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April 15, 2014

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Ralph Musgrave

Another possibility is thus. The Bank of England reckoned that a significant amount of inflation over the last four years or so was cost push. If that effect is fading, then you’d tend to get falling inflation combined with a constant or even falling level of unemployment.

Boffy

The other possibility is that the actual inflation data is totally bogus. Take into consideration the massive increase in the price of housing faced by workers, particularly in London, whether to buy or to rent; take into consideration that as the bubble of share prices and bond prices gets blown up, workers pension contributions buy fewer and fewer bonds and shares, and the yield on those bonds and shares declines, making it more and more difficult to provide the income required to pay their pensions or annuities, so the real cost of buying pension provision has been massively increased by the blowing up of asset price bubbles via money printing and the real rate of inflation faced by workers is many times the official figure.

I could easily construct an inflation index that gives the figure required if you let me include or exclude the relevant data in the way the ONS data does!

Boffy

Oh I should have also included that another effect of the cuts is that where services were previously provided free or heavily subsidised by Local authorities, and then aren't this is an additional expense for workers then having to pay for them, but doesn't show up as a price rise. In the same way, if part of your cost of rearing children was covered by a Child Tax Credit, which is then reduced or withdrawn that is a real increase in your child care costs.

Miguel Madeira

If the unemployment, even if decreasing, is above the NAIRU, I think that it is expectable that the inflation be also decreasing - the inflation should only begin to rise only when the reduction of the unemployment put it below the NAIRU.

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