Inflation falls: good news for pensioners and savers

Hi Ed I think you need to find yourself another financial guru. Dr Marc Faber is good...and right. Nouriel Roubini seems to know what is going on, too. [I] Krugman has consistently said that, in our current economic circumstances, QE wouldn't trigger big rises in inflation, and he's been proved right. [/I] QE IS inflation, Ed. The currency loses value. That means that every stimulus package -QE4, 5, 6, whatever - would need to be bigger than the last. A few billion here, there, will not stimulate the economy anymore. Not that the economy needs to be stimulated. That is what got us into this mess in the first place. British industry - last I heard - was only 12 percent of GDP. If you kick-start the economy, all that will happen is that people will spend their money on imported goods. That is how this country got into this condition in the first place. The answer is the good old "Export to survive". That means that the businesses that are failing should be left to fail, and the vast army of civil servants and local government plonkers should be fired. [I]There is no other way.[/I] For once I agree with Gideon Osborne and Cameron. I just don't think they are being tough enough. The longer they pussyfoot about bringing in swingeing austerity measures, the worse it is going to get. You said: [I]I'll probably be told that we have had high inflation in recent years. But since 2009, our highest rate has been 5%, which is historically low. The problem has been that inflation-adjusted interest rates have been very low, which has been tough for savers.[/I] I told you, Ed, to ignore the "inflation" figures spewed out by a government department. The people who compile these figures are no more "independent" than the bank of England is. 5 percent indeed. A few months back, the price of a 2nd class stamp went up nearly 40 percent. Because of the rise in postage rates, it is almost impossible now for the small business to send stuff abroad. I have also told you elsewhere, Ed, that the low interest rates are caused by the BoE printing money to buy their own bonds in order to keep the interest rates low; that is the definition of quantitative easing. Krugman is someone who tells the politicians what they want to hear: that all they have to do is print a trillion dollars or so, and the recession will go away. It won't, Ed. Either you will tighten your belt through austerity measures or through hyperinflation. I'd rather the former: there will be fewer dead old age pensioners.

Of course the rate of inflation is lower in September, because that is the rate used for pensions increases. I'm sure the fat prats in Government will be spouting about how their 2.5% "safety net" means pensioners get a better than inflation rise. Ever asked yourself why gas and electricity price rises don't occur in September? What we pensioners actually want to see is a September CPI of over 5% to give us a pensions rise vaguely like the inflation we have seen over the the last 12 months. And like dampflok I paid NI from the earliest age I was allowed to until I was forced into retirement, well in excess of 40 years. But I still feel sorry for the hard working kids of today who will have to pay NI for, hmm, 30 years is it, in order to get a full state pension.

Hi Arblaster, I strongly disagree with you about Paul Krugman. Many pundits and economists have been predicting high inflation in the UK and US for the last four years and it hasn't happened. Krugman has consistently said that, in our current economic circumstances, QE wouldn't trigger big rises in inflation, and he's been proved right. He's also consistently said that fiscal stimulus was the right medicine for our current economic mess, and he's been proven right on that too. Just look at the UK economy since 2010. We've followed Osborne's austerity strategy and economic growth has been painfully slow. Pre-2008, Krugman frequently flagged up the risk of a housing crash in the US, and he was also opposed to Bush's tax cuts. (Tax cuts were a dumb idea when the economy was close to full capacity between 2001-7, and just created a massive government debt mountain in the US. Things are different now, a fiscal stimulus is the only way to get growth moving and boost growth, which will eventually reduce the deficit. There's no real danger of inflation because there's lots of spare capacity in the economy.) So no, he didn't predict the financial crisis as it turned out, or I haven't seen any such predictions anyway, but he wasn't too far off the mark pre-2008. He correctly highlighted two growing problems which were both causes of our current mess: Bush tax cuts and the US housing bubble. I'll probably be told that we have had high inflation in recent years. But since 2009, our highest rate has been 5%, which is historically low. The problem has been that inflation-adjusted interest rates have been very low, which has been tough for savers. So yes, savers have had a tough time. Lots of people have had a tough time since the crisis. But we haven't seen inflation spike upwards to 10% or more. And that's what many folk were expecting in 2009/10. Krugman's commentary is very insightful and mostly correct in my view Regards, Ed