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The two key elements are business margins and disposable income.

As disposable incomes shrink, demand for everything except core essentials dries up, GDP is hammered, and there's a credit crash as people default on loans and mortgages. So there's a personal tipping point that creeps up the income curve, as more and people fall off the bottom and their GDP contribution switches from positive to negative.

Likewise if margins shrink and businesses become unprofitable, businesses die, unemployment increases, demand goes down, and GDP is hammered again.

A useful exercise with real numbers would be to get some of the annual accounts posted by haulage and logistics companies at Companies House - that would show what kind of margins they're running on, and how close they are to being killed by current and future price increases.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 27th, 2008 at 12:16:25 PM EST
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