Just accept the fact that you are going to be poorer.......

[Aruntraveller]

says the man on £180,000 a year:

https://www.theguardian.com/business/2023/apr/25/britons-need-to-accept-theyre-poorer-says-bank-of-england-economist

He can just fuck right off.

[Udayana]

Essentially he has revealed that he has no idea how a capitalist economy and society operate -  confirming the nonsense put out by Bailey (£495,000) on inflation and interest rates up to now.

You can't expect good advice from bankers whose only job is to keep the financial system stable hence their own finances secure.

[Nearly Sane]

Essentially he has revealed that he has no idea how a capitalist economy and society operate -  confirming the nonsense put out by Bailey (£495,000) on inflation and interest rates up to now.

You can't expect good advice from bankers whose only job is to keep the financial system stable hence their own finances secure.

I think he also overeggs the effect of us importing natural gas

[Udayana]

I think he also overeggs the effect of us importing natural gas

Probably ... would be good to have country comparisons.

[Nearly Sane]

Probably ... would be good to have country comparisons.

What it reveals is that the tools to control inflation are incredibly blunt, and the use of raising interest rates here has been counterproductive, since the inflation was not being driven by demand.

[jeremyp]

What it reveals is that the tools to control inflation are incredibly blunt, and the use of raising interest rates here has been counterproductive, since the inflation was not being driven by demand.

Yes it is.

Or rather inflation is driven by the relationship between supply and demand. Prices go up when demand exceeds supply no matter whether it is supply that goes down or demand that goes up or both.

Britain has gone through a number of shocks recently. We had Brexit, the pandemic and now there's a major war going on in Europe. There's no way we are going to get through all of that without a major impact on all our personal wealth.

[Nearly Sane]

Yes it is.

Or rather inflation is driven by the relationship between supply and demand. Prices go up when demand exceeds supply no matter whether it is supply that goes down or demand that goes up or both.

Britain has gone through a number of shocks recently. We had Brexit, the pandemic and now there's a major war going on in Europe. There's no way we are going to get through all of that without a major impact on all our personal wealth.

And if supply is restricted raising interest rates has fuck all impact in most circumstances but serves only to raise inflation and demand for money.

[jeremyp]

And if supply is restricted raising interest rates has fuck all impact in most circumstances

Raising interest rates restricts demand because people have less money to spend. It means they are less inclined to borrow money and more inclined to save it.

but serves only to raise inflation and demand for money.

"demand for money" would be the opposite of inflation. If demand for money was high (or the supply of money was low - same thing really), it would mean that people who have got money can ask for more goods to exchange with it from the people who haven't got money but want it.

[Udayana]

Raising interest rates restricts demand because people have less money to spend. It means they are less inclined to borrow money and more inclined to save it.

True, it is a way to put the brakes on inflation when it is caused by an economy that is growing quickly. But it is of no use when there is no growth, or when restricting demand is not possible  because the goods in low supply are essential to everyone.

 
"demand for money" would be the opposite of inflation. If demand for money was high (or the supply of money was low - same thing really), it would mean that people who have got money can ask for more goods to exchange with it from the people who haven't got money but want it.

They've been printing extra money since 2008 (QE), but carefully making sure that it is used to shore up the banking system and major industries, rather than go to people who might want to spend it on necessities.

[Udayana]

...
Britain has gone through a number of shocks recently. We had Brexit, the pandemic and now there's a major war going on in Europe. There's no way we are going to get through all of that without a major impact on all our personal wealth.

We are poorer both absolutely and relative to many other countries because of the handling of those events. 

However, within the UK wealth has not been static; because of the way the banking crisis and austerity were handled and now with the raising of interest rates, wealth within the UK has been moving from the poorest to the richest so even though the country is poorer many have increased their wealth relative to their fellow residents (and in the end this counts more than wealth in world terms). So it makes no sense to tell people they shouldn't make demands for higher wages - people want more of whatever pie there is rather than let the fat hog yet more.

(No offence meant to anyone overweight).
 

[Aruntraveller]

We are poorer both absolutely and relative to many other countries because of the handling of those events. 

However, within the UK wealth has not been static; because of the way the banking crisis and austerity were handled and now with the raising of interest rates, wealth within the UK has been moving from the poorest to the richest so even though the country is poorer many have increased their wealth relative to their fellow residents (and in the end this counts more than wealth in world terms). So it makes no sense to tell people they shouldn't make demands for higher wages - people want more of whatever pie there is rather than let the fat hog yet more.

(No offence meant to anyone overweight).
 

Exactly.

[Nearly Sane]

We are poorer both absolutely and relative to many other countries because of the handling of those events. 

However, within the UK wealth has not been static; because of the way the banking crisis and austerity were handled and now with the raising of interest rates, wealth within the UK has been moving from the poorest to the richest so even though the country is poorer many have increased their wealth relative to their fellow residents (and in the end this counts more than wealth in world terms). So it makes no sense to tell people they shouldn't make demands for higher wages - people want more of whatever pie there is rather than let the fat hog yet more.

(No offence meant to anyone overweight).
 

+1

[jeremyp]

We are poorer both absolutely and relative to many other countries because of the handling of those events. 

However, within the UK wealth has not been static; because of the way the banking crisis and austerity were handled and now with the raising of interest rates, wealth within the UK has been moving from the poorest to the richest so even though the country is poorer many have increased their wealth relative to their fellow residents (and in the end this counts more than wealth in world terms). So it makes no sense to tell people they shouldn't make demands for higher wages - people want more of whatever pie there is rather than let the fat hog yet more.

(No offence meant to anyone overweight).
 

The problem is that almost all of the pie is already going to poorer people. NHS workers collectively get a vast slice of the pie, but there are so many of them that they individually get a tiny piece. If you have a rich person getting a million pounds a year and you redistribute all of their money to the NHS, the average pay rise would be less than £1.

[Udayana]

The problem is that almost all of the pie is already going to poorer people. NHS workers collectively get a vast slice of the pie, but there are so many of them that they individually get a tiny piece. If you have a rich person getting a million pounds a year and you redistribute all of their money to the NHS, the average pay rise would be less than £1.

Yes .. there are no easy/quick solutions on this. Seems to require clearly defined objectives to be set and long term plans put in place to deliver fair income distribution. Not even sure that is  possible in the UK without a world economy that fairly supports the population of the planet in a sustainable manner - and, taking climate change into account, we've probably missed the boat on that.

For an individual (ok, myself) probably best to maximise what you have and enjoy it or pass on as you like. Even for that though, it would be best not to continue shovelling money to bankers, hedge funds and fraudsters to satisfy bunkum economics theory.
 

[Alan Burns]

The bottom line is that we need some fair way to enable recovery from the trillions of pounds of debt incurred during the pandemic and from the costs incurred by dealing with the war in Ukraine.  Those who maintain their previous real income will do so at the expense of others.  If we give in to the demands of powerful trade unions, the resulting inflation will be unfair to those who have no means keep up with such inflation.  The only fair means to share the burden of debt will have to be through well thought out government legislation rather than allowing a free for all and giving in to those with the most powerful clout.

[Aruntraveller]

free for all and giving in to those with the most powerful clout.

I agree.

Just to be clear that isn't the unions:

https://www.statista.com/chart/27505/uks-richest-are-getting-richer/#:~:text=The%20UK%20%E2%80%99s%20top%20ten%20richest%20people%20are,in%202022%20-%20an%20increase%20of%20281%20percent.

[Stranger]

The bottom line is that we need some fair way to enable recovery from the trillions of pounds of debt incurred during the pandemic and from the costs incurred by dealing with the war in Ukraine.

You missed out the self-inflicted idiocies that were Brexit and the Liz Truss / Kwasi Kwarteng disaster. And, of course, many of the costs of the pandemic were due to government incompetence (e.g. all that useless PPE ordered from cronies).

Those who maintain their previous real income will do so at the expense of others.

Yes. The current government seems intent on making sure that the already very rich maintain their income at the expense of everybody else.

If we give in to the demands of powerful trade unions, the resulting inflation will be unfair to those who have no means keep up with such inflation.

The problem is not "powerful trade unions". We simply can't maintain public services if you don't pay people enough to recruit and retain the staff required, and you can't do that if you're protecting the income of the very rich and the huge profits big businesses.

[jeremyp]

I agree.

Just to be clear that isn't the unions:

https://www.statista.com/chart/27505/uks-richest-are-getting-richer/#:~:text=The%20UK%20%E2%80%99s%20top%20ten%20richest%20people%20are,in%202022%20-%20an%20increase%20of%20281%20percent.

It's not clear to me that all of that wealth really exists. Take Elon Musk as an example (yes, I know he is not British). He is valued at around $170 billion but he hasn't got $170 billion, he has shares in various companies whose valuation collectively comes to about that much. He has, for example, about $30 billion in Tesla shares. If he tried to sell them all, he wouldn't get $30 billion because, as soon as he started selling, the price would immediately drop.

Likewise, it's all very well saying the top twenty British billionaires have between then £600 billion. If we took most of that and left them all with $1 billion each, which will keep them in a very luxurious life style for a long time to come, we wouldn't have £580 billion, we'd have a load of share certificates that we would find quite hard to liquidate.

[Aruntraveller]

A take on this issue:

https://www.theguardian.com/commentisfree/2023/apr/26/the-guardian-view-on-britons-getting-poorer-dont-accept-it

[Nearly Sane]

A take on this issue:

https://www.theguardian.com/commentisfree/2023/apr/26/the-guardian-view-on-britons-getting-poorer-dont-accept-it

And the Labour Party are almost silent