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I suspect that many people are like me in not believing we are in a deflationary situation. It is complete cobblers and should not be influencing economic policy.
The principal reason why the RPI is dropping into negative territory is that interest rates have been destroyed in recent months. This allegedly reduces the cost of living, which is rubbish for a shedload of people, including pensioners, those who have paid off their mortgage and those who are either in fixed deals or have not been able to negotiate a better rate because of their LTV situation, etc.
When I look at my own situation, I know that my family's cost of living is definitely going up, and I suspect that is true for the majority of the UK. In any case, a reduction in interest rates is temporary and surely those in deep debt are using any relief they are getting in their mortgage payments to accelerate the rate at which they are paying down that debt. should that be the case, their day-to-day 'cost of living' has not improved.
The price of food continues to rise, masked by 'special offers' that are only available to those who can buy and store. The cost of imported goods are going up because of the exchange rate - and much of the range of electrical goods on sale in the UK are imported. I know this because I have had my eye on an electrical item that I know has gone up since the end of the January sales - likewise with regard to furniture.
So, let's not look at one figure that measures a hypothetical basket, but instead look at some real-life examples, then base policy on what is really happening to the majority of people in the country. I think we'll find that the reality is different for many people.
Because of this inaccurate assessment, we'll no doubt see yet more dubloons sprayed around the country in the most inappropriate fashion, when we need to see targeted help, aimed at those who are in the most difficulty with their debts, to get everyone's 'balance sheets' back in working order. Only then will we see an end to this crisis.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
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