Interest rates

[Oriel27]

[FONT=Arial Unicode MS][SIZE=4]stag⋅fla⋅tion[/SIZE][/FONT]
–noun an inflationary period accompanied by rising unemployment and lack of growth in consumer demand and business activity.


I dont really agree with your expanation of stagflation.
This is the actual textbook version of stagflation. Thats where we are heading if we are not already there. Negative or zero growth is not really the issue.

Inflation erodes wealth
Reduction in Business activity reduces wealth
Increased Interest rates will reduce our wealth as we have more debt than savings


Borrowing more will not solve this, paying off debt over the long term will, but that is extremely painful and damaging to the domestic economy in the short term. Lowering wages etc to become more "competitive" may do more harm than good. Its good for the profit margins of some businesses and high earners realtive wealth but it will further weaken the economy. Loss of competitive edge is not one of our major problems, loss of demand and too much debt is.

This myth that if we were cheaper to employ that some white Knight will save us needs to be challanged. We are putting all our eggs in one basket and fighting this war with the lessons from the last one. The reason demand has fallen for our produce is not mainly because of price, but because domestic demand in our markets is poor. Reduction in price will not lead to a great increase in demand.


I think the whole direction we are heading in this crisis is completely wrong and based on false assumptions that are now almost universally accepted. A low cost, low activity economy with poor infrastruction does not look like a good road to me. There has been no public debate about this at all, we just accept we will slash and burn everything for the next five years, balance the books with the EU and throw everything at saving the banks. There will be no economy left within a year or two if we continue.

I agree with your views, well put.

tell me, how does Germany do it? surely they are one of the wealthiest nations in the world, great standard of living, and one of the biggest manufacturers in the world...

why does ireland follow what they do?

it amazed me this week that a company in kerry are moving their production to Germany because its cheaper.
Can someone explain this one...

[toughbutfair]

I agree we won't have stagflation - the ECB will stamp out the threat of inflation when the european economy gets going, which may worsen our recession.

Why has oil doubled in the last six months or so, I know the dollar has weakend a bit but still?

Rising oil, usually causes headline inflation to rise, makes it more likely rates will go up.

[X-ray]

OK, even if the economy doesn't have to be stagnant, but can be in recession (like us), we don't have stagflation now.

There is deflation (the price index is falling cd27). All definitions of stagflation involve increasing prices.

That real incomes are falling is to be expected in a recession. We have a fairly normal (but bad) recession at the moment. We don't have stagflation at the moment, and I strongly doubt we will have it. The ECB will stomp on inflation.

Stagflation - Wikipedia, the free encyclopedia

The way they will "stomp" on it is to raise interest rates, which will disproportionately raise inflation here because of the crazy levels of mortgage debt our young workers have.

Wages dropping, rent and mortgage payments = stagflation in the medium term.

People seem to think we can have a better economy by people having reduced incomes. This when you think of it is clearly nonsense. We may need pay reductions in some cases to survive the storm but as a long term goal it is insanity. It is effectively saying by making you poorer we will make you richer. It wont, never has anywhere anytime.

Run away inflation would be great for us now as it would efffectively reduce debt over time and "restore competitiveness" without industrial wars. We dont control that though and it will not be allowed to happen without huge interest rate hikes we cannnot afford. We are in a serious bind.

[X-ray]

I also do not agree that prices are dropping in this country at anything like the rate people say and they are certainly not dropping as fast as incomes. We are not technically in stagflation yet, but we are heading there. We will fail to bounce with the rest of the EU and then suffer again being economcially out of set with them again.

[X-ray]

I agree with your views, well put.

tell me, how does Germany do it? surely they are one of the wealthiest nations in the world, great standard of living, and one of the biggest manufacturers in the world...

why does ireland follow what they do?

it amazed me this week that a company in kerry are moving their production to Germany because its cheaper.
Can someone explain this one...

In Germany it is not unreasonable for a worker on a good wage to expect to be able to live near to work in a nice property at a nice price.

It is not reasonable to expect that here and we are paying for that now, the reduction in property prices does not help now as the debts to buy them are locked in stone now.

We allowed our economy to be run to the benefit of one branch that was based on the price of property. It is crazy that this needs to be stated, but the most important aspect of property is its use to live and operate businesses out of. We let its primary function be to employ people building unwanted property and speculation.

Thats the difference with Germany, we are as well educated, young, work as hard etc. We just waste it all on nonsense with multiple properties each adn then demand pay rises to cover it. We really have blown it all on property and if we are very lucky and clever we might have one last chance to avoid being a 2nd world counrty again. We need to ruthlessly cast aside property vested interests now and put the country and young families etc first.

[cd27]

imported déise, there is disinflation not deflation. Inflation is measured at the ECB level, changes in the price level at both national and european level.

[cd27]

I will concede that inflation helps those in debt.