4 ms·

We've been in a period of very low inflation for the past 2-3 years, current inflation rate is about 1%, I'm guessing we might spike as high as 3% maybe from cu

by dageshi 10y ago

We've been in a period of very low inflation for the past 2-3 years, current inflation rate is about 1%, I'm guessing we might spike as high as 3% maybe from currency depreciation? It's not the end of the world.

TheOtherHobbes 10y ago
It's likely to go much higher, because the UK imports a lot more than it produces. And unlike countries that can export home-grown food and/or raw materials, most UK exports are the end of a long supply chain that starts outside the country. So even on exports, its margins are a lot lower than those of countries that produce raw materials and food. Brexit will make this worse. The UK can't continue like this indefinitely (it's not the hegemon, like the US) because when you spend more than you earn you have to make up the difference by borrowing money or devaluing your own currency. The consequences are predictable - prices rise, inflation rises, the cycle repeats, and eventually the economy breaks down altogether after sovereign default becomes a real threat. At that point the UK will either have to go full North Korea, or will need to strip everyone of their savings, raise taxes - and will still need a bailout. Having "taken back sovereignty" the country will be on the hook to the banks for decades.
- pcardh0 10y ago
  Probably will take a few weeks before the UK has to go "full North Korea"
- dageshi 10y ago
  The devaluation after brexit is no larger than the one after the financial crisis in 2008. In fact it's probably smaller I think. Inflation rose to 5% approx from a base level of around 2% and that's with oil being considerably higher than it is now. So your prediction of "The consequences are predictable - prices rise, inflation rises, the cycle repeats, and eventually the economy breaks down altogether after sovereign default becomes a real threat." didn't happen then, it likely won't happen now. Why? Because inflation due to currency fluctuations is different to the type of inflation caused by an economy overheating. Hell the bank of england has been printing money for 5 years and if that didn't cause runaway inflation I don't see how the pound weakning somewhat is going too.

by dageshi 10y ago

TheOtherHobbes 10y ago

It's likely to go much higher, because the UK imports a lot more than it produces. And unlike countries that can export home-grown food and/or raw materials, most UK exports are the end of a long supply chain that starts outside the country. So even on exports, its margins are a lot lower than those of countries that produce raw materials and food. Brexit will make this worse. The UK can't continue like this indefinitely (it's not the hegemon, like the US) because when you spend more than you earn you have to make up the difference by borrowing money or devaluing your own currency. The consequences are predictable - prices rise, inflation rises, the cycle repeats, and eventually the economy breaks down altogether after sovereign default becomes a real threat. At that point the UK will either have to go full North Korea, or will need to strip everyone of their savings, raise taxes - and will still need a bailout. Having "taken back sovereignty" the country will be on the hook to the banks for decades.

pcardh0 10y ago
Probably will take a few weeks before the UK has to go "full North Korea"
dageshi 10y ago
The devaluation after brexit is no larger than the one after the financial crisis in 2008. In fact it's probably smaller I think. Inflation rose to 5% approx from a base level of around 2% and that's with oil being considerably higher than it is now. So your prediction of "The consequences are predictable - prices rise, inflation rises, the cycle repeats, and eventually the economy breaks down altogether after sovereign default becomes a real threat." didn't happen then, it likely won't happen now. Why? Because inflation due to currency fluctuations is different to the type of inflation caused by an economy overheating. Hell the bank of england has been printing money for 5 years and if that didn't cause runaway inflation I don't see how the pound weakning somewhat is going too.