Is the UK heading for hyperinflation?

I think there's a moderate chance that the UK could be heading for endemic high inflation, possibly even a hyperinflation phase of over 25% inflation.

Why do I think this?

- existing official inflation rate is already over 9% and is higher than the Bank of England and the government predicted it would be right now.

- underlying the inflation are big hikes in energy and food prices - neither of these look like doing anything but increasing still further over the coming months.

- workers across the country are striking or planning to strike for at least 7% and in some cases more than 10% increases. Such demands can only intensify.

The government don't appear to have any concerted plan other than the usual anti-strike rhetoric and some modest compensation to poorer people that does not match the big increases in the cost of the basics.

It seems plausible that things are going to get much worse.

Reply 1

caravaggio2

17

We certainly live in interesting times and the wealth gap is certainly only going to widen.
Millions of people have savings but never reached enough to buy property. People who have a second or third home will be in a life boat while those not in such a position will be desperately left swimming, trying to keep the head above water, only to see their savings decimated when the inevitable happens and the government panics into quantitative easing.
The government spaffed over £30 billion on useless PPE, a decision so colossally bad that only people who don't generate income, but use other peoples money, could have made it. To imagine the same people will steer us on a course to avoid the looming rocks is hope over experience.
Sadly I don't thing the other mob would be any better either.

Reply 2

Muttly

20

Yes we are - and there is no concealing it either by fraudulent money printing or any other creative ways of dressing it up

Even a five year old knows that if the world supply chains are curtailed and fossil fuels & energy are in short supply - it spells inflation down the line.

Reply 3

Fullofsurprises

OP

20

Original post by caravaggio2

The government spaffed over £30 billion on useless PPE, a decision so colossally bad that only people who don't generate income, but use other peoples money, could have made it. To imagine the same people will steer us on a course to avoid the looming rocks is hope over experience.
Sadly I don't thing the other mob would be any better either.

One of the many infuriating things about the PPE scandal is that a lot of the cash went to offshored companies and is now squatting in the Grand Caymans and Luxembourg, out of the reach of the taxman. The government appear to be doing exactly nothing to attempt to retrieve any of this cash. Some people have gotten very, very rich out of Covid and it was basically epic scale criminal activity but sanctioned by ministers and senior civil servants.

I fear so. :frown:

What should we track it by? Guns, Gas or Indentured Slaves?

Or some sort of Mad Max era spanning fusion?

Reply 6

martin7

20

Original post by Fullofsurprises

I think there's a moderate chance that the UK could be heading for endemic high inflation, possibly even a hyperinflation phase of over 25% inflation.

One definition of hyperinflation is prices rising at 50% per month. The UK's annual rate is around 9% per annum, or 0.72% per month. That's not hyperinflation.

Even 25% per annum is under 1.9% per month.

(edited 1 year ago)

Reply 7

caravaggio2

17

Original post by martin7

One definition of hyperinflation is prices rising at 50% per month. The UK's annual rate is around 9% per annum, or 0.72% per month. That's not hyperinflation.

Even 25% per annum is under 1.9% per month.

Watch this space. 😟

(edited 1 year ago)

Reply 8

Fullofsurprises

OP

20

Original post by martin7

One definition of hyperinflation is prices rising at 50% per month. The UK's annual rate is around 9% per annum, or 0.72% per month. That's not hyperinflation.

Even 25% per annum is under 1.9% per month.

I realise there are technical definitions attempted, I was speaking in broad brush terms. Compared to having been at 2% or lower for many years, leaping up towards 20 or 30 percent a year is alarmingly high and if it persists and becomes endemic, then we will be another Argentina.

Reply 9

Pythian

21

Nope. Not at all. I don't think so.

From my understanding, the Bank of England interest rate increases have the effect of curbing inflation.

When that happens, people and businesses stop spending as much, because they have to pay greater interest on loans. Thus, consumption goes down. Demand goes down. Then, inflation down.

The governor of the BoE will get the job done with more rate hikes. The problem is that it takes time to take effect.

Original post by Fullofsurprises

I think there's a moderate chance that the UK could be heading for endemic high inflation, possibly even a hyperinflation phase of over 25% inflation.

Why do I think this?

- existing official inflation rate is already over 9% and is higher than the Bank of England and the government predicted it would be right now.

- underlying the inflation are big hikes in energy and food prices - neither of these look like doing anything but increasing still further over the coming months.

- workers across the country are striking or planning to strike for at least 7% and in some cases more than 10% increases. Such demands can only intensify.

The government don't appear to have any concerted plan other than the usual anti-strike rhetoric and some modest compensation to poorer people that does not match the big increases in the cost of the basics.

It seems plausible that things are going to get much worse.

Reply 10

Rakas21

21

Original post by Fullofsurprises

I think there's a moderate chance that the UK could be heading for endemic high inflation, possibly even a hyperinflation phase of over 25% inflation.

Why do I think this?

- existing official inflation rate is already over 9% and is higher than the Bank of England and the government predicted it would be right now.

- underlying the inflation are big hikes in energy and food prices - neither of these look like doing anything but increasing still further over the coming months.

- workers across the country are striking or planning to strike for at least 7% and in some cases more than 10% increases. Such demands can only intensify.

The government don't appear to have any concerted plan other than the usual anti-strike rhetoric and some modest compensation to poorer people that does not match the big increases in the cost of the basics.

It seems plausible that things are going to get much worse.

Endemic inflation and hyperinflation are not the same thing.

Endemic Inflation although somewhat unlikely (though it depends on your time definition) is possible given that the UK is structurally exposed to secondary inflation and we can't predict global events. The important thing here though is that we could solve the issue if we were willing to pay the price (we can significantly increase the strength of Sterling to cull inflation at the cost of crushing our goods export sector).

Hyperinflation is typically caused by the collapse in value of one's currency and stock markets (and the 30% fall in value since 2014 of Sterling against the dollar is not on that scale). Essentially you see money fleeing the country and the market unable to provide price stability.

Hyperinflation is honestly terrifying to anybody who understands economics. Fiat currency exists as a means of allowing an economy to advance faster than the physical limitations of capital but that also means that it is dependent on confidence. The confidence that the pound you were given last night will still be able to buy a loaf of bread tomorrow. When prices are increasing so fast that the loaf of bread you saw this morning is no longer affordable even a few days later as happened in Wiermart Germany then confidence in the money supply becomes a premium and markets break down, in extreme cases we return to bartering (in the modern world we see in the likes of Argentina that people start hoarding the US dollar instead of their own currency).

The Austrians wrote a book about hyperinflation.. it's called 'when money dies'!

(edited 1 year ago)

Reply 11

londonmyst

19

Original post by Rakas21

Endemic inflation and hyperinflation are not the same thing.

Endemic Inflation although somewhat unlikely (though it depends on your time definition) is possible given that the UK is structurally exposed to secondary inflation and we can't predict global events. The important thing here though is that we could solve the issue if we were willing to pay the price (we can significantly increase the strength of Sterling to cull inflation at the cost of crushing our goods export sector).

Hyperinflation is typically caused by the collapse in value of one's currency and stock markets (and the 30% fall in value since 2014 of Sterling against the dollar is not on that scale). Essentially you see money fleeing the country and the market unable to provide price stability.

Hyperinflation is honestly terrifying to anybody who understands economics. Fiat currency exists as a means of allowing an economy to advance faster than the physical limitations of capital but that also means that it is dependent on confidence. The confidence that the pound you were given last night will still be able to buy a loaf of bread tomorrow. When prices are increasing so fast that the loaf of bread you saw this morning is no longer affordable even a few days later as happened in Wiermart Germany then confidence in the money supply becomes a premium and markets break down, in extreme cases we return to bartering (in the modern world we see in the likes of Argentina that people start hoarding the US dollar instead of their own currency).

The Austrians wrote a book about hyperinflation.. it's called 'when money dies'!

PRSOM

Reply 12

BVB Fan

8

The PPE scandal came about by corrupt tory MPs aiding their chums by giving them the contracts without properly checking if it was up to scratch. Now it is all due to be incinerated. Sums up the CONservatives in one action, imo

Reply 13

caravaggio2

17

https://youtu.be/NOzR3UAyXao "World collapse explained in 3 minutes"

Meanwhile 10 yrs on.....

Reply 14

Quady

20

Original post by Fullofsurprises

possibly even a hyperinflation phase of over 25% inflation.

The International Accounting Standards Board has issued guidance on accounting rules in a hyperinflationary environment. It does not establish an absolute rule on when hyperinflation arises, but instead lists factors that indicate the existence of hyperinflation:

The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power;
The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency;
Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short;
Interest rates, wages, and prices are linked to a price index; and
The cumulative inflation rate over three years approaches, or exceeds, 100%.

So over 33% for three years?