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Inflation – it’s worse than you think

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It’s funny that after a decade of cheap credit, low interest rates and out of control house prices, it’s only now that people are starting to worry about inflation. Nobody seems to mind that it’s prohibitively expensive to buy a home, or even rent one, but as soon as the cost of a litre of petrol starts to creep up and a loaf of bread costs a few pence more, all of a sudden the people of Britain are up in arms. Where was all this righteous fury when an entire generation was being robbed of the opportunity to own a home at a fair price?

In any case, if you think inflation of 3 or 4% is bad, you ain’t seen nothing yet. The measure of inflation used to arrive at these numbers is the badly flawed Consumer Prices Index (CPI – which is explained in an earlier economonkey article here). Think honestly about how much the cost of your food and fuel bills have risen in recent years, and ask yourself if it’s really just a few percent? According to the Telegraph, which has taken a stab at producing an alternative index, the real cost of living has risen by almost 10% in the past year alone – but we suspect that’s still probably a bit optimistic.

Inflation – it was a hoot when the value of your property was shooting up by 10% a year, but not so much now that it’s starting to hit you in the pocket…

  1. Alice Cook says:

    Economonkey,

    Asset inflation – good
    Goods inflation – bad

    Alice