The ONS announced today that the CPI and RPI index measures of inflation have increased from their frankly absurd lows where CPI was just 1.8%

I say absurd because the while the CPI figure was descending, it became clear that fuel, food and basic necessities inflation was rocketing up. It has recently been reported that supermaket price inflation on groceries has been running anywhere between 10 and 16%, this is said to be caused by poor crops and high transportation costs. Of course, the fuel price is going up fast with a barrel of Brent crude costing more than $90US at the end of last week. This has a knock-on effect for energy prices as some powerstations are oil fired.

It has been widely rumored that the items in the CPI basket are regularly manipulated in order to produce a desirable CPI figure. This has lead some to complain that they cannot eat their iPods and that music downloads cause poor performance when used as fuel for their vehicles.

The ONS states that the new CPI figure of 2.1% is off the back of the increasing fuel price. The Retail Price Index is now up to 4.2%

The Bank of England’s only method of control over inflation is to set interest rates which now stand at 5.75% It appears they may need to go higher still to curb inflation.

Worryingly, the fuel price is continuing upwards. Last week I wrote that the AA were reporting the average price of a litre of petrol as having exceeded £1/litre. During last week, the price was increasing at an average of 0.2p/litre/day (and this continued through the weekend). However, into today, the fuel price increased at 0.3p/litre/day which would mean a 2.1p/litre a week increase in the price should this trend continue. The recent and suddenly high price of Brent crude may be yet to filter through to the ‘pump’ so there is potential for the price trend to stay.

This fast increase in the price of fuel is bound to force the reported rate of inflation higher.

It has been not so widely reported in the last few days that a Chinese Type 039 Submarine (NATO reporting name “Song Class”) buzzed the USS Kitty Hawk on the 27th of October while the Kitty Hawk was on maneuvers in the western Pacific Ocean.

The event seems to have caused much consternation for NATO and the US Navy as apparently the Song Class had sneaked up on the 7th fleet unnoticed before surfacing with 5 nautical miles of the US Supercarrier.

This is bound to be causing a few headaches at the US Navy as 5 nautical miles is well within the Song Class’ firing range for both torpedos and anti-ship missiles. The Song Class carries Yu-4 torpedos with a range of ~8 nautical miles at up to 30 knots and the YJ-8 anti-ship cruise missile which has a 43 nautical mile range at just under the speed of sound and a ‘hard-to-hit’ flight profile which comes in down to 3m above wave-height.

The Chinese, of course, deny that they were shadowing and intercepting the Seventh Fleet. I can just imagine the look of anguish as the Chinese boat captain realised that he had accidentally surfaced in the middle of an American Carrier Group

Now, my theory as to how the Chinese managed to creep up on the Seventh Fleet is thus: The Song Class firstly has a latest-generation design prop which makes it particularly quiet. Secondly, the Song probably makes a different sound to a Russian submarine. The reason this is critical is that I’ll bet the class Hollywood image of a steely-eyed sonar operator being able to detect a Russian sailor breaking wind on a submarine 5 miles away is a bit of a fallacy. What is more likely is that they have a computer listening to the sonar at all times running some pattern-matching software. Now, that’s all good and well if they encounter the sound of submarines that the computer has patterns for but if the computer doesn’t have a pattern for a Chinese Sub, perhaps it can’t interpret it’s presence at all.

I wonder if the solution really could be as simple as giving a new pattern to the sonar computer?

The UK government is proposing that those caught driving faster than the speed limit should receive double the number of points on their driving licence.

Effectively a speeder would receive 6 points rather than 3 for driving in excess of 45mph in a 30limit, 57mph in a 40limit and 93mph in a 70limit. Therefore, any driver caught speeding to this excess twice would have clocked up 12 points (the UK licence limit) and be eligible for a driving ban of up to 6 months. Presumably, the points for speeding at less the excesses mentioned would remain at 3 points.

This is probably a reasonably good idea as long as the roads are desperately overcrowded in the UK and exceeding the limits to the extent above is bordering on insanity. (It also burns up the commodity oil at a greater rate which is running out). The 3 point system would have to remain for those that exceed the limit to a lesser extent in order to avoid public outcry as you can rarely drive for more than a couple of miles in the UK without encountering one of our dreaded speed traps.

Photo Credit: Andrew Dunn. Copyright Andrew Dunn cc-by-sa-2.0

Well, it’s official. The AA reports that the average price per litre of petrol within the UK is now 100.1p, the price of a litre of Diesel, a staggering 103.3p.

This is being caused by a combination effort. Firstly, Gordon Brown’s 2p/litre increase in tax pushed the price close to £1 followed by the Turkish intervention with the Kurds in Northern Iraq driving  the price of a barrel of crude over $96.

The next pre-programmed increase in fuel tax in April from the former chancellor should see the UK fuel price pegged firmly in excess of £1/litre in perpetuity

Naturally, the huge and increasing cost of fuel has a knock-on effect and coupled with poor crops this year, the transportation costs of food are now showing up on the Supermarket Shelves. (Supermarket inflation reputedly running at 10-12% on groceries)

£1+ Fuel looks to be here to stay.

Bloomberg report today that Brazillian Supermodel Gisele Bundchen (the one that went out with DiCaprio) wants to stay the world’s richest supermodel. She intends to do this by refusing to be paid in US dollars.

The rather attractive 27 year old apparently prefers to be paid in Euros which have been gaining against the US dollar in recent years. Her sister, Patricia Bundchen, commented that “Contracts starting now are more attractive in euros because we don’t know what will happen to the dollar”.

Now, I do worry about how many people actually do look to supermodels for financial advice but I have to agree. The dollar seems to have been propped up on a bubble of bad credit and now the consequences are being felt. I have the same fear for Sterling (which is my primary currency right now). The Pound seems to be propped up on nothing but credit, fairy-tales and wishful thinking; there is certainly no industry (or perhaps even reality) left to back it.

Update: Dealbreaker notes that Gisele’s manager issued a prompt denial that she was dumping the dollar  “Some idiot in Brazil reported something just to make news,”.

Image Credit: Tiago Chediak

In the news today, German airline Lufthansa cargo seems to be on the receiving end of some Russian strong-arm tactics. Lufthansa currently operates it’s Asia cargo hub at Astana, Kazakhstan but Russia wants Lufthansa to move the hub into Siberia so Russia has removed Lufthansa’s permission to fly through their airspace. Presumably this permission will be withheld until Lufthansa complies.

The Russian Transport Ministry retorts that Lufthansa are not banned, rather their temporary permission to operate in Russian airspace has expired.

Lufthansa don’t particularly want to move to Siberia, they cite the famously poor Siberian weather and lack of ground transport infrastructure at the mentioned sites of Novosibirsk or Krasnojarsk as sufficient reason for sticking with Kazakhstan. It is worth remembering that these days, while Kazakhstan is a sovereign nation, Siberia remains part of Russia (and would therefore be a boost to tax and trade if Lufthansa operated there)

Image credit: Juergen Lehle