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Post by buccaneer on Jan 14, 2024 10:36:33 GMT
Yet you seem to think interest rates work just fine and dandy in doing that even though they hit far fewer people. With a levy on incomes the ones not paying would tend to be the ones with least discretionary spending to start with who are thus contributing the least to any demand excess that we are trying to suppress. Interest rate increases hit so few people in comparison that they have to be tough to have any effect at all. So many people from across the income range remain unaffected. Private tenants might be hit indirectly by landlords offsetting their increased mortgage costs onto tenants, so that landlords take no hit at all whilst their often poor tenants do. Social housing tenants meanwhile are immune to this yet entirely unaffected by interest rate rises regardless of how much they are earning. A young person on a high income but still at home with their parents is entirely unaffected. Anyone in fact without a mortgage - or any other significant debt vulnerable to rate changes - is entirely unaffected. Which is why as a tool it is so ineffective. And you keep insisting on my idea of a small levy on income set at the same rate for all earners as somehow redistribution and therefore bad. It is not. It takes the same percentage from everyone whilst giving to no one. Note particularly the words "same percentage" and "giving to no one" in trying to understand it in non-ideological terms. Wealth redistribution it isnt. Spreading the load fairly in proportion to incomes is what it is. Those with more discretionary income would tend to pay more of course which simply increases the effectiveness of the idea, but only because they earn more. The actual percentage they pay is exactly the same. And whilst decrying non-existent wealth redistribution in my idea, you fail to see that interest rate rises really are redistributive because they tend to take money from those in debt who often include both struggling mortgage payers and many poorer people, whilst actually enriching those with little or no debt and much in the way of assets or investments. Interest rate rises, and indeed rate reductions, are inherently redistributive. Rate rises tend to redistribute wealth towards the wealthier elements. Rate cuts do the opposite, tending to redistribute wealth away from wealthier elements. This is so obvious its hard to see how someone could argue against it. I think what Pacifico is reduced to now is "But we've always done it that way" Like I said before, you think you've got the silver bullet to a very complex problem. |
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Post by zanygame on Jan 14, 2024 11:15:33 GMT
Everyone is discussing controlling inflaytion/cost of living from the demand side...reducing demand by siphoning off your money into banks via interest rates. No one thinks about controlling inflation by increasing supply and market forces bringing down prices. The UK needs foreign investment, creating more employment, and importing more. But shops cant afford to due to higher interest rates and rental of space. The assumption I believe is that market forces do keep prices as low as they can be. That is certainly my experience in running a moderate sized business. The difficulty with this particular inflation is its driven by gas and oil prices which are not in our control and effect everything we buy. One way to break this strangle hold is to produce our own energy, which are are very much starting to do, so the future might get more stable. Yep. Its a balance between allowing the public access to cheaper prices and keeping our standard of living. I like to consider the idea of an alien race showing up with their replicators which can produce every product we desire at a tenth the price. Would we welcome the cheap goodies and then be shocked at losing our income? I'd hope we were more intelligent, but I'm far from sure. Might make a good book. |
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Post by zanygame on Jan 14, 2024 11:17:31 GMT
This is so obvious its hard to see how someone could argue against it. I think what Pacifico is reduced to now is "But we've always done it that way" Like I said before, you think you've got the silver bullet to a very complex problem. I'm sure there are complications, but I'm equally sure they could be solved. If we had politicians brave enough to carry out such tax hikes and trusted enough to explain it to the public and be believed. Now THAT is a tall order. |
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Post by Pacifico on Jan 14, 2024 11:26:12 GMT
The problem with progressive taxes as a vehicle for reducing inflation is that, by definition, they are progressive. So the vast majority of the country will have little to no increase in taxation (and thus no effect on demand) and those at the other end of the spectrum have the means to continue their consumption by cutting back in other areas. The reason that every Central Bank in the world uses interest rates to curtail inflation is that it affects a wide spectrum of the economy - which is what you need when your wish is to reduce demand in the economy. Surely that depends on the rate of tax. I agree an increase of 1% has little effect on any ones spending, but an increase of 25% would have a dramatic effect across the board. I agree interest rates is a one size fits all badly. Is anyone really suggesting a 25% increase on the basic rate? - people don't want to pay an extra 1% for the State Religion (the NHS). I can just imagine the uproar if you put the basic rate up to 25% |
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Post by Pacifico on Jan 14, 2024 11:37:18 GMT
Yet you seem to think interest rates work just fine and dandy in doing that even though they hit far fewer people. With a levy on incomes the ones not paying would tend to be the ones with least discretionary spending to start with who are thus contributing the least to any demand excess that we are trying to suppress. Well we use interest rates because they are the one method proven to work - if there were a better way I'm sure someone would have come up with one by now. That is not to say that there are no problems with using interest rates - but the negatives are just as big for any other method No - interest rate changes hit the whole economy, which is why they are the preferred method. They push up the price of borrowing which then takes money out of the economy suppressing demand. But as Zany has pointed out - a small levy will not change behaviour at the extremes. Would you support Zany's idea for a 25% increase across the board? High interest rates slow the growth in the economy which is not what the wealthy want as it reduces the growth/income of their investments. Having high interest rates hurts business and thus is the last thing anyone with an investment portfolio wants. |
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Post by Deleted on Jan 14, 2024 11:56:10 GMT
Yet you seem to think interest rates work just fine and dandy in doing that even though they hit far fewer people. With a levy on incomes the ones not paying would tend to be the ones with least discretionary spending to start with who are thus contributing the least to any demand excess that we are trying to suppress. Well we use interest rates because they are the one method proven to work - if there were a better way I'm sure someone would have come up with one by now. That is not to say that there are no problems with using interest rates - but the negatives are just as big for any other method No - interest rate changes hit the whole economy, which is why they are the preferred method. They push up the price of borrowing which then takes money out of the economy suppressing demand. But as Zany has pointed out - a small levy will not change behaviour at the extremes. Would you support Zany's idea for a 25% increase across the board? High interest rates slow the growth in the economy which is not what the wealthy want as it reduces the growth/income of their investments. Having high interest rates hurts business and thus is the last thing anyone with an investment portfolio wants. Interest rates do not hit the whole economy. They enrich parts of it enabling even more spending, whilst hitting other parts hard, whilst leaving many other parts entirely unaffected. In terms of suppressing demand, spreading the load more widely and fairly would be far more effective. It therefore stands to logical reason that if a certain level of interest rates are necessary to suppress demand, increasing the spending power of some whilst entirely unaffecting many others in the process, the same effect could be achieved by spreading the load much more widely whilst enriching no one, with a much less substantial raise. |
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Post by zanygame on Jan 14, 2024 11:59:47 GMT
Surely that depends on the rate of tax. I agree an increase of 1% has little effect on any ones spending, but an increase of 25% would have a dramatic effect across the board. I agree interest rates is a one size fits all badly. Is anyone really suggesting a 25% increase on the basic rate? - people don't want to pay an extra 1% for the State Religion (the NHS). I can just imagine the uproar if you put the basic rate up to 25% Yes. That's the point. A 6% increase in interest rate means people with mortgages having to find £800 a month more. (Averaged) So why would a £100 monthly increase for the lowest tax payer and a £2,000 increase for the highest be so crazy? I suggest it would only cause uproar by those are not affected by the mortgage rate and wish to be excused the pain of those who carry the burden for them. |
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Post by zanygame on Jan 14, 2024 12:02:54 GMT
I had to address this.
Interest rates work in favour of those who pull the strings and make the rules. That's why better ways have not been explored.
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Post by Deleted on Jan 14, 2024 12:10:39 GMT
This is so obvious its hard to see how someone could argue against it. I think what Pacifico is reduced to now is "But we've always done it that way" Like I said before, you think you've got the silver bullet to a very complex problem. I think I have the starting point for an idea that its opponents seem unable to address without resorting to distortions and straw men. It is only the basis for discussion and whether it is a reasonable suggestion or not depends on the pros and cons as it is placed under the microscope of examination. But the fact that thus far no one here seems to be able to come up with a strong logical objection without first misrepresenting it with the aid of some sort of set of ideological goggles, is itself rather telling right now. |
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Post by Deleted on Jan 14, 2024 12:24:13 GMT
As I think someone has rightly pointed out. Inflation is not merely in part the result of an excess of demand but a shortage of supply. Supply being allowed to expand to match demand also reduces inflationary pressures. But to do this businesses need to borrow to invest, which they are less able to do with higher interest rates. Thus interest rate rises whilst taking money out of some pockets to suppress demand, also damage the ability of businesses to be able to increase supply to better match demand and thus is actually damaging to any fight against inflation on the supply side.
A levy on incomes would be far less damaging to the ability of businesses to increase supply whilst being more effective at suppressing demand. The two should be able to meet in the middle somewhere with far less economic pain.
The problem seems to be that far too many people are economically invested in high interest rates as a tool because it doesnt affect them and indeed some of them gain out of it. As ever unpleasant medicine is necessary but only if they dont have to swallow it too. Any suggestion that they should and they suddenly start arguing that the medicine is poison, that it is something it isnt.
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Post by zanygame on Jan 14, 2024 13:07:21 GMT
Like I said before, you think you've got the silver bullet to a very complex problem. I think I have the starting point for an idea that its opponents seem unable to address without resorting to distortions and straw men. It is only the basis for discussion and whether it is a reasonable suggestion or not depends on the pros and cons as it is placed under the microscope of examination. But the fact that thus far no one here seems to be able to come up with a strong logical objection without first misrepresenting it with the aid of some sort of set of ideological goggles, is itself rather telling right now. Agreed. Buccaneer just saying "you think you've got the silver bullet to a very complex problem." and repeating it, says nothing more than I don't like it, I don't like change, I have no idea why. |
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Post by zanygame on Jan 14, 2024 13:10:41 GMT
As I think someone has rightly pointed out. Inflation is not merely in part the result of an excess of demand but a shortage of supply. Supply being allowed to expand to match demand also reduces inflationary pressures. But to do this businesses need to borrow to invest, which they are less able to do with higher interest rates. Thus interest rate rises whilst taking money out of some pockets to suppress demand, also damage the ability of businesses to be able to increase supply to better match demand and thus is actually damaging to any fight against inflation on the supply side. A levy on incomes would be far less damaging to the ability of businesses to increase supply whilst being more effective at suppressing demand. The two should be able to meet in the middle somewhere with far less economic pain. The problem seems to be that far too many people are economically invested in high interest rates as a tool because it doesnt affect them and indeed some of them gain out of it. As ever unpleasant medicine is necessary but only if they dont have to swallow it too. Any suggestion that they should and they suddenly start arguing that the medicine is poison, that it is something it isnt. Maybe the BofE should be given the extra lever of income tax levies. Such income could be reserved purely to pay down public debt, thus preventing cries of government waste. |
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Post by Deleted on Jan 14, 2024 15:39:21 GMT
As I think someone has rightly pointed out. Inflation is not merely in part the result of an excess of demand but a shortage of supply. Supply being allowed to expand to match demand also reduces inflationary pressures. But to do this businesses need to borrow to invest, which they are less able to do with higher interest rates. Thus interest rate rises whilst taking money out of some pockets to suppress demand, also damage the ability of businesses to be able to increase supply to better match demand and thus is actually damaging to any fight against inflation on the supply side. A levy on incomes would be far less damaging to the ability of businesses to increase supply whilst being more effective at suppressing demand. The two should be able to meet in the middle somewhere with far less economic pain. The problem seems to be that far too many people are economically invested in high interest rates as a tool because it doesnt affect them and indeed some of them gain out of it. As ever unpleasant medicine is necessary but only if they dont have to swallow it too. Any suggestion that they should and they suddenly start arguing that the medicine is poison, that it is something it isnt. Maybe the BofE should be given the extra lever of income tax levies. Such income could be reserved purely to pay down public debt, thus preventing cries of government waste. Seems like a good idea. I suggested earlier that keeping the decision at arms length from the government would be desirable. And giving the bank of England the power to set the necessary rate seems sensible. I suggested that the monies raised could be used for far more useful purposes than boosting the profits of lenders. I suggested building social housing as an example. But the drawback with a government deciding what to spend the monies on runs the obvious risk of providing political motivations for whatever the rate is set at, leading to political pressure. Your idea that it be mandated exclusively and solely to be used for national debt reduction regardless of who is in power is a good idea to take politics out of the decision. Which exchange between us tends to demonstrate that actual engagement with the idea rather than determinedly misunderstanding it, can help raise genuine potential problems rather than the imaginary ones so far thrown about, leading in turn to sensible tweaks of an idea. The fact that those who instinctively dislike the idea either for self-interested or ideological reasons - or both - cannot find good reasons for demonstrating that it is a bad idea without inventing shit, is merely serving to make the idea or some version of it appear to stand up to scrutiny so far. What we are seeing throughout this thread from the usual suspects is an automatic and immediate dislike of the idea combined with an utter inability to demonstrate good logical reasons why it is a bad idea without resorting to total misrepresentations and straw men. Even the normally intellectually sound Pacifico has been reacting in this intellectually dishonest way. As to the idea being any supposed silver bullet as some sort of criticism, the answer is simple (and this is not aimed at you, Zany). If it wont work better than interest rates as a lever, say why without inventing fabrications and falsehoods. If it is not a silver bullet - and I never claimed it would be simple - at least try and demonstrate some logical reasons as to why it is a bad idea. |
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Post by zanygame on Jan 14, 2024 15:56:03 GMT
Maybe the BofE should be given the extra lever of income tax levies. Such income could be reserved purely to pay down public debt, thus preventing cries of government waste. Seems like a good idea. I suggested earlier that keeping the decision at arms length from the government would be desirable. And giving the bank of England the power to set the necessary rate seems sensible. I suggested that the monies raised could be used for far more useful purposes than boosting the profits of lenders. I suggested building social housing as an example. But the drawback with a government deciding what to spend the monies on runs the obvious risk of providing political motivations for whatever the rate is set at, leading to political pressure. Your idea that it be mandated exclusively and solely to be used for national debt reduction regardless of who is in power is a good idea to take politics out of the decision. Which exchange between us tends to demonstrate that actual engagement with the idea rather than determinedly misunderstanding it, can help raise genuine potential problems rather than the imaginary ones so far thrown about, leading in turn to sensible tweaks of an idea. The fact that those who instinctively dislike the idea either for self-interested or ideological reasons - or both - cannot find good reasons for demonstrating that it is a bad idea without inventing shit, is merely serving to make the idea or some version of it appear to stand up to scrutiny so far. What we are seeing throughout this thread from the usual suspects is an automatic and immediate dislike of the idea combined with an utter inability to demonstrate good logical reasons why it is a bad idea without resorting to total misrepresentations and straw men. Even the normally intellectually sound Pacifico has been reacting in this intellectually dishonest way. As to the idea being any supposed silver bullet as some sort of criticism, the answer is simple. If it wont work better than interest rates as a lever, say why without inventing fabrications and falsehoods. If it is not a silver bullet - and I never claimed it would be simple - at least try and demonstrate some logical reasons as to why it is a bad idea. Yes to all of that. |
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Post by Pacifico on Jan 14, 2024 18:13:51 GMT
Well we use interest rates because they are the one method proven to work - if there were a better way I'm sure someone would have come up with one by now. That is not to say that there are no problems with using interest rates - but the negatives are just as big for any other method No - interest rate changes hit the whole economy, which is why they are the preferred method. They push up the price of borrowing which then takes money out of the economy suppressing demand. But as Zany has pointed out - a small levy will not change behaviour at the extremes. Would you support Zany's idea for a 25% increase across the board? High interest rates slow the growth in the economy which is not what the wealthy want as it reduces the growth/income of their investments. Having high interest rates hurts business and thus is the last thing anyone with an investment portfolio wants. Interest rates do not hit the whole economy. They enrich parts of it enabling even more spending, whilst hitting other parts hard, whilst leaving many other parts entirely unaffected. In terms of suppressing demand, spreading the load more widely and fairly would be far more effective. It therefore stands to logical reason that if a certain level of interest rates are necessary to suppress demand, increasing the spending power of some whilst entirely unaffecting many others in the process, the same effect could be achieved by spreading the load much more widely whilst enriching no one, with a much less substantial raise. Of course Interest rates hit the whole economy - they also hit the business sector which is something that a rise in Income Tax would fail to do. By hitting every sector of the economy higher interest rates can suppress demand for all economic growth, which is precisely why the rich do not like high interest rates. |
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