Failure to ignore and plan for this will devastate your financial future for years to come and wreak havoc on your job, mortgage, savings, investments, pension.
This is 100% correct, guaranteed.
http://www.ft.com/cms/s/0/b9f78190-a414-11...?nclick_check=1
That old stagflation dilemma again
By Samuel Brittan
Published: December 6 2007 19:33 | Last updated: December 7 2007 07:45
There is not all that much difficulty in steering a modern economy when it is faced with one main danger. If that is inflation, the need is clearly to rein back on the growth of demand. If the central bank overdoes the restraint it is not all that difficult to correct its error by loosening its policy. If its first measures prove inadequate, it can step up the dose.
Should the main danger be recession or a severe slowdown it will need to apply a stimulus, for instance by lowering the policy-determined short-term interest rate. A point may indeed be reached where monetary policy needs to be supplemented by fiscal policy, which is a posh way of describing lower taxes or higher public spending, in principle temporary. As long as policymakers do not delude themselves that they can achieve pinpoint accuracy and are not afraid of a little trial and error the task is not all that complicated, and outside analysts are kept in employment predicting their next move.
What, however, should they do if the economy is faced with both increasing inflation and severe growth slowdown? This is the dilemma of stagflation. It was illustrated by the Bank of England’s recent judgment that the outlook for the UK economy in the near term was “one of slowing growth and rising inflation. But further ahead that outlook is for a return of growth to its average rate and inflation to the target.” You can believe the second part of the assertion or not.
In any case the Bank, which was raising its “policy rate” as recently as last July, has now changed course and is following the Fed in applying a stimulus to counter the effects of the credit crunch on economic growth. The European Central Bank has, however, stood firm, admittedly at a level of both nominal and real interest rates considerably below the UK’s.
So, far from the stagflation dilemma being a new problem, it is one that has recurred at least once every decade since the 1970s. But we are still far from a solution. The puncturing of the housing and property booms in so many countries, which in turn has generated a headline-scale credit crisis, points to an output slowdown and rising unemployment. Yet the sharp rise in oil and commodity prices, together with signs that the downward pressure on prices from cheap Chinese and other third world products is coming to an end, point to the danger of increasing inflation.
....
Such indeed was the behaviour of prices in the heyday of the international gold standard. US wholesale prices, for instance, increased by an annual average of only 0.1 per cent from 1879 to 1913.
....
The long-term stability of the late 19th century was not, of course, due to government measures but was the semi-automatic effect of the international gold standard.
Full Version: Financial Times: S T A G F L A T I O N
Moved again. Someone wants to shoot the messenger. 
QUOTE (Minos @ Dec 7 2007, 09:45 PM) 
Moved again. Someone wants to shoot the messenger.
Someone whose pension pot will be devastated by it.
QUOTE (cgnao @ Dec 7 2007, 11:20 PM)
Someone whose pension pot will be devastated by it.
Just someone who's trying to keep "The Main Discussion Forum on House Prices" on topic.
QUOTE (cgnao @ Dec 7 2007, 08:11 PM)
Failure to ignore and plan for this will devastate your financial future for years to come and wreak havoc on your job, mortgage, savings, investments, pension.
This is 100% correct, guaranteed.
http://www.ft.com/cms/s/0/b9f78190-a414-11...?nclick_check=1
That old stagflation dilemma again
By Samuel Brittan
Published: December 6 2007 19:33 | Last updated: December 7 2007 07:45
There is not all that much difficulty in steering a modern economy when it is faced with one main danger. If that is inflation, the need is clearly to rein back on the growth of demand. If the central bank overdoes the restraint it is not all that difficult to correct its error by loosening its policy. If its first measures prove inadequate, it can step up the dose.
Should the main danger be recession or a severe slowdown it will need to apply a stimulus, for instance by lowering the policy-determined short-term interest rate. A point may indeed be reached where monetary policy needs to be supplemented by fiscal policy, which is a posh way of describing lower taxes or higher public spending, in principle temporary. As long as policymakers do not delude themselves that they can achieve pinpoint accuracy and are not afraid of a little trial and error the task is not all that complicated, and outside analysts are kept in employment predicting their next move.
What, however, should they do if the economy is faced with both increasing inflation and severe growth slowdown? This is the dilemma of stagflation. It was illustrated by the Bank of England's recent judgment that the outlook for the UK economy in the near term was "one of slowing growth and rising inflation. But further ahead that outlook is for a return of growth to its average rate and inflation to the target." You can believe the second part of the assertion or not.
In any case the Bank, which was raising its "policy rate" as recently as last July, has now changed course and is following the Fed in applying a stimulus to counter the effects of the credit crunch on economic growth. The European Central Bank has, however, stood firm, admittedly at a level of both nominal and real interest rates considerably below the UK's.
So, far from the stagflation dilemma being a new problem, it is one that has recurred at least once every decade since the 1970s. But we are still far from a solution. The puncturing of the housing and property booms in so many countries, which in turn has generated a headline-scale credit crisis, points to an output slowdown and rising unemployment. Yet the sharp rise in oil and commodity prices, together with signs that the downward pressure on prices from cheap Chinese and other third world products is coming to an end, point to the danger of increasing inflation.
....
Such indeed was the behaviour of prices in the heyday of the international gold standard. US wholesale prices, for instance, increased by an annual average of only 0.1 per cent from 1879 to 1913.
....
The long-term stability of the late 19th century was not, of course, due to government measures but was the semi-automatic effect of the international gold standard.
This is 100% correct, guaranteed.
http://www.ft.com/cms/s/0/b9f78190-a414-11...?nclick_check=1
That old stagflation dilemma again
By Samuel Brittan
Published: December 6 2007 19:33 | Last updated: December 7 2007 07:45
There is not all that much difficulty in steering a modern economy when it is faced with one main danger. If that is inflation, the need is clearly to rein back on the growth of demand. If the central bank overdoes the restraint it is not all that difficult to correct its error by loosening its policy. If its first measures prove inadequate, it can step up the dose.
Should the main danger be recession or a severe slowdown it will need to apply a stimulus, for instance by lowering the policy-determined short-term interest rate. A point may indeed be reached where monetary policy needs to be supplemented by fiscal policy, which is a posh way of describing lower taxes or higher public spending, in principle temporary. As long as policymakers do not delude themselves that they can achieve pinpoint accuracy and are not afraid of a little trial and error the task is not all that complicated, and outside analysts are kept in employment predicting their next move.
What, however, should they do if the economy is faced with both increasing inflation and severe growth slowdown? This is the dilemma of stagflation. It was illustrated by the Bank of England's recent judgment that the outlook for the UK economy in the near term was "one of slowing growth and rising inflation. But further ahead that outlook is for a return of growth to its average rate and inflation to the target." You can believe the second part of the assertion or not.
In any case the Bank, which was raising its "policy rate" as recently as last July, has now changed course and is following the Fed in applying a stimulus to counter the effects of the credit crunch on economic growth. The European Central Bank has, however, stood firm, admittedly at a level of both nominal and real interest rates considerably below the UK's.
So, far from the stagflation dilemma being a new problem, it is one that has recurred at least once every decade since the 1970s. But we are still far from a solution. The puncturing of the housing and property booms in so many countries, which in turn has generated a headline-scale credit crisis, points to an output slowdown and rising unemployment. Yet the sharp rise in oil and commodity prices, together with signs that the downward pressure on prices from cheap Chinese and other third world products is coming to an end, point to the danger of increasing inflation.
....
Such indeed was the behaviour of prices in the heyday of the international gold standard. US wholesale prices, for instance, increased by an annual average of only 0.1 per cent from 1879 to 1913.
....
The long-term stability of the late 19th century was not, of course, due to government measures but was the semi-automatic effect of the international gold standard.
IMO stagflation will suit the homebuyer who can hang on to it rather well. ie. little chance of nominal falls and inflation will erode the debt. Some may indulge in some Au but it a minority sport.
TBO its my least favourite possible outcome. Ideally, I would like money to regain some worth as the ecological destruction of gold-mining can be horrific (Deflation). Of course if they cut IRs until they remove the stagnation element, cgnao will be fully vindicated and hyperinflation will destroy Fiat.
This is a "lo-fi" version of our main content. To view the full version with more information, formatting and images, please click here.