Britain’s people have spent two decades-worth of effort/cash/credit buying and selling over-priced housing to each other. We’re exhausted.

It’s the long-term choke on the supply of housing, with its resulting inflation, compensated by excessive lending that has really trashed the money supply.

They talk about “fixing structural issues” by re-capitalising banks who invested in bad mortgages, but the underlying structural problem in the UK is the weak supply of property.

Just my opinion.

I would suggest inflation is a certainty because sterling has crashed and the UK is a net importer of goods.

If you import things priced in currencies against whcih Sterling has declined, the price in Sterling is greater, Inflation.

the UK is a net importer of goods.

And a net exporter of services!

konabunny, it doesn’t cover the gap though, http://www.statistics.gov.uk/cci/nugget.asp?ID=199

Hmm – but otoh, the volume of GBP’s that actually bought and sold to pay for imports/exports is tiny compared to the amount that’s traded speculatively, so what we’re talking about maybe irrelevant to currency strength.

Also, just a question that’s semi-related, how does GBP bought to trade in bonds affect GBP rates (because that’s not goods or services)?

Konabunny, it may not impact on the strength of the currency, i don’t know. My point is simply if the GBP is worth less but the price remains the same in the manufacturers currency you can get less of something for your GBP and the shop price has to rise. As we import most goods, it means things will cost more, ie inflation.

Possibly, but not necessarily. It might be that the exporter sucks up the lower profit margin (because, for instance, no-one else in the world is buying their stuff), or that the retailer/manufacturer does etc etc. Also, a weak pound is great news for exporters (except of course if they use a lot of imports in their exports IYSWIM).

I’m actually not really disagreeing with you here and take your point. I suppose I am really just saying that in economics (as a academic observation), it’s practically impossible to come up with any rules/laws that always work so that you can predict ahead of time what’s going to happen.

Prices are already going up because of the weak pound, have a look at car prices for example. Everyone seemed surprised that CPI remained high whilst they were panicing about negative RPI. I think the low RPI figure will work itself out after a while (variable rate mortgages are as low as they are going to go) and the underlying real inflation is going to go up, if anything.

Konabunny, i see your point and if the pound had moved a few percent i would tend to agree, 30%, which is the devaluation, is a bit more than can be absorbed IMO. I can’t see how it can’t be passed on at some point.