Reply to: Deflation news

[ChimpMaster]

As with all train companies, mine is putting prices up well over inflation so I decided to buy an annual pass today (it had to be today to beat the rise). If I get 10 months use out of it then the remaining 2 months will effectively be free - so let's hope the contract endures, though even if my contract terminates, I can get a partial refund. So I've got a good feeling about having done one over on the train operator today ... though I'm sure one of you lot will find some reason to shoot down my plan

[Freamon]

Yes of course my bad - greatly increased public transport costs are not inflation in any shape or form.

See, you're getting it now.

[AtW]

Does the statement "M4, Mx whatever means fook all" aim to suggest that money and credit in circulation have no influence whatsoever on prices, or the economy?

No, what this means is that BoE should look at REAL PRICING SITUATION first, and then on money supply next - prices are going through the roof on pretty much everything (apart from plasma TVs and stuff like that), this means it's BoEs duty to INCREASE INTEREST RATES ffs - does not matter what M4, M550 indicators say - it's their fooking job to use rates in order to supress inflation.

[AtW]

it's nonsensical to conflate rail fares and inflation

Yes of course my bad - greatly increased public transport costs are not inflation in any shape or form.

[Freamon]

It does not matter as far as fact of higher prices is concerned - so long as those reasons are fairly long term - intra day changes don't affect inflation.

Those M4, Mx whatever means fook all - the real inflation is what people and companies pay every day - fuel, food, business rates, house prices etc - all this money supply bollox is just there for 's from BoE to make their own decisions look justified - the only thing they should use is real inflation index that takes into account all unavoidable costs: energy, food, housing, transport, booze etc.

I'm confused. Are prices a force of nature or not?

Does the statement "M4, Mx whatever means fook all" aim to suggest that money and credit in circulation have no influence whatsoever on prices, or the economy?

Sounds pretty ground-breaking to me.

Do you reckon the BoE should ignore money and credit, look at a "real inflation index" and then just try to guess the reasons that prices rise/fall, and what the best course of action is?

[Freamon]

No, you are picking a fight for the sake of it.

At the top this thread is about the price inflation of rail fares. The word inflation is not limited to your definition.

Well I've tried to explain why it's nonsensical to conflate rail fares and inflation, w.r.t. "deflation warnings from Mr King". Since I've noticed AtW doing it on a number of other occasions, I thought it was only fair to wade in and try to enlighten him.

[AtW]

The reason for the increase/decrease in price doesn't matter?

It does not matter as far as fact of higher prices is concerned - so long as those reasons are fairly long term - intra day changes don't affect inflation.

Those M4, Mx whatever means fook all - the real inflation is what people and companies pay every day - fuel, food, business rates, house prices etc - all this money supply bollox is just there for 's from BoE to make their own decisions look justified - the only thing they should use is real inflation index that takes into account all unavoidable costs: energy, food, housing, transport, booze etc.

[Doggy Styles]

AtW refers to the "deflation Mr King warned about". An increase in rail fares is nothing to do with that, partly because rail fares are only one small part of the economy, but mostly because prices are not inflation.

No, you are picking a fight for the sake of it.

At the top this thread is about the price inflation of rail fares. The word inflation is not limited to your definition.

[Freamon]

Short term changes in prices are not inflation - however if they are over long period of time (say month or year) then yes they are: it does not matter what's the reason, the only thing that matters is that the same product costs more (or less in case of deflation).

The reason for the increase/decrease in price doesn't matter? Do you think prices are some kind of force of nature? Why do people even try to measure prices, if the reason for changes in prices doesn't matter?

Obviously prices are not a force of nature. The reason the BoE, govt and others seek to measure prices is that they claim to seek to influence them through monetary policy, fiscal policy, etc.

Now remember, inflation is an expansion in the total amount of money and credit in circulation. This is not the same thing as a rise in the average price of goods and services. Prices can rise or fall for many many reasons, one of which may or may not be inflation. The oil tanker example is just one of these possible reasons. Nobody has control over prices per se. The BoE/govt seek to "control" inflation because they believe it has an influence on prices and economic stability.

This is why it's more than a little bit stupid to point to rail ticket prices and say that this disproves deflation. Mainly because prices and inflation are not the same thing.

It might make some small sense, if the total amount of money and credit in circulation was increasing by any significant amount. But M4 growth is at its lowest for decades, and the shadow banking system is still deleveraging. So it's safe to say that higher train ticket prices really have nothing to do with inflation.

I know this is hard to take in, as you've been told for so many years that prices are inflation, but I'm afraid you've been lied to.

[AtW]

If an oil tanker spills its contents and the price of oil rises as a result, is that inflation? Of course not. Prices are not inflation.

Short term changes in prices are not inflation - however if they are over long period of time (say month or year) then yes they are: it does not matter what's the reason, the only thing that matters is that the same product costs more (or less in case of deflation).

[centurian]

Of course the 'train operating companies' could just take a smaller 'profit' instead

Like that's ever going to happen - the only obligation of a private company is to maximise profits for it's shareholders, using every trick in the book it can think of. Everything else comes secondary to this. Even when they do appear to taking money out of their profits - the only reason it is done is to ensure future profits continue to flow, not to be kind.

For instance, Southeastern are claiming shed loads from the taxpayer for the snow delays, while then refusing to pass on this compensation to their customers by cancelling trains so they just meet their charter requirements (only late running trains count against their stats) - and then slapping 7.8% on the fares from today.

Rail passenger anger over Southeastern Trains delay compensation - Telegraph

[Freamon]

Change in RPI is incorrectly deemed measure of inflation

Fixed that for you.

any change in price of the same product is inflation or deflation (unless it's seasonal moves).

Rubbish. If an oil tanker spills its contents and the price of oil rises as a result, is that inflation? Of course not. Prices are not inflation.

[Freamon]

AtW is talking about price inflation of rail fares.

In that respect he is correct, and £5000 will be seen as a breakthrough by some people.

AtW refers to the "deflation Mr King warned about". An increase in rail fares is nothing to do with that, partly because rail fares are only one small part of the economy, but mostly because prices are not inflation.

[AtW]

RPI? RPI is a price index, not a measure of inflation.

Change in RPI is deemed measure of inflation - any change in price of the same product is inflation or deflation (unless it's seasonal moves).

[AtW]

Som £5k may be 20% of the average salary for the UK but you can bet your bottom dollar that the majority paying that are way way way above the average.

The point it for less money in Germany people can travel all around the country rather than on some route - rail fares are a rip off in the UK despite being massively subsidised by taxpayer - once this support is withdrawn prices will go up 50% easily - probably more as less people will travel so companies will have to increase prices even more to make up for shortfall.

The only thing that deflates these days are wages - they are worth less and less.