Pyramid Comment

This journal takes an alternative view on current affairs and other subjects. The approach is likely to be contentious and is arguably speculative. The content of any article is also a reminder of the status of those affairs at that date. All comments have been disabled. Any and all unsolicited or unauthorised links are absolutely disavowed.

Thursday, January 20, 2011

Inflation Is A Growth Requirement

Inflation And Oil
Inflation Control

Inflation is inextricably linked with debt and its associated interest. No debt -> no interest = much, much less inflation.

Not zero, just paradoxically a great
reduction in 'growth' potential

That's a good thing for consumers, though the worst scenario for the commercial sector.

Inflation shows that prices rose 3.7% to December 2010, up from the 3.3% of the previous month. The rapidly rising cost of oil drove the biggest monthly increase on record. This is growth. Inside the last three decades, the UK had the cheapest petrol in Europe, but now has the most expensive. In a global market, why is there such a huge increase. Lowest to highest? The figures from the Office for National Statistics mean that inflation, as tracked on the consumer price index (CPI), stayed at least one (almost 2% more than - DA) percentage point away from the Bank of England's 2% target.

  • There seems a lot of surprise about rising inflation levels, but this is what makes money grow. It's what it's all about. Profiting through inflation. Without inflation growth would be very slow. This has a knock-on effect on all prices and the associated VAT and other 'duties'. The only way to make money appear to grow is to devalue it, so that more money is needed to 'buy' any commodity or service. If money were to truly grow, then less would be needed as it would be more powerful. 'More money' equates to actually 'weakness'.
Create the problem.

Provide 'a' solution
    Inflation  is now certain to move above 4% by early 2011...” (Simon Ward, chief economist at Henderson Global Investors).

      • That's a contest that is lost before the race is even started. It's a principle that interest on savings must be less than inflation and anything that increases it. If the yield from inflation is greater than any interest out ('earned') on savings then growth is guaranteed. Growth of the banks.

    Energy and food prices are driving up inflation in the UK (or the other way around!!! - DA), as global oil prices near $100 a barrel and crop supply shortages around the world increase demand for food. These problems (may have) remained behind the sudden surge last month: soaring month-on-month air fares. Prices for fuels and lubricants jumped 2.8%. But what caused the jump in the first place - DA). This represents the biggest rise in a November-to-December period since 1996. Prices were also pushed up by increasing gas bills as some of the major energy suppliers raised their tariffs.

    But what actually caused the rise?
    Were prices simply raised and 'justified'
    by undefined cost increases DA

    The 'worry' (expectation) is that inflation will accelerate further as January’s rise in the VAT to 20pc takes affect and the rising cost of oil keeps feeding through into fuel prices and utility bills (as The Plan moves ahead). The Bank of England’s own (usually inflationary moves) projections are that a full pass through of the sales tax rise would add 1.4 percentage points to the inflation rate. Or 0.7% even if only half of the effect feeds through.

    Apparently, BoE Monetary Policy Committee (MPC) meeting minutes last month showed that members noted that inflation could “well reach 4% by the spring, somewhat higher than the November Inflation Report” in which they laid out their quarterly projections. Wait for it...

    • Paul Fisher, the Bank’s executive director for markets and a committee member, said in a new interview that the sticky inflation was "very uncomfortable", but that the Bank had to look through the short-term factors pushing up prices, however unpopular that may be.

    The MPC policymakers will have had an early estimate of the latest inflation rate to hand when they last week left interest rates on hold for another month. The Bank is worried (really!!! - DA) about derailing* the recovery by raising rates prematurely, but others question whether the higher commodity prices are indeed a short-term phenomenon.

    *Risk upsetting The Plan

    Inflation as tracked by the retail price index (RPI), which includes more housing costs and is the benchmark for many wage deals, also picked up, from 4.7% to 4.8%. The highest figure since July.
    George Osborne, the Chancellor (BBC, Tuesday) that rising price pressures were a concern for the government. (Well, of course they are!!! - DA.)

    "We're very clear that the pressure on working
    families of rising prices is a huge concern for
    everyone and a concern
    for the government."

    "We also support what the BoE is doing on its fight against inflation, and...

    we're paying off the nation's credit card... *

    which is crucial to all of this," he added, referring to his deficit-cutting plan that starts in earnest this year. It seems it hasn't really even started yet - DA.

    * Usual rhetoric taken directly from the script.

    The Plan started in the USA is well under way and moving onwards - 100 years on.