So interest rates will rise that much to counter it?
Sunlit uplands
The can has been kicked down the road so much that we’ve come up against a dead end. Keep rates low and we will have stagflation, raise rates and we will compound the coming recession.
The fiscal tools have been exhausted. It’s time for us to face the consequences of the capitalist snake eating its own tail.
Billionaires: Yay.
Millionaires: Shrug.
Those who own a house outright: I’m alright jack.
Those with a mortgage: Oh shit, time to fix.
Renters and the working poor: RIP
Let’s all have a big Etonian hip-hip-hurrah for late game Tory capitalism. Hasn’t it worked well?
Raising interest rates does actually work to curb inflation but it comes at the understood cost of causing a recession.
This understanding is based on the policies enacted by Paul Volcker during his tenure as the Chair of the Federal Reserve in the US from 1979 to 1987.
In the 1970s the US was experiencing an inflation crisis as inflation topped out at 14% in some States. Inflation had gotten that high because the previous Federal Reserve chairman believed that inflation would come down once economic stability was restored after the 1973 oil crisis ended. But that didn’t happen. For a variety of reasons (that aren’t important to this point) inflation kept rising and nothing was done about it.
Volcker believed that by slowing down economic activity and forcing people to save their money it would bring inflation under control as there would be less money changing hands. The way to do this is to raise interest rates to such a degree that borrowing becomes too expensive and so people stop doing it. Instead of spending money on buying a house or car (or other big purchase) they save their money. Those with savings accounts are incentivised to keep their money in the account as the high interest rate means that their money is better off there, instead of being spent where its value is not guaranteed.
The side effect of this approach is that with less economic activity and the rate of borrowing/spending significantly reduced it puts the economy into a recession (albeit a deliberate one). The outcome though is that it dropped inflation from 14% to 1% by the late 1980s and early 1990s. The post recession period was an economic boom for the US as people had been saving for nearly a decade and with low inflation their money was worth more (purchasing power wise).
Increasing interest rates is the right thing to do but it necessitates putting in places measures that will help those most likely to be affected by this policy; the poor, students and the elderly.
The government could cut student loan interest rates. Raise the threshold at which you start paying tax. Increasing tax on the wealthy and reducing the NI contribution of the lowest income areas. Increasing funding to TFL and reduce the cost of public transport. Put in place secondary measures that ensure that the most affected can still live and have enough money to get by without worrying about where their next meal with come from or whether they have to pay rent or pay their electricity bill.
Obviously the government won’t do shit to support those in need.
10% ho ho thats punchy
I’m just glad the Wrexiters got what they wanted.
The way things are right now may very well look like the good times by the end of this year. If the Tories do not do something (and I have very little hope that they will) then they will potentially find themselves governing a very angry population that will see mass strikes and riots as a means to get the government’s attention. We are still in the early stages of the cost of living crisis, with many people still just about keeping their heads above water, if that changes by winter then Johnson will not be able to rely on his persona to waffle his way out of serious political action.
Never going to happen. Print that on a T shirt. 10% would leave large swathes of this country in financial ruin and with nothing left to do they will be free to pull the whole damn country apart. Buckle up!
So much of the economy is just making shit for the sake of it.
I walk into Poundland and just sigh at all the tat.
I’m sure someone, somewhere is making a mint on producing trashy “Live, Laugh, Love” merch, and plastic gnomes with their bums hanging out.
But does humanity really need these things to exist?
Does bum gnome make us happier?
Or would the same Labour and resources be better spent working towards something else, like tree planting?
10 comments
So interest rates will rise that much to counter it?
Sunlit uplands
The can has been kicked down the road so much that we’ve come up against a dead end. Keep rates low and we will have stagflation, raise rates and we will compound the coming recession.
The fiscal tools have been exhausted. It’s time for us to face the consequences of the capitalist snake eating its own tail.
Billionaires: Yay.
Millionaires: Shrug.
Those who own a house outright: I’m alright jack.
Those with a mortgage: Oh shit, time to fix.
Renters and the working poor: RIP
Let’s all have a big Etonian hip-hip-hurrah for late game Tory capitalism. Hasn’t it worked well?
Raising interest rates does actually work to curb inflation but it comes at the understood cost of causing a recession.
This understanding is based on the policies enacted by Paul Volcker during his tenure as the Chair of the Federal Reserve in the US from 1979 to 1987.
In the 1970s the US was experiencing an inflation crisis as inflation topped out at 14% in some States. Inflation had gotten that high because the previous Federal Reserve chairman believed that inflation would come down once economic stability was restored after the 1973 oil crisis ended. But that didn’t happen. For a variety of reasons (that aren’t important to this point) inflation kept rising and nothing was done about it.
Volcker believed that by slowing down economic activity and forcing people to save their money it would bring inflation under control as there would be less money changing hands. The way to do this is to raise interest rates to such a degree that borrowing becomes too expensive and so people stop doing it. Instead of spending money on buying a house or car (or other big purchase) they save their money. Those with savings accounts are incentivised to keep their money in the account as the high interest rate means that their money is better off there, instead of being spent where its value is not guaranteed.
The side effect of this approach is that with less economic activity and the rate of borrowing/spending significantly reduced it puts the economy into a recession (albeit a deliberate one). The outcome though is that it dropped inflation from 14% to 1% by the late 1980s and early 1990s. The post recession period was an economic boom for the US as people had been saving for nearly a decade and with low inflation their money was worth more (purchasing power wise).
Increasing interest rates is the right thing to do but it necessitates putting in places measures that will help those most likely to be affected by this policy; the poor, students and the elderly.
The government could cut student loan interest rates. Raise the threshold at which you start paying tax. Increasing tax on the wealthy and reducing the NI contribution of the lowest income areas. Increasing funding to TFL and reduce the cost of public transport. Put in place secondary measures that ensure that the most affected can still live and have enough money to get by without worrying about where their next meal with come from or whether they have to pay rent or pay their electricity bill.
Obviously the government won’t do shit to support those in need.
10% ho ho thats punchy
I’m just glad the Wrexiters got what they wanted.
The way things are right now may very well look like the good times by the end of this year. If the Tories do not do something (and I have very little hope that they will) then they will potentially find themselves governing a very angry population that will see mass strikes and riots as a means to get the government’s attention. We are still in the early stages of the cost of living crisis, with many people still just about keeping their heads above water, if that changes by winter then Johnson will not be able to rely on his persona to waffle his way out of serious political action.
Never going to happen. Print that on a T shirt. 10% would leave large swathes of this country in financial ruin and with nothing left to do they will be free to pull the whole damn country apart. Buckle up!
So much of the economy is just making shit for the sake of it.
I walk into Poundland and just sigh at all the tat.
I’m sure someone, somewhere is making a mint on producing trashy “Live, Laugh, Love” merch, and plastic gnomes with their bums hanging out.
But does humanity really need these things to exist?
Does bum gnome make us happier?
Or would the same Labour and resources be better spent working towards something else, like tree planting?
Hmm.