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Post by Hutchyns on Jul 14, 2023 9:20:14 GMT
Fairsociety
Is that not a comment on the relationship between interest rates and inflation ? .... the very thing I've just said this thread is intended to address ?
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Post by Orac on Jul 14, 2023 10:01:20 GMT
Business as usual, particularly once Nordstream 1 & 2 were in full flow, was destined to create an increasingly wealthy Russia and Western Europe, and those clever and industrious Chinese were progressing in leaps and bounds as well. Someone could sense their pre-eminent position was slipping away ...... and had to devise ways of throwing a major spanner into the economic works of both regions. The war spanner for Russia and the sanctions spanner for Europe ..... with both economies crippled, full concentration on a massive spanner to clobber China, and hey presto, the old order is restored. While political deviousness and planning is the root cause, broadening the discussion away from the relationship between interest rates and inflation is probably not what the original poster wanted or intended. I'm sure Vinny will agree. But they go hand-in-hand, hence the reason we are having interest hikes because inflation is getting out of control, so to bring interest rates down you first have to control inflation. Interest rates are used to control inflation. Inflation is a change in the relationship between the scarcity of money and the scarcity of goods. High interest rates makes money scarcer. |
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Post by Fairsociety on Jul 14, 2023 10:10:51 GMT
But they go hand-in-hand, hence the reason we are having interest hikes because inflation is getting out of control, so to bring interest rates down you first have to control inflation. Interest rates are used to control inflation. Inflation is a change in the relationship between the scarcity of money and the scarcity of goods. High interest rates makes money scarcer. If they keep hiking interest rates there will be even scarcity of money, people's disposable income is shrinking ever day, with energy prices rises, food bill rises, this is on top of mortgage/rent rises, if people don't have money to spend the likes of the hospitality industry, clothes, electrical, furniture and so on will all go under, It is baffling why economists aren't briefing the government on basic economics. |
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Post by Orac on Jul 14, 2023 10:20:30 GMT
Interest rates are used to control inflation. Inflation is a change in the relationship between the scarcity of money and the scarcity of goods. High interest rates makes money scarcer. If they keep hiking interest rates there will be even scarcity of money, people's disposable income is shrinking ever day, with energy prices rises, food bill rises, this is on top of mortgage/rent rises, if people don't have money to spend the likes of the hospitality industry, clothes, electrical, furniture and so on will all go under, It is baffling why economists aren't briefing the government on basic economics. The alternative would be to become productive. However, with half the population employed in government Diversity Inclusion and Equity programs or working in HR departments, i can't see how we would manage that without a bit of a shakeup. |
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Post by Fairsociety on Jul 14, 2023 10:32:07 GMT
If they keep hiking interest rates there will be even scarcity of money, people's disposable income is shrinking ever day, with energy prices rises, food bill rises, this is on top of mortgage/rent rises, if people don't have money to spend the likes of the hospitality industry, clothes, electrical, furniture and so on will all go under, It is baffling why economists aren't briefing the government on basic economics. The alternative would be to become productive. However, with half the population employed in government Diversity Inclusion and Equity programs or working in HR departments, i can't see how we would manage that without a bit of a shakeup. We've got chunks of the Civil Service and Public sector still WFH, we've got those who took chucks of furlough some genuine some fraud, Landlords are selling up because they can't keep up with the rates rises, like I've said on a different thread, what happens when there is more takers than givers, people are just throwing in the towel and relying on state hand outs, while probably topping their income up by working on the side. |
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Post by Pacifico on Jul 14, 2023 10:37:01 GMT
Well the interest rate rises (and expected future rises) have pushed up the value of Sterling which makes imports cheaper - so yes they are having an effect. Also raising interest rates mean people with mortgages have less money to spend on other things so that reduces demand. If there is a better alternative nobody has suggested it. There certainly was, not borrow untold billions and hand it out like confetti for an outcome that was never going to occur being driven by fear and psychology, while creating the next crisis by war in Europe, while also creating mass unfettered immigration and letting commodity brokers and banks run riot like a bunch of arsonists. Where the only outcome would be more borrowing and large inflation, but on the other hand telling us all it was all under control via austerity, which was all more bollox. The BOE are under the impression they are economic gods and must crash the economy all for the greater good, greater good. In fact they seem most put out that it is proving a little harder than they first thought. Well that is all very true - but we are where we are..  Of course had we gone fracking we would have had lower inflation anyway, but 'saving the planet' meant that we would rather import fracked gas rather than burning our own.. |
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Post by Orac on Jul 14, 2023 10:39:11 GMT
The alternative would be to become productive. However, with half the population employed in government Diversity Inclusion and Equity programs or working in HR departments, i can't see how we would manage that without a bit of a shakeup. We've got chunks of the Civil Service and Public sector still WFH, we've got those who took chucks of furlough some genuine some fraud, Landlords are selling up because they can't keep up with the rates rises, like I've said on a different thread, what happens when there is more takers than givers, people are just throwing in the towel and relying on state hand outs, while probably topping their income up by working on the side. It's a feedback loop. The more we insist on supporting and funding non-production, the less returns (reward) there is for the productive. People engaged in production throw the towel in and pursue non-production instead - which is better rewarded and less risky. Liz truss had the right idea. |
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Post by zanygame on Jul 14, 2023 20:50:33 GMT
Well the interest rate rises (and expected future rises) have pushed up the value of Sterling which makes imports cheaper - so yes they are having an effect. Also raising interest rates mean people with mortgages have less money to spend on other things so that reduces demand. If there is a better alternative nobody has suggested it. Increase taxes. That means everyone has less money to spend on other things so that reduces demand. It also helps government finances. |
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Post by Pacifico on Jul 14, 2023 21:21:37 GMT
Well the interest rate rises (and expected future rises) have pushed up the value of Sterling which makes imports cheaper - so yes they are having an effect. Also raising interest rates mean people with mortgages have less money to spend on other things so that reduces demand. If there is a better alternative nobody has suggested it. Increase taxes. That means everyone has less money to spend on other things so that reduces demand. It also helps government finances. FFS Zany - we already have the highest tax burden since WW2. Daily there are complaints from members of the government and media commentators about the amount of people retiring early and how they should go back to work - well they are not going to go back to work because tax rates are so high it makes work financially pointless. |
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Post by zanygame on Jul 14, 2023 21:42:50 GMT
Increase taxes. That means everyone has less money to spend on other things so that reduces demand. It also helps government finances. FFS Zany - we already have the highest tax burden since WW2. Daily there are complaints from members of the government and media commentators about the amount of people retiring early and how they should go back to work - well they are not going to go back to work because tax rates are so high it makes work financially pointless. You didn't ask me for a view on tax rates, you asked for a better alternative to interest hikes. Do you deny that massive increases in taxation would reduce spending and therefore inflation? You see I know you don't mind people with young families and new homes taking the punch so long as its not you. |
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Post by Pacifico on Jul 15, 2023 6:35:38 GMT
FFS Zany - we already have the highest tax burden since WW2. Daily there are complaints from members of the government and media commentators about the amount of people retiring early and how they should go back to work - well they are not going to go back to work because tax rates are so high it makes work financially pointless. You didn't ask me for a view on tax rates, you asked for a better alternative to interest hikes. Do you deny that massive increases in taxation would reduce spending and therefore inflation? You see I know you don't mind people with young families and new homes taking the punch so long as its not you. If you want to use taxation to reduce demand then the obvious way is to increase VAT to 25%. But we both know that is not what you had in mind - it's your usual 'tax the rich' mantra that would have no effect on general demand in the economy. The obvious way to reduce inflation is to do what works in other economies - stop having artificially high prices for energy. |
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Post by zanygame on Jul 15, 2023 7:55:47 GMT
You didn't ask me for a view on tax rates, you asked for a better alternative to interest hikes. Do you deny that massive increases in taxation would reduce spending and therefore inflation? You see I know you don't mind people with young families and new homes taking the punch so long as its not you. But we both know that is not what you had in mind - it's your usual 'tax the rich' mantra that would have no effect on general demand in the economy. The obvious way to reduce inflation is to do what works in other economies - stop having artificially high prices for energy. I disagree. The more money you have the less you are effected by non progressive taxes. Increase progressive taxes and you slow spending across the board. And again stop trying to deflect the conversation and address the point. As far as I'm concerned it could be a temporary rise in taxes just the same as the temporary rise in interest rates. Big difference is that the pain would be shared, whereas the current method puts the pain on one group while lining the pockets of another. |
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Post by zanygame on Jul 15, 2023 8:04:24 GMT
You didn't ask me for a view on tax rates, you asked for a better alternative to interest hikes. Do you deny that massive increases in taxation would reduce spending and therefore inflation? You see I know you don't mind people with young families and new homes taking the punch so long as its not you. The obvious way to reduce inflation is to do what works in other economies - stop having artificially high prices for energy. Artificially high prices? How are you going to stop that? Give Ukraine to Putin? Or are you denying that the energy prices shot up because of the Ukraine war? |
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Post by sheepy on Jul 15, 2023 8:12:01 GMT
If you want to use taxation to reduce demand then the obvious way is to increase VAT to 25%. But we both know that is not what you had in mind - it's your usual 'tax the rich' mantra that would have no effect on general demand in the economy. The obvious way to reduce inflation is to do what works in other economies - stop having artificially high prices for energy. I disagree. The more money you have the less you are effected by non progressive taxes. Increase progressive taxes and you slow spending across the board. And again stop trying to deflect the conversation and address the point. As far as I'm concerned it could be a temporary rise in taxes just the same as the temporary rise in interest rates. Big difference is that the pain would be shared, whereas the current method puts the pain on one group while lining the pockets of another. Sure, but all you would do is boost the government coffers which a huge chunk is already taken in interest on a National debt while at the same time taking it out of the economy hence slowing it and eventually creating another massive recession. Which the most wealthy never suffer from anyway. It has never worked before but then wash rinse repeat always seems the order of the day. |
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Post by borchester on Jul 15, 2023 8:13:06 GMT
Nope.
Inflation is caused by too much money chasing too few goods. If you increase the cost of money then the problem just gets worse.
The only reasons that governments increase interest rates is because
(a) they have to look as though they are doing something even if it is the wrong thing
(b) the public demand that something be done, even if it is stupid.
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