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Old 23rd Apr 2017, 10:57   #12221 (permalink)
 
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Islandlad

Some of your comments are a bit rich coming from someone who lives on an island that is independent from the UK and is outside of the EU. Interestingly it is the UK government who intervened to allow tariff free trade in Manx goods to exist between the Isle of Man and the UK and the rest of the EU.

So the Isle of Man enjoys tariff free and unfettered access to the EU and the single market at the gift of the British government. No wonder you are concerned about Brexit!
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Old 23rd Apr 2017, 12:20   #12222 (permalink)
 
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Originally Posted by Jet II View Post
Here is an explanation of why a 2% inflation rate is preferred - and it has got nothing to do with Brexit.


BBC
But the issue is that it is not 2% is it........

Wages at minimum level are going up way above that, Unlever, P&G and other consumer companies have not sough 2% price increases............. Have they ?, try 10% plus. Even reducing size of a product is inflation but doesn't get added in.

Inflation is starting to take off and nobody is seeking 2% inflation increases.
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Old 23rd Apr 2017, 13:28   #12223 (permalink)
 
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Originally Posted by racedo View Post
But the issue is that it is not 2% is it........

Wages at minimum level are going up way above that, Unlever, P&G and other consumer companies have not sough 2% price increases............. Have they ?, try 10% plus. Even reducing size of a product is inflation but doesn't get added in.

Inflation is starting to take off and nobody is seeking 2% inflation increases.

UK inflation is finally at target after years of the BoE trying to engineer it - you should be cheering that they have finally been succesful.

Its certainly nothing to worry about as the cause of the recent rise was the bad weather in Spain at the start of the year that pushed up fruit and veg prices and the depreciation of the pound last year - but that effect drops out after 12 months. The challenge is to maintain it at the current rate.
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Old 23rd Apr 2017, 15:03   #12224 (permalink)
 
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Originally Posted by Jet II View Post
UK inflation is finally at target after years of the BoE trying to engineer it - you should be cheering that they have finally been succesful.

Its certainly nothing to worry about as the cause of the recent rise was the bad weather in Spain at the start of the year that pushed up fruit and veg prices and the depreciation of the pound last year - but that effect drops out after 12 months. The challenge is to maintain it at the current rate.
Nothing to do with BOE in the slightest.

The effect drops out 12 months AFTER the price increase have actually occured. Prices are still going out and many did not even happen until back end of last year, beginning of this year which means there is lots more to come. Prices only going up well after the Brexit vote.

Once inflation takes hold it doesn't just suddenly stop, it continues to feed its way through.

Interest rates haven't yet moved but they will.
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Old 23rd Apr 2017, 15:14   #12225 (permalink)
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The average annual inflation rate from 1900 to 1970 was approximately 2.5%.
From 1970-1979, however, the average rate was 7.06%, and topped out at 13.29% (average) in December 1979 and peaked at 16% in 1974, 24 % in 1975, 18.5% in 1976, 15.8% in 1977, 13.4% in 1979 and 22% in 1980.
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Old 23rd Apr 2017, 17:10   #12226 (permalink)
 
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And through those crazy years in the 1970s one could get a mortgage at an interest rate well below inflation. It would have been mad not to leap aboard. Thus was born the house market obsession.
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Old 23rd Apr 2017, 17:32   #12227 (permalink)
 
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Originally Posted by racedo View Post
Nothing to do with BOE in the slightest.
Eh? - the remit of the BoE is to keep inflation at the target level of 2%. They are expected to use the economic levers at their disposal to achieve that.

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The effect drops out 12 months AFTER the price increase have actually occured. Prices are still going out and many did not even happen until back end of last year, beginning of this year which means there is lots more to come. Prices only going up well after the Brexit vote.

Once inflation takes hold it doesn't just suddenly stop, it continues to feed its way through.

Interest rates haven't yet moved but they will.
The 15% drop in the value of Sterling pushed up import prices - that is a one-off surge in inflation that falls out of the figures after a year. Unless of course you think that Sterling is going to continue to fall..
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Old 23rd Apr 2017, 17:51   #12228 (permalink)
 
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And through those crazy years in the 1970s one could get a mortgage at an interest rate well below inflation. It would have been mad not to leap aboard. Thus was born the house market obsession.
Well said, WS.

Madam Wossername, the one whose publically celebrated demise was banned by the BBC, deliberately engineered a mindless property bubble.

Pop!
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Old 23rd Apr 2017, 18:15   #12229 (permalink)
 
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Tim Farron, the leader, said his party had a duty to offer a distinct alternative to the Tories and Labour, who both support a clean break with the EU.
He added that the party raised 1.6m in donations in the four days following the announcement of the general election. The Lib Dems have said they wish to represent those who voted for the UK to remain in the EU.
So throughout this thread there have been those who say the government have got to appease the 48%, while honouring the 52% who voted for exit, but Farron states the above and no one bats an eyelid, so whats Farron going to do for the 52%, I will have to assume sweet bugger all and no doubt the remain side will accept that stance, but surely won't that be considered even more divisive, so why should May still be expected to cater for the 48%.
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Old 23rd Apr 2017, 18:18   #12230 (permalink)
 
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Eh? - the remit of the BoE is to keep inflation at the target level of 2%. They are expected to use the economic levers at their disposal to achieve that.
BOE has had nothing to do with current inflation rate, they cautioned on Brexit vote and got ignored, they reduced int rates to keep up demand in the short term. They really have little cards to play.

The substantial increase in Minimum wage on April 1st last year was inflationary, businesses are unable to sustain uncreases like that without seeking customer price rises.
BOE had nothing to do with minimum wage increase.

As inflation goes up BOE will be forced to raise Interest rates which will lead into inflation and people will be seeking more pay to cover for inceased costs.

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The 15% drop in the value of Sterling pushed up import prices - that is a one-off surge in inflation that falls out of the figures after a year. Unless of course you think that Sterling is going to continue to fall..
er no because the problem you have is the lead time in price increases is substantial. Tesco and major retailers demand a minimum of 13 weeks before they will allow an increase but reality is that from first discussion to actually accepting the increase is close to 26 weeks or longer. In 2016 it was closer to 9 months before price increases happened and that ignores what happened in between.

Price increase discussions were already occurring last year preBrexit vote, the collpase of sterling post meant businesses stuck with a double whammy which was unsustainable and not possible to take.

This also meant that the price increases they needed just to cover minimum wage increases of 11% were no longer just the discussion point.

Every producer for Tesco is faced with the wage increase and needed to pass it on from the cardboard manufacturer to the logistics company plus what Tesco needed to do to keep margins as well.

Then add in the import costs on top of that which was 15% or more.

This combined change in pricing has not been met, promotions have been reduced substantially as a way to get price increases but retailers know that producers will be back in 6 months seeking another round of price increases as wages still going up as are costs.

UK set for a period of inflation that will continue for quite a few years.
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Old 23rd Apr 2017, 19:16   #12231 (permalink)
 
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Originally Posted by Cazalet33 View Post
Well said, WS.

Madam Wossername, the one whose publically celebrated demise was banned by the BBC, deliberately engineered a mindless property bubble.

Pop!
If you mean the blessed Maggie she didn't come to power until 1979, well after the pump had been primed. Her policy reversed the inflation/mortgage interest rate relationship but the game had been kicked off. I well remember the mad scramble to be in the market in the 1970s and feeling dangerously left behind until I made my first purchase at the beginning of '79 before her first election win. People were buying houses anywhere in order to get a foothold. I bought a bungalow in Pembrokeshire for 18k and I thought I'd been left behind. I was 28 at the time.
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Old 23rd Apr 2017, 19:18   #12232 (permalink)
 
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Racedo

It depends on how long the pound keeps bucking along the gutter and from word go that has been in Theresa Mays hands
Indication of a softer brexit and the pound will quickly rise
If May continues on her hard brexit path it will fall further
The outside world do not like what we are doing and cannot see a good economic outcome from hard brexit as simple as that

With Macron now likely to win the French elections we are being left further in the cold
Expect the Euro to strengthen and the pound to weaken further on that result sadly
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Old 23rd Apr 2017, 19:26   #12233 (permalink)
 
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It depends on how long the pound keeps bucking along the gutter and from word go that has been in Theresa Mays hands
Wrong again as you are totally aware, as she was not in power when the pound dropped and has been recovering since art 50 announced, however has fallen due to the French election, not May, you really must stop with the flowery exaggerations and presenting them as fact.

And I will repeat:

Quote:
Tim Farron, the leader, said his party had a duty to offer a distinct alternative to the Tories and Labour, who both support a clean break with the EU.
He added that the party raised 1.6m in donations in the four days following the announcement of the general election. The Lib Dems have said they wish to represent those who voted for the UK to remain in the EU.
So throughout this thread there have been those who say the government have got to appease the 48%, while honouring the 52% who voted for exit, but Farron states the above and no one bats an eyelid, so whats Farron going to do for the 52%, I will have to assume sweet bugger all and no doubt the remain side will accept that stance, but surely won't that be considered even more divisive, so why should May still be expected to cater for the 48%.
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Old 23rd Apr 2017, 19:40   #12234 (permalink)
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Originally Posted by Wingswinger View Post
I well remember the mad scramble to be in the market in the 1970s and feeling dangerously left behind until I made my first purchase at the beginning of '79 before her first election win. People were buying houses anywhere in order to get a foothold. I bought a bungalow in Pembrokeshire for 18k and I thought I'd been left behind. I was 28 at the time.
I bought a house for 5000 in 1970 (with a 100% mortgage) and sold it for 12500 in 1976 - upsizing to a 17500 house with no problem doubling my mortgage.
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Old 23rd Apr 2017, 21:02   #12235 (permalink)
 
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Exrigger

Naturally the pound would drop with a decision to leave the EU
Having made that decision the markets were looking for reassurance that we intended to remain in the single market but just got hard brexit statements from May where the markets responded by dropping further

It has strengthened a small amount with the hope that May will with a larger majority not be held to ransom by elements of the hard brexit portion of her party in making concessions to the EU which may lead to a softer brexit

Whether she uses that extra power to do that or push through ano deal departure is another matter

Had Le Pen looked like winning hence destabilising the EU the pound would have strengthened
As that looks unlikely the Euro will strengthen instead

There is nothing colourful or fanciful about the above
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Old 23rd Apr 2017, 22:15   #12236 (permalink)
 
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Wrong again as you are totally aware, as she was not in power when the pound dropped and has been recovering since art 50 announced, however has fallen due to the French election, not May, you really must stop with the flowery exaggerations and presenting them as fact.
Pound / Euro is at same rate it was on 1st of December.
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Old 23rd Apr 2017, 22:25   #12237 (permalink)
 
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Exrigger

Frankly Le Pen was the last chance for the UK in getting a good ??? EU deal
With Macron taking the crown that will make the USA direct deal more likely with the EU effectively sidelining our two biggest customers
The EU will probably have had enough of the UK tantrums and instead will look at attracting business out of the UK into the EU

May may be forced with two choices accepting a soft brexit or bankrupting the country
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Old 23rd Apr 2017, 23:23   #12238 (permalink)
 
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I actually believe that if there was another referendum the leave vote would be greater, but then I must be wrong as the remain said they would win another referendum, again from them it is fact, apparently.
Two reasons why you're probably right:
(1) apparently 70% of Brits want the government to "get on with it" as far as brexit is concerned; and
(2) some of the soft and/or reluctant remain vote will have been disgusted by the arrogant and vindictive behaviour of the EU since article 50 was triggered and the impossible conditions it is attempting to impose on the UK.



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Have to agree - any EU sulking over Brexit is going to fade away as they are going to have much bigger problem with the flood of refugees which doesn't look like slowing down any time soon. What are the odds that Schengen will be suspended by the end of the year?
Almost certainly! and a good job too. Common travel areas only work when a handful of countries are involved.



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The EU is a Cold War legacy economic union to mirror the Communist bloc and is very out of date. They have just not noticed yet.
A 1950s remedy for a 1930s problem.



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Yes I agree, there is nothing wrong with a trading bloc but it has morphed into a quasi state that is in reality controlled by a small elite. How long before the people are ignored altogether for the greater good. Thae warning bells should have started ringing when all the people in power are unelected and impossible to remove.
Always the plan from day 1 (treaty of Rome 1957), it's all there.

The point was to create a European super state by stealth as military attempts to to do it always eventually fail after much bloodshed and hardship. Control by religous hegemony also failed after several centuries.



Quote:
If you mean the blessed Maggie she didn't come to power until 1979, well after the pump had been primed. Her policy reversed the inflation/mortgage interest rate relationship but the game had been kicked off. I well remember the mad scramble to be in the market in the 1970s and feeling dangerously left behind until I made my first purchase at the beginning of '79 before her first election win. People were buying houses anywhere in order to get a foothold. I bought a bungalow in Pembrokeshire for 18k and I thought I'd been left behind. I was 28 at the time.
Edward Heath was the father of inflation. Heath's chancellor Anthony Barber, printed money like there was no tomorrow; Heath had us join the EEC with the consequent price rises; and Heath introduced VAT accross the board to replace purchase tax which was only selectively deployed (usually on luxury goods).

House prices doubled between 1970 and 1974, the lights went out, the miners were on strike and the country was on a three-day week.

The worst prime minister of the post war period, along with Blair and Thatcher (in no particular order).

Heath's only saving grace is that he was kicked out quickly.

Despite everything the 1970s were great days!



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May may be forced with two choices accepting a soft brexit or bankrupting the country
Define soft brexit. Depending on your definition, this is either (1) not possible because it is considered to be cherrypicking by the EU, or (2) pointless because it means accepting free movement, all the regulations, and the jurisdiction of the ECJ but with no say over how things are done.

Which is it Pace?
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Old 23rd Apr 2017, 23:41   #12239 (permalink)
 
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Seeing as how the pundits have miscalculated and guessed wrong for several recent political events, what if Marine Le Pen does get elected and FN sweeps to power in France?

There might be encouragement for all the disenfranchised French citizens that are currently living in the ghettos surrounding Paris to leave the country. Where exactly would be a tempting place for an EU citizen to head for if France was no longer an option?

We seriously need to get on with Brexit!
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Old 24th Apr 2017, 00:17   #12240 (permalink)
 
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Originally Posted by racedo View Post

As inflation goes up BOE will be forced to raise Interest rates which will lead into inflation and people will be seeking more pay to cover for inceased costs.
only if inflation continues to rise which the BoE isn't expecting to happen.


Quote:
er no because the problem you have is the lead time in price increases is substantial. Tesco and major retailers demand a minimum of 13 weeks before they will allow an increase but reality is that from first discussion to actually accepting the increase is close to 26 weeks or longer. In 2016 it was closer to 9 months before price increases happened and that ignores what happened in between..


...UK set for a period of inflation that will continue for quite a few years.
Er - try reading the BoE's quarterly inflation report. They say that the recent rise in inflation is due to rises in energy and food prices and the feeding through of the drop in Sterling. As the effects of the currency depreciation fall out of the system the BoE are forecasting that inflation will peak in Q4 2017 and then fall.
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