Fuel Prices cause inflation surge

#3
I thought it was a story about chinese making fuel out of natural resources.
 
#5
Anyone can see that one coming. Raise the price of fuel and the cost of making and transporting goods rise. No chance of any cuts in duty either the one eyed wonder needs all the tax income he can get.
 
#6
I'd fire up the Outrage bus over the inflation, but there's no fuel in the tank!
 
#10
Don't forget when Darling cut VAT from 17.5% to 15 % he added 2p/litre duty to compensate.

When VAT increases again to 17.5% on 1 January, has there been any mention of a 2p duty reduction???

Nope

Stealth tax number 436...........

Odo
 
#11
jagman said:
Dodgy P on my laptop,
Better be careful. That can permanently damage the screen as well as delivering a very nasty electric shock if you hit the inverter.

So, now that we don't need to worry about deflation any more, I take it Gordon will stop printing cash for his 'quantitative easing' programme.

Only joking. 99% of the newly minted cash goes straight into the government's pocket. It's 'injected into the economy' by using it to buy government bonds. Xerox money now accounts for about one third of government expenditure.
 
#16
Or as mi mate Giudo says

"Coming Soon : Double Digit Inflation

If you haven’t got any gold, stock up on baked beans, because inflation is coming back. Data released this morning from the Office for National Statistics showed inflation in the UK rose for the second month in succession to 1.9% in November, jumping from 1.5% in October. This rise in inflation is far stronger than consensus economists were expecting. Guido will bet a large amount of money that the Governor of the Bank of England will have to write to Chancellor Osborne next year telling him why inflation is over-shooting target.

Not hard to figure out why when the government has printed the money to buy all the billions in government gilts offered this year. Take that in, the net effect of printing all that money via quantitative easing was to prop up the government’s debts. Andrew Lilico at Policy Exchange is equally as pessimistic as Guido, he is predicting 2 quarters of anemic growth, followed by 2 quarters of contraction next year and double digit inflation to follow by early 2012 – a double dip. Double digit inflation and probably a recession in 2013 – stagflation.

Lilico calls the failure of Darling to use the PBR to tackle the deficit sooner rather than later a “nihilist fiscal policy”. There has been some argument made by left-wingers that the ‘AAA’ rating is not really under threat and that it is just political scaremongering by George Osborne to claim otherwise. The fact is that the markets have already removed the triple ‘A’ rating before the ratings agencies. In terms of the interest rate paid and implied risk premium for UK debt, gilts trade like double ‘A’ countries – Japan, Portugal, Ireland – rather than triple ‘A’ countries like Germany. As a result, the cost of servicing UK debt is already 20% higher* than it is for Germany despite £200 billion having been thrown at keeping short-term rates down, not surprising when the UK leads the G20 in having the highest inflation and worst indebtedness."

john
 
#17
MikeMcc said:
Anyone can see that one coming. Raise the price of fuel and the cost of making and transporting goods rise. No chance of any cuts in duty either the one eyed wonder needs all the tax income he can get.
The thing is though that lowering tax rates can actually increase tax revenue. When tax is so high that it harms business, it can reduce economic activity and therefore lower the number of people actually paying any tax.
 
#18
Isn't this the plan?

We're borrowing £178bn this year, and almost as much next year. That's on top of what we already owe. No way in hell we're going to get that much paid off even with spending cuts and tax rises.

So how else do we deal with it? You inflate it away. People will suffer, but the govt has a slightly less discreditable route out of penury than running to the IMF in tears.
 
#19
StickyEnd said:
MikeMcc said:
Anyone can see that one coming. Raise the price of fuel and the cost of making and transporting goods rise. No chance of any cuts in duty either the one eyed wonder needs all the tax income he can get.
The thing is though that lowering tax rates can actually increase tax revenue. When tax is so high that it harms business, it can reduce economic activity and therefore lower the number of people actually paying any tax.
For example, small businesses create many jobs and produce huge amounts of tax revenue, but the Government is killing them off/pushing them down through excessive taxation.

A small business director with plenty of cash can afford to market the company, take on new staff and expand - as well as keep a healthy sum in the accounts and build up a good credit score. The plus side of this is, of course, large amounts of tax revenue from a successful business.

A small business director who is taxed on every penny his company has in the bank will simply pay the money to himself and not bother to expand. When times are hard, the company will not have capital to fall back on or a credit score which enables it to borrow. The down side of this is zero tax revenue, no new jobs and (potentially) state-funded bankruptcy.

Gordon's idea of closing down 'loopholes' to increase tax revenue worked a bit like closing the air vents to help a fire get hotter.
 
#20
Bollocks it's the price of fuel driving up inflation. Running the printing presses to fund a deficit is going to cost us dear, and all because Gordon decided that keeping public spending high (and himself in the job) was a price worth paying.

The Spectator said:
The inflation surge is now upon us. The CPI rate again “surprised” to the upside – Britain is the only major economy in the world to have inflation doing this. But given that the Bank of England’s printing presses have been working overtime to fund a fiscally irresponsible government then little wonder things are different here. To understand just how unusual the UK situation is, consider the below graph: despite suffering the longest recession in G20, we have one of highest rates of inflation in the developed world.



The next few months will see this push higher, potentially reaching 4 percent in March and busting the 2 percent target. Without the temporary VAT cut, inflation would never have dropped below the 2 percent target rate the Bank of England is mandated to follow – so, in a way, the VAT cut helped Brown justify turning on the Bank of England’s printing presses. It helped provide cover for the “independent” Monetary Policy Committee to fund the government deficit through money printing, but now the inflationary price needs to be paid. The pound fell sharply through the latter part of last year as the scale of the UK’s fiscal and banking problems became clear, and the intention of the Government to use the printing press to fund spending became apparent. With the manufacturing sector halving in size since 1997 (and they blame Thatcher for hitting manufacturing!), the UK now imports most of its consumption.

Why does all this matter? Well, sterling has fallen by about a third versus the Euro since the beginning of the banking crisis in July 2007 (see below). As our currency falls, the costs of imports rise – passed on to consumers. If we are to maintain inflation stability (as per Brown’s target) domestic prices have to decline – so net result is wages stagnate or fall, while the cost of living rises. This causes living standards to decline. And this spells misery.



So, memo to Brown: this is why most properly-run countries chose to sort out government debt problems rather than revert to the oldest tool in the central bank toolkit – debasing the currency to cover government debt problems. A nightmare scenario looms for Britain.

All told, David Cameron’s comments in his conference speech that printing money was the wrong solution to the UK’s debt problems and risked inflation are looking increasingly prescient. While the usual suspects lined up to deride his economic ignorance, the facts increasingly bear out the disaster that the Labour’s print and spend policies are about to unleash.
My bold. If the price of fuel was the main determinant in rising inflation then why is inflation higher the UK than in other advanced economies, particularly those with a larger manufacturing sector (and thus higher fuel use)?
 

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