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| 425 Chaotic Requisition |
 Posted: Sun Oct 21, 2007 4:29 am Post subject: Britain's Inflation |
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The Doctor
Joined: 18 Jun 2007
Posts: 3147
Location: Now
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This idea came to me when I realised that many international goods-such as the PS3 are being affected price wise world wide because of the UK's inflation. Sony in particular, do you know that a £1400 plasma wide screen TV would cost around $2820? Its rediculous. If the UK's inflation continues to rise the UK is set to be one very rich nation and could pay off their bills. But how would this affect the world?
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| Ophiolite |
| Posted: Sun Oct 21, 2007 4:46 am Post subject: Re: Britain's Inflation |
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Forum Radioactive Isotope
Joined: 25 Jul 2005
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Location: Scotland
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Are you telling us that Sony make their plasma screens in the UK? That is the only way in which UK costs (nor prices) could have a significant global effect. Moreover UK inflation is low. I am bemused as to what you are trying to say here.
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| 425 Chaotic Requisition |
| Posted: Sun Oct 21, 2007 7:02 am Post subject: |
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The Doctor
Joined: 18 Jun 2007
Posts: 3147
Location: Now
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It is not low-the price of goods yadayadayada text book answer, is double the United States-hence the double price tag. For instance-what would be say a dollars worth of cookies in the US would be 50p over here. That is to say that no-one would by cookies from here in the US as they would cost $2, you follow me? Corporate entities such as Sony 'care' greatly about which country they sell in. When I said inflation I assumed you would understand give it is the UK that it is stable-and not a threat like Zimbabwe. UK consumers are the largest currently in the world with an average of 95% of homeowners regualarly purchasing expensive goods. We are called the largest consumers because the stength of the pound relative to other currencies means that we spend a lot more-hence the price of goods being high-hence inflation being high. Sony sells plasma TVs in this country and PS3s, not just Sony but other corporate entities with their own goods at the equivalent price of what it would cost here against your country. That is the US have to pay $600 for a PS3 but the UK have to pay £300. Do you think that if the pound and the dollar were equal that Sony would charge only 300 currency? Its due to our inflation that many goods and worldwide services cost more give certain businesses. Of course I'm not saying that cookies in the US would be more money due to the UKs inflation-just that goods that corporations can make money on will take advantage of the inflation of high inflation countries-not neccesarily the UK alone. Take Dubai for instance.
PS. When I say 'your' I mean people in general-not you Ophiolite I know your from the UK.
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| Ophiolite |
| Posted: Sun Oct 21, 2007 11:39 am Post subject: |
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Forum Radioactive Isotope
Joined: 25 Jul 2005
Posts: 4486
Location: Scotland
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Thank you for your response, but I am afraid all you have done is to confuse me even further as to your meaning, therefore I am going to focus on just one part of your answer and try to nail down what you mean.[quote="svwillmer"] Sony sells plasma TVs in this country and PS3s, not just Sony but other corporate entities with their own goods at the equivalent price of what it would cost here against your country. That is the US have to pay $600 for a PS3 but the UK have to pay £300. quote]At the present exchange rate $600 is almost exactly equal to £300. i.e if those prices apply then the priceof the PS3 is the same in the US as the UK. I thought your point had been that goods were more expensive here. Do you see what I am not getting? Please clarify.
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| 425 Chaotic Requisition |
| Posted: Sun Oct 21, 2007 12:42 pm Post subject: |
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The Doctor
Joined: 18 Jun 2007
Posts: 3147
Location: Now
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No I meant that the price of international goods has increased in other countires because of the UKs inflation rate-the PS3 may be only $300 in the US if our inflation was lower and the exchange rate the same as them. I don't mean we have to pay more-I meant that other countries have to pay more because of it. Take a Dodge Viper for sale in the US, here it would be half that amount (it cost $75,000 in the US-here it cost £37,500). If it was very popular and had a market in the UK and sold very much as in the US-the company wouldn't want to lose money and would therefore charge the UK say £75,000 and the US now $150,000 (they may not go that high but still)). I'm saying basically that goods that are sold in an international market are affected by high spending countries with high inflation (such as us). If we made international cookies as sold them for £4 a bag (a bit extortionate I know)-in the US they would be $8, which would be seen as a rip off over there and they would not buy them-not when they can buy $1 cookies as I said in my last post.
The jist of what I'm saying is that the PS3 is $600 because it's £300 over here and would be $300 if our exchange rate the same as the US'. But because its not and Sony can make more money by ripping off the US-they might be paying say $80 for a HD-DVD player to go with a plamsa TV-we'd pay £80 as it may not be an international product. Do you see where I'm going? I hope I've cleared things up a bit.
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| Ophiolite |
| Posted: Sun Oct 21, 2007 1:05 pm Post subject: |
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Forum Radioactive Isotope
Joined: 25 Jul 2005
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| svwillmer wrote: |
| Do you see where I'm going? I hope I've cleared things up a bit. |
YEs, I see where you are going - in the wrong direction. Prices are determined by market conditions in the country or area they are being sold. The higher prices of some goods and services in the UK is reflection of higher distribution and retailing costs. The bottom line profit for each item may well be the same, or less than it is in the US. The only minor effect that UK prices could have on an internationally ditributed product is to reduce the quantity available for lower priced markets (or rather lower profit markets).
Let me make it plainer. UK prices make almost no contribution to the prices of goods in the US.
Also, why do you keep saying the UK has high inflation when this is patently not so?
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| 425 Chaotic Requisition |
| Posted: Sun Oct 21, 2007 1:11 pm Post subject: |
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The Doctor
Joined: 18 Jun 2007
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Location: Now
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Inflation relative to the US and other countires is higher. Up to 30% of PS3's wil be bought in the UK. So Sony can make a lot of money from our currency being high against others. If the PS3 cost $300-it would only be £150-Sony loses £150 on each sale of a PS3 and say they sell 100,000 of them when at that price they lose £15 million. But they can make more money if they charge higher in the UK thus charging much higher in the US. I'm saying that it is a coincidence that the US price and the UK price matches perfectly the exchange rate. I think that we should investigate the price of the PS3 in other countries against the UK's exhnage rate with that country. I'll have a look.
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| Ophiolite |
| Posted: Mon Oct 22, 2007 4:06 pm Post subject: |
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Forum Radioactive Isotope
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| svwillmer wrote: |
| Inflation relative to the US and other countires is higher. |
svwillmer, I have no idea where you get your ideas, or your facts, but they seem often to be in error.
As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in August, at 1.8 per cent, was close to the provisional figure for the European Union as a whole of 1.9 per cent.
Source:http://www.statistics.gov.uk/CCI/nugget.asp?ID=19
Inflation in the US for September was 2.76%.
Source:http://www.inflationdata.com/Inflation/Inflation/Inflation.asp
So please stop claiming that UK inflation is higher than the US and other countries when it is very clear that it is not.
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| 425 Chaotic Requisition |
| Posted: Mon Oct 22, 2007 4:19 pm Post subject: |
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The Doctor
Joined: 18 Jun 2007
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Ok then-exhange rates. The exhange rates determines the price of international goods sold where the price of one currency dominates the other by however much percent. Thats basically what I meant in the first place-guess I should have been a bit more clearer, my bad. 
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| Ophiolite |
| Posted: Mon Oct 22, 2007 4:26 pm Post subject: |
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Forum Radioactive Isotope
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| svwillmer wrote: |
| Ok then-exhange rates. The exhange rates determines the price of international goods sold where the price of one currency dominates the other by however much percent. Thats basically what I meant in the first place-guess I should have been a bit more clearer, my bad. |
Then your observations make no sense to me at all.
With respect svwillmer, if you so readily confuse exchange rates and inflation I find it difficult to beleive you have the remotest idea of how economics works. (Given that this condition describes most economists, I would not become distressed about it.)
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| 425 Chaotic Requisition |
| Posted: Mon Oct 22, 2007 4:32 pm Post subject: |
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The Doctor
Joined: 18 Jun 2007
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I know that inflation is price of goods or rather money growth in a system against consumer spending which leads to a change in the supply of those goods and services-or something like that. Please forgive my mixed knowledge.
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| Pendragon |
| Posted: Sat Oct 27, 2007 4:14 pm Post subject: |
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Svwillmer, a general advise when talking about economics: always think in terms of supply and demand. Simplify your ideas until they sound like "there's more of thing A, while thing B stays the same, so the price/interest rate/etc changes"
Inflation means that over some period you get more money on the market chasing less goods, hence the price of goods in terms of money rises.
Exchange rates also work through supply and demand: when supply of dollars on the market rises while the supply of pounds or euro's stays the same, the price of pounds/euro's in terms of dollars rises. The demand for a certain currency depends on what you can do with it, you want dollars either to buy American goods or to invest in American stocks or factories (or to speculate with the dollars).
So try to formulate your idea in simple supply-demand logic, so we can have a look at it  |
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| 425 Chaotic Requisition |
| Posted: Sun Oct 28, 2007 3:01 am Post subject: |
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The Doctor
Joined: 18 Jun 2007
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OK Thanks. Well the supply of PS3s is quite high and the demand is low. So there is less money in that product here than perhaps any where else in the world. Seeing as the supply of UK pounds is decreasing as due to our debt, against the US, would the PS3's price change as a result of that change in cash?
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| Pendragon |
| Posted: Thu Nov 01, 2007 12:25 pm Post subject: |
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So let's imagine there are only two countries in the world, the UK and the US. I assume the PS3 is produced in the US and exported to the UK.
I think the supply of UK pounds isn't being changed significantly relative to the US dollar because of the national debt in the UK. But, for several reasons, the demand in the UK for US dollars is dropping, so the value of the dollar is dropping. For UK consumers this means that their pounds can buy more goods in the US, so US companies can more easily compete with UK companies on price. So US companies have an interest in supplying PS3's in the UK, but apparently demand in the UK is not big enough to absorb this additional supply (you say demand in the UK is low). So the price of PS3's in the UK should drop. In other words, if a PS3 is worth 10 pairs of shoes in the US, it should be worth less than 10 pairs of shoes in the UK (unless shoes are also imported from the US)
I'm not sure if this is exactly what you meant, but that's about as far as the influence of exchange rate goes for normal consumer products (unless I overlook something, which I may very well do). |
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| 425 Chaotic Requisition |
| Posted: Thu Nov 01, 2007 3:23 pm Post subject: |
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The Doctor
Joined: 18 Jun 2007
Posts: 3147
Location: Now
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No, your right thats more or less what I meant. My business knowledge iss overall ok but needs tidying up; I'm glad you and Ophiolite have done so. Thank you. I love this forum  .
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