Comments on: King’s mistake

By: Colin Blackman

Colin Blackman — Fri, 20 Jun 2008 07:53:30 +0000

With perfect timing the Chinese Government raised oil prices on Thursday (19th) to the surprise of economists and consumers alike. Petrol in China is now about 39p a litre.
And the locals are complaining!

By: Colin Blackman

Colin Blackman — Wed, 18 Jun 2008 21:42:14 +0000

I take issue with you on one point – the reference to “the price of oil … is down to consumers in places such as China spending more.” In China, as in much of south east asia, the retail price of oil is controlled by the government. With inflation already high, the Chinese government has maintained the price cap leaving the domestic oil companies (publicly listed but still majority state owned) squeezed in the middle. They’ve all been running huge losses this year. With the exporting companies huge energy users, and very inefficient users with prices so low, the ultimate benefactors are the end customers ie us!

So the whole subjecy gets even more complicated.

By: Mervyn joins the dovecote | Investment and Business News

Mervyn joins the dovecote | Investment and Business News — Wed, 18 Jun 2008 11:36:42 +0000

[...] Mervyn King is no TV presenter, so he said it instead in the natural language of central bankers, econ [...]

By: Michael Baxter

Michael Baxter — Wed, 18 Jun 2008 11:31:03 +0000

You are not wrong. Central bankers have coined the euphemism â€˜leaning against the windâ€™ to describe this.

Should they have upped interest rates earlier this decade in order stop house pries from rising?

They didnâ€™t, yet now many are urging them to lower rates to stop house prices from falling.

But there is another important point. In Japan ten years ago, and during the build up to 1929, asset prices had been rising fast. When they crashed, a period of deflation followed.

A danger today is that when oil and food stop rising, and hopefully then fall, the combination of falling house prices and falling oil and food prices could lead to deflation in consumer prices, as happened in Japan and during the Great Depression.

This is why, right now, central bankers face an extraordinarily difficult balancing act.

By: Iain Crockatt

Iain Crockatt — Wed, 18 Jun 2008 10:57:59 +0000

Forgive me for being a bit simple, but surely we did have massive inflation during this period. House prices were increasing at an average of 10% per annum!! it’s just that they dont figure in anybody’s inflation calculation. I’ve always held the view that inflation is inflation and is bad. My children now have a problem in trying to buy house because they have inflated so much.