Is rising inflation looming?

[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

[Nimrod103]

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

I agree petrol and diesel demand is relatively inelastic, at least compared to a lot of discretionary expenditure. I did eventually find the May 22 figures (https://www.stalbansreview.co.uk/news/n ... -spending/
[I must add the St Alban's and Harpenden Review to my regular reading list]). This shows that fuel sales actually went up by 1.1% which was attributed to people returning to work in offices. However, I was looking forward to later in the year, for which I feel the phrase 'we ain't seen nothin' yet' is appropriate.
It must depend a bit on where you live, but in my neighbourhod huge numbers of children are taken to school by car. Totally unnecessary because public transport/walking can be substituted. Also many people in this area have jobs which could almost entirely be done from home.

I suspect people will just give up on a lot of travel, especially long distance,and stay more local. I remember a time in the 1960s and 70s when this was the norm, and I can imagine a return to many of the habits of that era.

[Wuffle]

Going more local in the twilight is fine.
Being forced to live a worse life than your parents when you still have some 'whooosh' about you is not fine.

W.