Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.6% in the 12 months to August 2024, up from 3.3% in July;
OK. About which Spud says:
So, we can conclude that:
Inflation is stable.
The real core of inflation (energy, food, etc) is stable: it is on the periphery, like airfares, where there is inflation.
The obsession with this issue is now unjustified.
Therefore, the Bank of England urgently needs to cut interest rates and heavily
He’s managed to get the definition the wrong way around. Core inflation is without food and energy. Because we know that those can be affected – up and down – by near random changes in the marketplace. It’s the other stuff that is “core” because that’s the bit that’s showing us the inflation rate being caused by monetary conditions, not random market variations.
The core rate is up. That’s advice *against* cutting interest rates therefore.
Jeebus on his Pogo Stick the man’s bad at economics.
I mean, the definition is even in the very quote he takes from ONS….
I don’t think he’s saying Core Inflation (the official definition) is food and energy, what he’s saying (very badly) is that inflation for the things people buy (ie their core purchases) is stable at or below 2%, its the other service industry stuff outside of that which is going up. So one assumes he never has to service his car, get his hair cut or repair his boiler, and therefore no-one else need ever worry if the cost of those items is rising fast……..
A measure of inflation that doesn’t count things you have to buy regularly to live is not a useful measure of inflation. A list of items and services which can be postponed or done without is no bloody good to anybody except stupid angel-dancing counters or economists, but I repeat myself.
No, that’s not the point of it at all.
We know that food and energy prices bounce around for reasons nothing to do with general inflation. The weather, Opec getting cross, all sorts of things. They also go both up and down. Sure, they’re important to us consumers out here. But what makes those prices change is – say, eggs, in the US, avian ‘flu outbreak. That’s not a function of monetary policy.
The other stuff tho’? Pull out the stuff that we know *isn’t* changing price because of monetary policy and we’re left with what is changing price because monetary policy. Therefore that’s the inflation rate to use as a guide to monetary policy.
The idea of “core inflation” is as a guide to policy makers, nowt else. It’s the inflation rate that is changted by monetary policy.
The problem with excluding energy from the core inflation rate is that it has a knock on effect for much of the core indicators, albeit with some lag. I would hope that the financial whizzers use it as a leading indicator for inflation. The problem is that the man in the street sees changes most readily on the non-core items, which leads to some cognitive dissonance.
Yes, but high energy prices are government policy and only partly influenced by international factors. And this measure gives them a chance to duck that and shrug. “Nothing to do with me mate, factors beyond my control” Food too is subject to policy, to some extent..
Therefore, the Bank of England urgently needs to cut interest rates and heavily to:
Prevent recession
To meet Rachel Reeves’ demand for growth
To prevent the hardship and misery high rates are causing to those who borrow most in proportion to income – whether they be small employers or younger homeowners.
The required direction of travel – to base rates of three per cent or less – is now so obvious that the case hardly need be argued.
I do, however, very much doubt that the Bank of England, geared as it is to the interests of the cash-based saver who likes to deposit their funds in a bank, will see things that way. As a result, the misery will continue.
Interestingly what this tells me is that he has considerable personal debts that he is paying interest on and almost no cash savings – government by personal circumstance.
As of this month’s base rate cut, the rate is now 5%, which is the long-long-term average. As in 400 years average. Rates are now *normal*. I repeat: we have normality. Anything you still can’t cope with is therefore your own problem.
I think the word “inflation” does to much, and therefore causes (convenient?) confusion. You have price variation caused by scarcity, glut, and changes in demand – including artificial scarcity and glut caused by government policy and regulation – and then inflation caused by increased money supply relative to the amount of goods & services in the real economy. Same amount (or less) of stuff; more tokens of exchange available, therefore stuff costs more tokens of exchange.
Net Zero and lockdowns have caused large increases in the prices of most things by creating artificial scarcity. QE and furlough have created inflation by increasing the money supply at the same time goods and services were being artificially constrained. There, Spud. It’s easy.
That said, I take Spud’s point about interest rate vs. tax. If you’re a consumer without loans on which you’re paying interest, raising the interest rate isn’t going to take money out of your pocket directly, whereas raising taxation certainly will, immediately.
I’m starting to feel sorry for the cretin, as almost everything he spouts is wrong and all so easily derided by Tim and others here. Is he aware he’s such a fool? Can he remember his brother/cousin passing his exams for him? Why do the local drinking places not welcome his pearls of wisdom? How does he get the wrong end of the stick about all economics?
This sad and inadequate fool would be totally irrelevant if he wasn’t followed by so many gullible web idiots – but his malign influence on them is an issue, distorting and downgrading their economic understanding and possibly leading them to make foolish financial decisions.
OT A commenter here was asking about the process of this case:
https://www.telegraph.co.uk/news/2024/09/18/asian-man-jailed-summer-riots-far-right-posed-birmingham/
He got 2 years plus but they don’t say what the plus is. It does seem remarkably light for what he was actually doing. Considering the justifications why other people have got heavier sentences. But you are two-tier UK aren’t you?
“He got 2 years plus but they don’t say what the plus is”
The article says 2 years 4 months. So out in under a year with criminals currently being let out after 40% of their sentence.
but his malign influence on them is an issue, distorting and downgrading their economic understanding and possibly leading them to make foolish financial decisions.
Isn’t that rather the preferred outcome, Ed P? There is nothing more instructional about the dangers of fire than getting your hand burnt. The main problem is the readers of Spud are mostly skint assholes with designs on other people’s money.
I’m moving part of a comment I made on a previous thread up to here, because it seems so appropriate.
To reprise a conversation in these comments a short while back ; one of the major problems with the economy is economists. About as useful as tits on a boar. If economists were any good at economics, they’d all be wealthy. Not grifting for grants & living in rabbit hutches like one self described economist of minimal repute.
I’d add. How many economists are wealthy by their own efforts? Most become wealthy by being paid to be economists. In other words, being clever ( or mostly, not so clever) with other people’s money. Let’s hear from people with skin in the game or otherwise, shut the fuck up.
I’ve just remembered, no need to buy him anything, Hazlitt is still free:
https://www.hacer.org/pdf/Hazlitt00.pdf
@BiS
Most wealthy people became wealthy because they have directly created a great deal of wealth, or inherited it from parents who have.
Economists don’t create wealth. The good ones describe the world accurately. These descriptions can be extremely useful to wealth creators, but much of the time those wealth creators have largely intuited this stuff already. The economists’ observations merely confirm it.
So if you don’t create wealth you’re not going to get rich. You have to put your money where your mouth is to do that. Of course I’m ignoring parasitic rentiers here who can amass loads of tokens of exchange, but they don’t create wealth, do they? They merely leech others’.
Spud? Spud!