Inflation becoming a serious issue in Ireland

everdead.ie

Prices are down half a percent between December 2013 and January 2014.

The headline rate is up 0.2% in the year to January mostly driven by things we can't avoid putting off buying things like education costs and alcohol and Tobacco but things you can avoid are coming down.

Are we at a stage now where people are putting off buying things because they'll get cheaper?

This could potentially stop the "real" economy/GNP ie excluding the affects of multinationals from growing and cause a recession again.

What steps can we take at this point to get things going bearing in mind some of this is probably correction between our prices and the rest of the EU.

Realistically is a tax cut is currently the only thing the Irish government can do to stimulate the economy?

Chazz Michael Michaels

Does that include house prices? What is the rate for the Basket of Goods?

everdead.ie

Chazz Michael Michaels wrote: »

Does that include house prices? What is the rate for the Basket of Goods?

I don't think it includes house prices but I think it does include rent not 100% sure you can check the details here.

http://cso.ie/en/releasesandpublications/er/cpi/consumerpriceindexjanuary2014/#.UwXz_teE1vs

realitykeeper

everdead.ie wrote: »

Prices are down half a percent between December 2013 and January 2014.

The headline rate is up 0.2% in the year to January mostly driven by things we can't avoid putting off buying things like education costs and alcohol and Tobacco but things you can avoid are coming down.

Are we at a stage now where people are putting off buying things because they'll get cheaper?

This could potentially stop the "real" economy/GNP ie excluding the affects of multinationals from growing and cause a recession again.

What steps can we take at this point to get things going bearing in mind some of this is probably correction between our prices and the rest of the EU.

Realistically is a tax cut is currently the only thing the Irish government can do to stimulate the economy?

The inflation/deflation debate is very interesting. Sadly, western leaders are doing the wrong thing again. To back up, lets review the facts:

1. Western countries had a credit crunch.
2. To avoid a depression they resorted to stimulus such as QE and lowering central bank interest rates.
3. Consumers were afraid to spend (there are various reasons for this).
4. Banks were reluctant to lend (they had balance sheets to repair).
5. Risk of deflation resulted.
6. Politicians don`t like deflation because it means there is little internal commercial activity so shops close, unemployment rises etc.
7. To counter this, politicians are planning to increase inflation by printing money thereby forcing savers to spend and banks to lend because their money is losing value.

The problem with this is that peoples fears about QE and the like are still there and the banks still need to fix their balance sheets. The politicians are trying to make people and banks more afraid of the devaluation of currency than they are of the very real risks of QE failure. Lest we forget, QE was intended to boost internal economic activity just like the artificial inflation the politicians are trying to create. The problem is none of this will make western countries more competitive relitive to the rest of the world so these strategies are just a quick fix designed to keep things ok until the next election.

So what should people do if they simply do not want to be afraid of either QE or of their money losing value? Some suggest consumers should buy physical gold coins or bullion. Others say it is better to hoards food supplies and invest in things like solar panels for your house. Another option is to buy a house or business in an emerging economy. Personally speaking, I would not buy gold because the politicians would fine a way to manipulate it.

everdead.ie

realitykeeper wrote: »

The inflation/deflation debate is very interesting. Sadly, western leaders are doing the wrong thing again. To back up, lets review the facts:

1. Western countries had a credit crunch.
2. To avoid a depression they resorted to stimulus such as QE and lowering central bank interest rates.
3. Consumers were afraid to spend (there are various reasons for this).
4. Banks were reluctant to lend (they had balance sheets to repair).
5. Risk of deflation resulted.
6. Politicians don`t like deflation because it means there is little internal commercial activity so shops close, unemployment rises etc.
7. To counter this, politicians are planning to increase inflation by printing money thereby forcing savers to spend and banks to lend because their money is losing value.

The problem with this is that peoples fears about QE and the like are still there and the banks still need to fix their balance sheets. The politicians are trying to make people and banks more afraid of the devaluation of currency than they are of the very real risks of QE failure. Lest we forget, QE was intended to boost internal economic activity just like the artificial inflation the politicians are trying to create. The problem is none of this will make western countries more competitive relitive to the rest of the world so these strategies are just a quick fix designed to keep things ok until the next election.

So what should people do if they simply do not want to be afraid of either QE or of their money losing value? Some suggest consumers should buy physical gold coins or bullion. Others say it is better to hoards food supplies and invest in things like solar panels for your house. Another option is to buy a house or business in an emerging economy. Personally speaking, I would not buy gold because the politicians would fine a way to manipulate it.

The gold market is already manipulated though there are more gold futures contracts than there is gold.

Inflation would clear overhanging debt quickly as the value of the debt would decline, unfortunately it would only lead to other problems. It a tricky one to balance I would think.

Nino Brown

Gold could actually be a wise investment either way. People consider it mostly as a hedge against inflation, but there is some data to suggest it may perform well in deflation as well.
I think deflation is more likely than inflation, the economy is desperately trying to deflate, governments and central banks are doing all they can to create inflation, but even with unprecedented money printing and essentially zero interest rates, the best they can manage is to hold off deflation and that can't last forever.

Chazz Michael Michaels

Gold is guaranteed safety. GUARANTEED.

everdead.ie

Chazz Michael Michaels wrote: »

Gold is guaranteed safety. GUARANTEED.

Depends when you buy over the long term it will rise but if you bought a few years ago you'd be in a lot of trouble or if you bought in 07/08 you would be rolling in it.

Nino Brown

everdead.ie wrote: »

Depends when you buy over the long term it will rise but if you bought a few years ago you'd be in a lot of trouble or if you bought in 07/08 you would be rolling in it.

Why would you be in trouble? I bought at around 1700-1800, I don't regret it all

everdead.ie

Nino Brown wrote: »

Why would you be in trouble? I bought at around 1700-1800, I don't regret it all

As in if you had to sell you could lose a lot of money.

Cookie_Monster

Chazz Michael Michaels wrote: »

Gold is guaranteed safety. GUARANTEED.

guaranteed - how so?

Copper would be much better given the massive demand and dwindling supplies.

Chazz Michael Michaels

Cookie_Monster wrote: »

guaranteed - how so?

Copper would be much better given the massive demand and dwindling supplies.

Because gold is gooooooolllllllld.

hfallada

everdead.ie wrote: »

Prices are down half a percent between December 2013 and January 2014.

The headline rate is up 0.2% in the year to January mostly driven by things we can't avoid putting off buying things like education costs and alcohol and Tobacco but things you can avoid are coming down.

Are we at a stage now where people are putting off buying things because they'll get cheaper?

This could potentially stop the "real" economy/GNP ie excluding the affects of multinationals from growing and cause a recession again.

What steps can we take at this point to get things going bearing in mind some of this is probably correction between our prices and the rest of the EU.

Realistically is a tax cut is currently the only thing the Irish government can do to stimulate the economy?

Ireland had a deflation rate of around 5% per year around 2009. But most inflation in Ireland is imported inflation eg from oil imports, higher import prices. Only when deflation is significant do people delay purchases.

The EU inflation rate is about 0.7% so Ireland isnt far off it. Having a lower inflation rate ensures Ireland is more competitive than other countries. Something we lost in the boom and are only recovering in the last few years.

Ireland is a very open economy and efforts to stimulate the economy will have limited results eg scrappage for cars will benefit japan and germany significantly more than Ireland.

The ECB is pouring cheap and easy credit into the Eurozone to stimulate the eurozone economy. This is will eventually cause some inflation. But even with America flooding the markets with cheap credit. Hyperinflation hasnt happened like some BS US economists predicted. But the credit has flowed into the stock markets

Nino Brown

everdead.ie wrote: »

As in if you had to sell you could lose a lot of money.

I don't see it that way. I bought gold because I was concerned by all the money printing. I didn't, and still don't think hyperinflation is likely, but there is a relatively high risk of it happening, so gold is my insurance policy.
If you buy house insurance, you lose 100% of what it costs you, but at the end of the year you don't get upset because your house didn't burn down.
But with gold I have my insurance, and if it turns out I don't need it, I just sit on it, and 20 years down the line I get my money back, and probably a tidy profit too.

Tabnabs

This is adding to the considerable thread drift, but gold over the last 10 years is currently on a declining cycle

Nino Brown

Tabnabs wrote: »

This is adding to the considerable thread drift, but gold over the last 10 years is currently on a declining cycle

That doesn't really matter, take a look at any stock index chart and they've had dips usually much bigger and more often than gold. Gold rose for 13 years straight, it has one down year and everybody thinks the rally is over.
But for me price is irrelevant, I am in gold because I don't really trust currency, so I really don't care how people value gold vs currency.

Gold was worth something 2000 years ago, and will be worth something in 2000 years time. The euro has only been around a few years, and its survival over the next decade isn't guaranteed.
Currencies have been failing for thousand of years because of excess currency creation. Nobody is making any more gold.
And the EU has come up with their bail-in plans, they didn't do that for the good of their health, that legislation will be used. But the government can't take what they don't know exists.

So I think Irish people should own gold, because we do have inflation risks, we do have currency risks, and we're definitely near the top of the list for countries likely to be "bailed'in".

Mr. teddywinkles

Chazz Michael Michaels wrote: »

Because gold is gooooooolllllllld.

Gold has higher conductivity than copper

Chazz Michael Michaels

Mr. teddywinkles wrote: »

Gold has higher conductivity than copper

Yup. You can't lose.

gaius c

hfallada wrote: »

Ireland had a deflation rate of around 5% per year around 2009. But most inflation in Ireland is imported inflation eg from oil imports, higher import prices. Only when deflation is significant do people delay purchases.

The EU inflation rate is about 0.7% so Ireland isnt far off it. Having a lower inflation rate ensures Ireland is more competitive than other countries. Something we lost in the boom and are only recovering in the last few years.

Ireland is a very open economy and efforts to stimulate the economy will have limited results eg scrappage for cars will benefit japan and germany significantly more than Ireland.

The ECB is pouring cheap and easy credit into the Eurozone to stimulate the eurozone economy. This is will eventually cause some inflation. But even with America flooding the markets with cheap credit. Hyperinflation hasnt happened like some BS US economists predicted. But the credit has flowed into the stock markets

Why? Japan had deflation despite ZIRP.

MayoSalmon

Chazz Michael Michaels wrote: »

Gold is guaranteed safety. GUARANTEED.

Agreed...QE is a ponzi scheme and this will all end in tears

alb

I bought some gold and bitcoin as hedges against QE. Gold has history, but then again so did letters by pen on paper until email. We're living in the computer revolution and digital inventions are disrupting traditional physical industries.

Farmer Pudsey

Chazz Michael Michaels wrote: »

Because gold is gooooooolllllllld.

It may be but not quite. A lot of gold traded is only on paper. The company selling it can always go bust. This is gennerally not an issue as the price climbs, as there are more buyers than sellers. If the price start to fall and you want out then the company trading in the paper may not have the finiancial strengt to pay up.

Real gold as in gold bullion/coin is the only real hedge, however at present gold is more than likly overvalued and will drop back in price over the next few years.

noodler

Nino Brown wrote: »

I don't see it that way. I bought gold because I was concerned by all the money printing. I didn't, and still don't think hyperinflation is likely, but there is a relatively high risk of it happening, so gold is my insurance policy.
If you buy house insurance, you lose 100% of what it costs you, but at the end of the year you don't get upset because your house didn't burn down.
But with gold I have my insurance, and if it turns out I don't need it, I just sit on it, and 20 years down the line I get my money back, and probably a tidy profit too.

Theres been very little money printing in the Euro Zone bar the two LTROs.

Icepick

Nino Brown wrote: »

and 20 years down the line I get my money back

investor of the year, lol

realitykeeper

Tabnabs wrote: »

This is adding to the considerable thread drift, but gold over the last 10 years is currently on a declining cycle

Germany is investigating a possible manipulation of the price of gold. Today I read the true value could be out by 50%. Also, Germany has been trying to get its physical gold back from the US and they were told they would have to wait 7 years for it, so the suspicion is that the physical gold has been sold but on paper it hasn`t.

Nino Brown

Icepick wrote: »

investor of the year, lol

It's a hedge, not an investment.