The BoE said they though inflation was (a) temporary and (b) caused by supply factors didn’t they? They don’t deny it’s bad or a risk I think. They just think it will go away on its own. And even if it doesn’t, they mostly only control demand factors so it’s not something they can just fix…
Yeah but the fact is, they don’t have much room for maneuver. If they increase interest rates significantly, the housing market goes bust.
No shit, anyone who has followed the finance world has been able to see it from the beginning of 2021.
And its not only the UK that has this issue, the US, the rest of Europe, Canada, etc. All have the same issue. The market is like an over pumped Barbara thats about to pop at any moment, that approaches its breaking point with every additional pump. Its going to result in an extremely violent, old cum splattering pop with unfathomable results.
It hasn’t underestimated anything, these guys know EXACTLY who is responsible, why it’s happened and the true info and effects, they are just feeding lower numbers to not panic the markets.
If the markets get spooked, them and their mates lose money, the whole thing is a sham, bunch crooks.
The author is the founder of the Economists for Brexit, who predicted that the Brexit vote would cause an immediate jump in GDP growth. So take his predictions with a decent punch of salt.
Rule #1: Higher interest rates make it costlier to do business.
Look around people – do you actually think the majority of businesses in the UK can handle an interest rate rise at this point in time? Most of them are still on their knees after covid.
Generally speaking interest rates are like a weight carried by a runner. If your economy is running too fast, you give it a heavier load to carry to slow it to a healthier speed. The UK economy is currently like a car crash victim going through rehab – it can just about walk if it has bars for support…
Only so much they can do when you have clowns in government
Yes, the Bank of England can do something to keep inflation low. It can raise interest rates substantially. That will reduce demand which, in turn, will (likely) result in price drops leading to lower inflation. However, raising interest rates will also increase unemployment and bankruptcies.
So what would you like? Somewhat higher, but manageable, inflation, caused mostly by transient, pandemic and Brexit caused, supply issues and NOT quantitative easing, OR lower inflation but lose your job and/or your thriving business? Your call.
Doesn’t much matter if bread is cheaper because inflation is low, but you can’t afford to buy it anyway because you lost your job.
Posted the following on this in the other sub –
What he means by the “second-round effects” of “inflation expectations” is workers seeking higher wages in order to maintain their existing real wage levels. The purpose of a rise in interest rates is to curb this tendency by reducing aggregate demand, creating a negative output gap, which increases unemployment. It is the higher unemployment which has the effect of reducing wage demands, by increasing competition in the labour market.
What I’ve said above is all an essential and explicit element of mainstream economic theory, and anybody who has studied economics will know what this guy is saying. But for the layperson, the actual mechanisms at work are generally not fully spelled out in newspaper articles, cos, when calling for interest rate rises to curb inflation, the fact that the means is to deliberately increase unemployment in order to drive down real wages would tend to affect its popularity.
Also –
In the inflation-targeting model of mainstream economics, firms always being able to maintain their existing profit margins, in the face of rising costs, is built in to the model as one of its assumptions. Ie the desired result is assumed as automatically happening. From this is necessarily follows that: all wage rises are automatically wiped out by firms putting their prices up to cancel them out, so there’s no point in workers trying to get higher wages; and all rises in costs automatically get passed on to workers. The fact that govts and central banks use policies, like increasing interest rates to increase unemployment, to bring this about is just seen as achieving by other, non-inflationary, means what would have happened anyway through inflation.
Timber up 200% in a year, most metals up 30% in a year petrol & deisel up 40%, gas and electricity up 50%, shipping container movement up 500%, there is noway inflation is going to remain in single digits next year.
Gerard Lyons. The man interviewed for governor of BOE despite not meeting the person spec. But he was *checks notes* a brexiteer and Boris’ adviser at city hall.
11 comments
The BoE said they though inflation was (a) temporary and (b) caused by supply factors didn’t they? They don’t deny it’s bad or a risk I think. They just think it will go away on its own. And even if it doesn’t, they mostly only control demand factors so it’s not something they can just fix…
Yeah but the fact is, they don’t have much room for maneuver. If they increase interest rates significantly, the housing market goes bust.
No shit, anyone who has followed the finance world has been able to see it from the beginning of 2021.
And its not only the UK that has this issue, the US, the rest of Europe, Canada, etc. All have the same issue. The market is like an over pumped Barbara thats about to pop at any moment, that approaches its breaking point with every additional pump. Its going to result in an extremely violent, old cum splattering pop with unfathomable results.
It hasn’t underestimated anything, these guys know EXACTLY who is responsible, why it’s happened and the true info and effects, they are just feeding lower numbers to not panic the markets.
If the markets get spooked, them and their mates lose money, the whole thing is a sham, bunch crooks.
The author is the founder of the Economists for Brexit, who predicted that the Brexit vote would cause an immediate jump in GDP growth. So take his predictions with a decent punch of salt.
Rule #1: Higher interest rates make it costlier to do business.
Look around people – do you actually think the majority of businesses in the UK can handle an interest rate rise at this point in time? Most of them are still on their knees after covid.
Generally speaking interest rates are like a weight carried by a runner. If your economy is running too fast, you give it a heavier load to carry to slow it to a healthier speed. The UK economy is currently like a car crash victim going through rehab – it can just about walk if it has bars for support…
Only so much they can do when you have clowns in government
Yes, the Bank of England can do something to keep inflation low. It can raise interest rates substantially. That will reduce demand which, in turn, will (likely) result in price drops leading to lower inflation. However, raising interest rates will also increase unemployment and bankruptcies.
So what would you like? Somewhat higher, but manageable, inflation, caused mostly by transient, pandemic and Brexit caused, supply issues and NOT quantitative easing, OR lower inflation but lose your job and/or your thriving business? Your call.
Doesn’t much matter if bread is cheaper because inflation is low, but you can’t afford to buy it anyway because you lost your job.
Posted the following on this in the other sub –
What he means by the “second-round effects” of “inflation expectations” is workers seeking higher wages in order to maintain their existing real wage levels. The purpose of a rise in interest rates is to curb this tendency by reducing aggregate demand, creating a negative output gap, which increases unemployment. It is the higher unemployment which has the effect of reducing wage demands, by increasing competition in the labour market.
What I’ve said above is all an essential and explicit element of mainstream economic theory, and anybody who has studied economics will know what this guy is saying. But for the layperson, the actual mechanisms at work are generally not fully spelled out in newspaper articles, cos, when calling for interest rate rises to curb inflation, the fact that the means is to deliberately increase unemployment in order to drive down real wages would tend to affect its popularity.
Also –
In the inflation-targeting model of mainstream economics, firms always being able to maintain their existing profit margins, in the face of rising costs, is built in to the model as one of its assumptions. Ie the desired result is assumed as automatically happening. From this is necessarily follows that: all wage rises are automatically wiped out by firms putting their prices up to cancel them out, so there’s no point in workers trying to get higher wages; and all rises in costs automatically get passed on to workers. The fact that govts and central banks use policies, like increasing interest rates to increase unemployment, to bring this about is just seen as achieving by other, non-inflationary, means what would have happened anyway through inflation.
Timber up 200% in a year, most metals up 30% in a year petrol & deisel up 40%, gas and electricity up 50%, shipping container movement up 500%, there is noway inflation is going to remain in single digits next year.
Gerard Lyons. The man interviewed for governor of BOE despite not meeting the person spec. But he was *checks notes* a brexiteer and Boris’ adviser at city hall.