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Deflation

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By (user no longer on site) OP   
over a year ago

Lots of talk on the news about deflation but economic opinion seems divided. Would it be a good thing for the economy or not?

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By (user no longer on site)
over a year ago

General consensus, by the powers that be are that it would not be good for the economy. Generally speaking the Govt would like and benefit from moderate inflation, hence the BoE target of 2%.

The argument against is that it would make people delay major purchases in the expectation that said items would be cheaper next month and so they will wait.

Notice though, how in recent years, consumer durable goods like TV's, Fridges, Music Systems et al and consumables like CD's themselevs have seen tremendous deflation yet people still buy them?

At the same time, the major Inflationary items are usually under the direct or indirect control of the Govt. Council Tax, govt fees, power bills, APT etc?

Makes you think, don't it.

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By *horltzMan
over a year ago

heysham

It won't last , fuel price has a big impact , good for mortgages , bad for savers

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By *londeCazWoman
over a year ago

Arse End of the Universe, Cumbria

I'd be unlikely to delay buying a new gadget cos it'd be cheaper next month, our first video recorder cost around £500 in 1980 and I don't recall my dad saying "We'll wait cos I'll be able to pick one up at a car boot for 20p in 2014"

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By (user no longer on site)
over a year ago

You will occasionally hear of people speaking of mortgage rates at 15%, yes fifteen.

What people forget to mention is that :

a) it was only for a matter of months, soon falling to 10.25%, and

b) at the same time as patying 15%, it was possible to achieve 12% interest on your savings.

It's all relative.

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By (user no longer on site) OP   
over a year ago

I think that low inflation, even deflation, could be good insofar as it should help stimulate spending and, consequently, growth. My concern, however, is whether lower prices and costs will start to cause companies to find excuses to start lowering wages. In spite of today's assertion that wages are rising (sound bites, surely?), most sectors are already seeing wage freezes and caps employed. If we see deflation, might we see wage deflation too - and what would be the consequence of that? I cannot remember a time when we had the current economic situation so it promises to be an uncertain time

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By (user no longer on site)
over a year ago


"I think that low inflation, even deflation, could be good insofar as it should help stimulate spending and, consequently, growth. My concern, however, is whether lower prices and costs will start to cause companies to find excuses to start lowering wages. In spite of today's assertion that wages are rising (sound bites, surely?), most sectors are already seeing wage freezes and caps employed. If we see deflation, might we see wage deflation too - and what would be the consequence of that? I cannot remember a time when we had the current economic situation so it promises to be an uncertain time"

Why should there not be falling wages with falling prices? For years there have been demands, not least by the public sector unions/workers, for pay rises in line with Inflation. So why not decreases in line with deflation?

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By (user no longer on site)
over a year ago

It's shit for the government as they rely on inflation to get themselves out of the debt they get themselves into.

It's bad for business as profits fall.

It's good for some aspects of the economy but in general under the current system we work under.

It's the worst thing ever.

Look no further than Japan for what is to come here.... Stagnation!

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By (user no longer on site) OP   
over a year ago


"I think that low inflation, even deflation, could be good insofar as it should help stimulate spending and, consequently, growth. My concern, however, is whether lower prices and costs will start to cause companies to find excuses to start lowering wages. In spite of today's assertion that wages are rising (sound bites, surely?), most sectors are already seeing wage freezes and caps employed. If we see deflation, might we see wage deflation too - and what would be the consequence of that? I cannot remember a time when we had the current economic situation so it promises to be an uncertain time

Why should there not be falling wages with falling prices? For years there have been demands, not least by the public sector unions/workers, for pay rises in line with Inflation. So why not decreases in line with deflation?"

What would happen if people's wages started being cut? They would spend less, lowering profits for companies. In turn this would lead to cutbacks. Potentially, we would be locked into a negative cycle

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By (user no longer on site)
over a year ago


"I think that low inflation, even deflation, could be good insofar as it should help stimulate spending and, consequently, growth. My concern, however, is whether lower prices and costs will start to cause companies to find excuses to start lowering wages. In spite of today's assertion that wages are rising (sound bites, surely?), most sectors are already seeing wage freezes and caps employed. If we see deflation, might we see wage deflation too - and what would be the consequence of that? I cannot remember a time when we had the current economic situation so it promises to be an uncertain time

Why should there not be falling wages with falling prices? For years there have been demands, not least by the public sector unions/workers, for pay rises in line with Inflation. So why not decreases in line with deflation?

What would happen if people's wages started being cut? They would spend less, lowering profits for companies. In turn this would lead to cutbacks. Potentially, we would be locked into a negative cycle

"
.

It's called stagnation.

It's happened before and something the bank of England have been desperate to avoid... The trouble is they keep printing money(QE), which should in itself lead to huge inflation, but it isn't and with 0% interest rates they've really got no where to go.

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By (user no longer on site)
over a year ago


"I think that low inflation, even deflation, could be good insofar as it should help stimulate spending and, consequently, growth. My concern, however, is whether lower prices and costs will start to cause companies to find excuses to start lowering wages. In spite of today's assertion that wages are rising (sound bites, surely?), most sectors are already seeing wage freezes and caps employed. If we see deflation, might we see wage deflation too - and what would be the consequence of that? I cannot remember a time when we had the current economic situation so it promises to be an uncertain time

Why should there not be falling wages with falling prices? For years there have been demands, not least by the public sector unions/workers, for pay rises in line with Inflation. So why not decreases in line with deflation?

What would happen if people's wages started being cut? They would spend less, lowering profits for companies. In turn this would lead to cutbacks. Potentially, we would be locked into a negative cycle

.

It's called stagnation.

It's happened before and something the bank of England have been desperate to avoid... The trouble is they keep printing money(QE), which should in itself lead to huge inflation, but it isn't and with 0% interest rates they've really got no where to go.

"

Lessons learned from Japan c1990 = Nil.

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By (user no longer on site) OP   
over a year ago


"I think that low inflation, even deflation, could be good insofar as it should help stimulate spending and, consequently, growth. My concern, however, is whether lower prices and costs will start to cause companies to find excuses to start lowering wages. In spite of today's assertion that wages are rising (sound bites, surely?), most sectors are already seeing wage freezes and caps employed. If we see deflation, might we see wage deflation too - and what would be the consequence of that? I cannot remember a time when we had the current economic situation so it promises to be an uncertain time

Why should there not be falling wages with falling prices? For years there have been demands, not least by the public sector unions/workers, for pay rises in line with Inflation. So why not decreases in line with deflation?

What would happen if people's wages started being cut? They would spend less, lowering profits for companies. In turn this would lead to cutbacks. Potentially, we would be locked into a negative cycle

.

It's called stagnation.

It's happened before and something the bank of England have been desperate to avoid... The trouble is they keep printing money(QE), which should in itself lead to huge inflation, but it isn't and with 0% interest rates they've really got no where to go.

"

I think they said on the news that Sweden and Denmark were even having negative interest rates

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By (user no longer on site)
over a year ago


"I think that low inflation, even deflation, could be good insofar as it should help stimulate spending and, consequently, growth. My concern, however, is whether lower prices and costs will start to cause companies to find excuses to start lowering wages. In spite of today's assertion that wages are rising (sound bites, surely?), most sectors are already seeing wage freezes and caps employed. If we see deflation, might we see wage deflation too - and what would be the consequence of that? I cannot remember a time when we had the current economic situation so it promises to be an uncertain time

Why should there not be falling wages with falling prices? For years there have been demands, not least by the public sector unions/workers, for pay rises in line with Inflation. So why not decreases in line with deflation?

What would happen if people's wages started being cut? They would spend less, lowering profits for companies. In turn this would lead to cutbacks. Potentially, we would be locked into a negative cycle

"

Wouldn't Company costs including labour also fall proportionately?

With Govt (incl local government)income falling maybe they too would look at significant and realistic cuts.

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By (user no longer on site)
over a year ago

Mmm I think if India and China become more of a consumer/service driven, and manufacturing move more to the west, I reckon there would be a pick up

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By (user no longer on site)
over a year ago


"I think that low inflation, even deflation, could be good insofar as it should help stimulate spending and, consequently, growth. My concern, however, is whether lower prices and costs will start to cause companies to find excuses to start lowering wages. In spite of today's assertion that wages are rising (sound bites, surely?), most sectors are already seeing wage freezes and caps employed. If we see deflation, might we see wage deflation too - and what would be the consequence of that? I cannot remember a time when we had the current economic situation so it promises to be an uncertain time

Why should there not be falling wages with falling prices? For years there have been demands, not least by the public sector unions/workers, for pay rises in line with Inflation. So why not decreases in line with deflation?

What would happen if people's wages started being cut? They would spend less, lowering profits for companies. In turn this would lead to cutbacks. Potentially, we would be locked into a negative cycle

.

It's called stagnation.

It's happened before and something the bank of England have been desperate to avoid... The trouble is they keep printing money(QE), which should in itself lead to huge inflation, but it isn't and with 0% interest rates they've really got no where to go.

I think they said on the news that Sweden and Denmark were even having negative interest rates"

Yes with Sweden beginning to start QE.

Monopoly anyone?

IIRC the Swiss introduced negative interest rates several months ago.

Ah fuck saving, let's all have a great blowout, live on debt and save the world.

Excuse me "my bank", may i have a £60k loan at minus 3% . Thanks.

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By (user no longer on site)
over a year ago


"I think that low inflation, even deflation, could be good insofar as it should help stimulate spending and, consequently, growth. My concern, however, is whether lower prices and costs will start to cause companies to find excuses to start lowering wages. In spite of today's assertion that wages are rising (sound bites, surely?), most sectors are already seeing wage freezes and caps employed. If we see deflation, might we see wage deflation too - and what would be the consequence of that? I cannot remember a time when we had the current economic situation so it promises to be an uncertain time

Why should there not be falling wages with falling prices? For years there have been demands, not least by the public sector unions/workers, for pay rises in line with Inflation. So why not decreases in line with deflation?

What would happen if people's wages started being cut? They would spend less, lowering profits for companies. In turn this would lead to cutbacks. Potentially, we would be locked into a negative cycle

.

It's called stagnation.

It's happened before and something the bank of England have been desperate to avoid... The trouble is they keep printing money(QE), which should in itself lead to huge inflation, but it isn't and with 0% interest rates they've really got no where to go.

Lessons learned from Japan c1990 = Nil.

"
.They don't learn that's something that seems never to change but you can't assume their stupid, the people in charge are extremely clever individuals with top honours from the very best universities.

The trouble is.... Capitalism has to end some time, it's a mathematical impossibility it will work forever.

It's just hard to think of an exit strategy that you can sell to the voters.... The word capitalism is not quite correct, our entire system is capitalistic but not free market, it's evolved and refined into a system that's intrinsic in everything, the very fabric of society is based upon money and exponentially of growth and it's got to such extent that the little things are enough to tip the balance into chaos.

The next ten years will be,I believe the most turbulent we'll ever see.

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By (user no longer on site)
over a year ago


"I think that low inflation, even deflation, could be good insofar as it should help stimulate spending and, consequently, growth. My concern, however, is whether lower prices and costs will start to cause companies to find excuses to start lowering wages. In spite of today's assertion that wages are rising (sound bites, surely?), most sectors are already seeing wage freezes and caps employed. If we see deflation, might we see wage deflation too - and what would be the consequence of that? I cannot remember a time when we had the current economic situation so it promises to be an uncertain time

Why should there not be falling wages with falling prices? For years there have been demands, not least by the public sector unions/workers, for pay rises in line with Inflation. So why not decreases in line with deflation?

What would happen if people's wages started being cut? They would spend less, lowering profits for companies. In turn this would lead to cutbacks. Potentially, we would be locked into a negative cycle

.

It's called stagnation.

It's happened before and something the bank of England have been desperate to avoid... The trouble is they keep printing money(QE), which should in itself lead to huge inflation, but it isn't and with 0% interest rates they've really got no where to go.

I think they said on the news that Sweden and Denmark were even having negative interest rates"
.

Switzerland already have negative interest rates -0.5

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By (user no longer on site)
over a year ago

Here's a thought, if deflation and waged decreases took us back to the price levels of c1970 would it be a bad thing?

Where a working class family could buy a 3 bed semi in a nice area for say £3,500 on ONE working wage.

Or are ther other factors at play?

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By (user no longer on site)
over a year ago


"

Here's a thought, if deflation and waged decreases took us back to the price levels of c1970 would it be a bad thing?

Where a working class family could buy a 3 bed semi in a nice area for say £3,500 on ONE working wage.

Or are ther other factors at play?

"
.

You miss the big picture.

All debt is intrinsically linked to inflation.... Just like savings.

You save ten pounds in the bank today. To use when you retire in twenty years... Well twenty years comes and your ten pounds is reduced to the buying power of £1:75.

They rob your savings every day with inflation to pay for their borrowing and borrowing in general. You can't have exponential growth without unserstainable borrowing.

The government can't pay back next years borrowing without reducing it by inflation... And that's where the problem of deflation occurs.

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By (user no longer on site)
over a year ago


"

Here's a thought, if deflation and waged decreases took us back to the price levels of c1970 would it be a bad thing?

Where a working class family could buy a 3 bed semi in a nice area for say £3,500 on ONE working wage.

Or are ther other factors at play?

.

You miss the big picture.

All debt is intrinsically linked to inflation.... Just like savings.

You save ten pounds in the bank today. To use when you retire in twenty years... Well twenty years comes and your ten pounds is reduced to the buying power of £1:75.

They rob your savings every day with inflation to pay for their borrowing and borrowing in general. You can't have exponential growth without unserstainable borrowing.

The government can't pay back next years borrowing without reducing it by inflation... And that's where the problem of deflation occurs."

I'm quite aware of the big picture. I'm letting others think about it.

That's also why NuLabour kept the GBP, so we could print more of it as and when we liked.

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By (user no longer on site)
over a year ago

There's an old analogy that goes.

At Jesus birth, if you'd wanted a hand made tailored outfit belt and shoes it would have cost you around an ounce of gold.

Now if you go down London and have a tailor make you a hand made suit, shoes and belt today it would set you back about the same... One once of gold or 1200 quid and that's because man power or skilled labour has always cost the same and will never change, the only thing driving prices down is cheap energy in making a product and automaton through abundance.

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By (user no longer on site)
over a year ago


"

Here's a thought, if deflation and waged decreases took us back to the price levels of c1970 would it be a bad thing?

Where a working class family could buy a 3 bed semi in a nice area for say £3,500 on ONE working wage.

Or are ther other factors at play?

.

You miss the big picture.

All debt is intrinsically linked to inflation.... Just like savings.

You save ten pounds in the bank today. To use when you retire in twenty years... Well twenty years comes and your ten pounds is reduced to the buying power of £1:75.

They rob your savings every day with inflation to pay for their borrowing and borrowing in general. You can't have exponential growth without unserstainable borrowing.

The government can't pay back next years borrowing without reducing it by inflation... And that's where the problem of deflation occurs.

I'm quite aware of the big picture. I'm letting others think about it.

That's also why NuLabour kept the GBP, so we could print more of it as and when we liked."
.

They don't want you to think about it.

The first rule of politics is never mention any problems you haven't got solutions for!

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