cut back their purchases.

[servodude]

If it's taxes, then it's redistributed income -- the extra taxes generated by VAT due to rising prices, for instance. VAT receipts on fuel duty must be going through the roof.

MDW1954

Only if fuel buyers have not cut back their purchases.

From the reports of how much people have been spending it doesn't sound like that's the case (or not to any noticeable degree)
- must be wonderful being able to ramp the cost of essential services

[Nimrod103]

If it's taxes, then it's redistributed income -- the extra taxes generated by VAT due to rising prices, for instance. VAT receipts on fuel duty must be going through the roof.

MDW1954

Only if fuel buyers have not cut back their purchases.

From the reports of how much people have been spending it doesn't sound like that's the case (or not to any noticeable degree)
- must be wonderful being able to ramp the cost of essential services

Which reports are those? I cannot find anything more recent than a few months ago on Google. Certainly traffic levels are still high, but they are being distorted by the train strikes. I find it inconceivable that people will not cut back on everything in response to higher prices.

[servodude]

If it's taxes, then it's redistributed income -- the extra taxes generated by VAT due to rising prices, for instance. VAT receipts on fuel duty must be going through the roof.

MDW1954

Only if fuel buyers have not cut back their purchases.

From the reports of how much people have been spending it doesn't sound like that's the case (or not to any noticeable degree)
- must be wonderful being able to ramp the cost of essential services

Which reports are those? I cannot find anything more recent than a few months ago on Google. Certainly traffic levels are still high, but they are being distorted by the train strikes. I find it inconceivable that people will not cut back on everything in response to higher prices.

"Inconceivable!"
- can I refer the honourable member to the words of Inigo Montoya

More pertinently though...

Quick thought experiment:
how many journeys? trips on the road... are unnecessary
As in... nothing would change it they did not happen?
And how much has the cost changed of making those journeys?
And what's the difference (that means "take away" if you're old school like me) with necessary journeys?

I don't think there's enough daylight to absorb the change in costs

If you were really old school and did O level economics like me we would have called the way fuel was used "inelastic demand"


-sd

[gryffron]

Quick thought experiment:
how many journeys? trips on the road... are unnecessary
As in... nothing would change it they did not happen?

So I’ll stick my neck out here. I reckon at least 50% of them could be made by public transport. If it were convenient, frequent and cheaper. (And not on strike)
Trips to work, school, shops…

I concede purely discretionary travel is a small share. Except at weekends.

Fuel and travel is still cheap.

Gryff

[servodude]

Quick thought experiment:
how many journeys? trips on the road... are unnecessary
As in... nothing would change it they did not happen?

So I’ll stick my neck out here. I reckon at least 50% of them could be made by public transport. If it were convenient, frequent and cheaper. (And not on strike)
Trips to work, school, shops…

I concede purely discretionary travel is a small share. Except at weekends.

Fuel and travel is still cheap.

Gryff

How big are those *if*s?

I don't disagree that there's a lot of "strictly" discretionary trips

I don't (yet) think that's how they're perceived at present though; or not sufficiently such that they would be seen in a reduction in fuel consumption

It will take time for the increase in cost to filter through to people's experience and then to moderate or change their behaviour
- at present they'll just be looking at the receipts going "f""k me how much?!" (if they look! )

-sd