Thursday 15 July 2021

Bank of England - What inflation?

 So as we see record rises in inflation and to continue Nick Drew's theme some key elements are being ignored...

There is a much wider theme at work, there is a huge shortage of computer chips due to raw materials shortages. The big issue is the change in demand with cars now needing more chips as well as phones and most things electrical - the supply chain for the near doubling of demand is going to take a couple of years to fix. Plus China, as ever, interferes where it can with raw materials and supplies to Taiwan which is the home of much of the world's chip production (recent military manoeuvres too on the China side of the Taiwan strait are fund too....).

So used cars, used computers etc are all seeing huge bump in price, as are say new cars which are limited in number. 

Against this background, the Bank of England issue another £1.5 billion of quantitative easing this week to try to get the UK economy booming again.  Err....excuse me? Wage inflation is at over 5% this year, supply of goods is restricted. There are only two outcomes.

Stagflation - inflation but little economic growth or just plain old inflation with higher wages and prices in a spiral. 

The genie is out of the bottle, last time this happened, it was 20 years to get it back in. Plenty of time over the summer for us to reflect on how this will impact the Economy, markets and Government. 

14 comments:

Elby the Beserk said...

"Against this background, the Bank of England issue another £1.5 billion of quantitative easing this week to try to get the UK economy booming again"

Clearly, QE works SO well we just have to keep on doing it. Beezer.

Scrobs. said...

I hope some of the haulage companies start to pay better wages soon, otherwise, our weekly supply of pate de foie gras, smoked salmon and Premier Cru booze will be in jeopardy...

dearieme said...

"The automaker has already made the unusual move of eliminate two fuel-saving features from some of the vehicles – engine start/stop and cylinder deactivation – and will now remove wireless mobile device charging pads from a few SUV trims, GM Authority first reported."

So manufacturers can, in part, accommodate to chip shortages by removing needless gizmos from their vehicles. Those first two are pretty stupid gizmos anyway - maybe the new SUVs will be more popular accordingly.

Don Cox said...

We have had many years of abnormally low inflation. It is likely to go higher than normal before settling back to around 2%.
I expect 8% over the next 12 months.

Don Cox

Jan said...

Quite right dearieme. Personally I don't want all the electronics. I prefer cars where you wind the windows down and open the door with a key. There's much less to go wrong. Same with washing machines where you only use one or two programmes.

I'm not completely convinced about the merits of EVs either after I heard of some poor hapless individual who was stuck inside because it ran out of power. Apparently there was no way to get out.

old git Carlisle said...

I'm with Jan on both the car and washing machine front .

Just part of the whole madness.

Local woman who works for car company had very nice EV got rid of it within 3 months over constant worry she would run out of juice,
.
How do EV manage for heating and air conditioning

Or am I just an 82 year old nut?

James Higham said...

QE which number now?

Matt said...

You could replace the Bank of England Monetary Policy Committee with a cephalopod to predict the future. It's be at lease as accurate and a good deal cheaper.

E-K said...

Lockdowns come with a huge cost.

Here they are.

E-K said...

What is the BBC talking about when it comes to failure in the uptake of the vaccines ? "Communities and community *leaders* need to be encouraged..."

I didn't realise England football fans had Community Leaders.

They're the ones who are going to be blamed for the September lockdown and Covid deaths.

CityUnslicker said...

That last comment is on the money EK - Racist England fans to blame for spike in BAME deaths. You should get a job a the Guardian!

Elby the Beserk said...

@dearime.

It is becoming increasingly clear to weirdoes like me who keep an eye on this stuff that the only way to save the planet is to completely destroy it...

"A new study warns that “a massive expansion of impervious surfaces” is an inevitable consequence of having electric vehicles reach a 40% share of citizens’ driving needs. A land area the size of Croatia (in the European Union) or West Virginia (in the United States) must be completely covered with wind turbines to meet EV"

https://notrickszone.com/2021/07/15/for-40-of-the-eu-and-usa-to-drive-evs-56000-70000-km%c2%b2-of-land-must-be-cleared-for-wind-turbines/

Meanwhile. many EU countries are starting to wake up to this joyous news...

"The astronomical costs of Net Zero policies are beginning to cause public anger and political upheaval. Now the EU is rocked by a massive revolt over its Green Deal"

https://www.thegwpf.com/european-union-rocked-by-wall-of-opposition-over-net-zero-costs/

I'm almost past caring. It is clear to me as I close in on my three score years and ten, that the days when one might hope that at least a few competent politicians with integrity might be running the country are long long gone. However, it is reassuring that SAGE whose modelling has been even worse than the climate crazies have now been put in charge of government policy.

One infection I DID get during Covid is Tourettes.

Elby the Beserk said...

Blogger James Higham said...
QE which number now?

2:22 pm
=======================

Indeed, James. And like lockdown, it works SO well they have to keep on doing it.

E-K said...

Excellent Elby !!! (Tourette's)