We must all accept being poorer
Discussion
Households should ‘accept’ being poorer, Bank of England’s top economist says
This is the new reality, according to Huw Pill - we must accept being worse-off than hitherto. Listening to the podcast (linked-to from the article above), it is telling how Pill fails to understand the different effects interest rates have on the US and UK economies, or indeed how the two economies behave very differently.
Admittedly he's talking there for a US audience, but that apparent importing of US-centric thinking to apply to UK-specific economic issues feels like it might be a part of a wider problem.
Nobody in the US is going to just "accept being poorer"
And, in fact, the evidence suggests it simply hasn't happened. It is only I who is concerned at this apparent casual acceptance of de facto austerity?
This is the new reality, according to Huw Pill - we must accept being worse-off than hitherto. Listening to the podcast (linked-to from the article above), it is telling how Pill fails to understand the different effects interest rates have on the US and UK economies, or indeed how the two economies behave very differently.
Admittedly he's talking there for a US audience, but that apparent importing of US-centric thinking to apply to UK-specific economic issues feels like it might be a part of a wider problem.
Nobody in the US is going to just "accept being poorer"
And, in fact, the evidence suggests it simply hasn't happened. It is only I who is concerned at this apparent casual acceptance of de facto austerity?What does poorer actually mean though? Many people I know of in the U.S. have left very well-paying jobs because their employer wanted them to go back to the office full-time. They've realised that they rather like the extra time that working from home and not commuting affords them, so they have gladly traded a lower income for more time with family. And since time is money, they aren't necessarily poorer overall. Just poorer in the wallet but much richer in the one thing that never stops dwindling. Time.
I don't have a family, but even I wouldn't want to go back to back to work at an office each day and every day. If it means bringing home a little less bacon, so be it.
I don't have a family, but even I wouldn't want to go back to back to work at an office each day and every day. If it means bringing home a little less bacon, so be it.
I'm usually an optimist, but the average citizen's outlook for the next decade is bleak. Interest rate hikes, inflation, growing reliance on automation (causing mass unemployment), climate change, and resource scarcity. Throw in a prolonged war (and proxy participants) in Ukraine and deteriorating relationship (diplomatic and economic) between the West and China, and the potential for a much wider armed conflict… Being poor might be the least of peoples problems.
s the lot of them. people need payrises, but he is right, if inflation is 11% and everyone gets 11% payrise, guess what, inflation stays at 11%. The only way to bring inflation down is to gradually curb spending. Traditionally by raising interest rates to encourage savings, but people got bored of savings with no returns for 10 years plus, so found other things to do with their cash, and so many ohters are just addicted to spending so cannot or will not stop...just moan and expect bail outs. So not the interest rate rises dont have so much effect.
With big payrises high inflation just lasts longer. It's a fine line to balance
With big payrises high inflation just lasts longer. It's a fine line to balance
But the problem is that the BoE only have interest rates as a means of controlling inflation.
From a Government perspective there are other options that could, and possibly should be used. Tax rates being the most obvious one, but a combination of tax rates and infrastructure investment in places other than London might well increase the efficiency of the country, while keeping a control of inflationary pressures.
And like it or not, Brexit has increased the rate of inflation. Sure the war in Ukraine, and the big economy shutdown have had an effect, but there have been massive inflationary pressure due to cutting ourselves off from a huge market and skills supply.
From a Government perspective there are other options that could, and possibly should be used. Tax rates being the most obvious one, but a combination of tax rates and infrastructure investment in places other than London might well increase the efficiency of the country, while keeping a control of inflationary pressures.
And like it or not, Brexit has increased the rate of inflation. Sure the war in Ukraine, and the big economy shutdown have had an effect, but there have been massive inflationary pressure due to cutting ourselves off from a huge market and skills supply.
bearman68 said:
But the problem is that the BoE only have interest rates as a means of controlling inflation.
From a Government perspective there are other options that could, and possibly should be used. Tax rates being the most obvious one, but a combination of tax rates and infrastructure investment in places other than London might well increase the efficiency of the country, while keeping a control of inflationary pressures.
And like it or not, Brexit has increased the rate of inflation. Sure the war in Ukraine, and the big economy shutdown have had an effect, but there have been massive inflationary pressure due to cutting ourselves off from a huge market and skills supply.
You're right, they can only look at interest rates and fwiw imo they were woefully slow to increase them, at least 6 months late. From a Government perspective there are other options that could, and possibly should be used. Tax rates being the most obvious one, but a combination of tax rates and infrastructure investment in places other than London might well increase the efficiency of the country, while keeping a control of inflationary pressures.
And like it or not, Brexit has increased the rate of inflation. Sure the war in Ukraine, and the big economy shutdown have had an effect, but there have been massive inflationary pressure due to cutting ourselves off from a huge market and skills supply.
Govt can increase tax rates, and indeed did (NI hike a year ago) and has done more recently having junked the NI increase, and will do again I am sure. But Govt is also a massive employer in the UK, ie public sector, and they can also control wages to a degree via that.
Its a balancing act, but like it or not, the reality is, if you keep everyone on salaries increasing in line with inflation, inflation will pretty much stay the same!
I think the general feeling is that perhaps the companies should accept a bit less profit as opposed to just immediately passing wage increase to prices.
A lot of companies are posting record profits. Perhaps they should make 100 million or a billion less and protect their employees a bit. Not as the employees at the bottom to suck it up and live tight for a few years.
I say this as until recently full card carrying Tory and company owner. I gave my employees above inflation pay rises and told directors no dividends of bonus this year.
A lot of companies are posting record profits. Perhaps they should make 100 million or a billion less and protect their employees a bit. Not as the employees at the bottom to suck it up and live tight for a few years.
I say this as until recently full card carrying Tory and company owner. I gave my employees above inflation pay rises and told directors no dividends of bonus this year.
poo at Paul's said:
people need payrises, but he is right, if inflation is 11% and everyone gets 11% payrise, guess what, inflation stays at 11%. The only way to bring inflation down is to gradually curb spending. Traditionally by raising interest rates to encourage savings, but people got bored of savings with no returns for 10 years plus, so found other things to do with their cash, and so many ohters are just addicted to spending so cannot or will not stop...just moan and expect bail outs. So not the interest rate rises dont have so much effect.
With big payrises high inflation just lasts longer. It's a fine line to balance
Your inflation theory assumes the inflation is demand-driven. There's little evidence that's true in the UK (it may be so in the US).With big payrises high inflation just lasts longer. It's a fine line to balance
I'm not a huge fan of orthodox thinking - the past is often not a very good guide to the future. People talk as if this stuff is settled science; it isn't. We've only had a floating currency within the lifetime of many on here, for instance. We had rent controls until 1980. Part of the reason we lurch from disaster to disaster is we quickly forget the lessons of, say, Long Term Capital Management, and try to pretend that data analysis and a few decades worth of data is sufficient to give us infinite insight.
ntiz said:
I think the general feeling is that perhaps the companies should accept a bit less profit as opposed to just immediately passing wage increase to prices.
A lot of companies are posting record profits. Perhaps they should make 100 million or a billion less and protect their employees a bit. Not as the employees at the bottom to suck it up and live tight for a few years.
I say this as until recently full card carrying Tory and company owner. I gave my employees above inflation pay rises and told directors no dividends of bonus this year.
Genuinely, bravo A lot of companies are posting record profits. Perhaps they should make 100 million or a billion less and protect their employees a bit. Not as the employees at the bottom to suck it up and live tight for a few years.
I say this as until recently full card carrying Tory and company owner. I gave my employees above inflation pay rises and told directors no dividends of bonus this year.
Massive respect to you ntiz
105.4 said:
ntiz said:
I think the general feeling is that perhaps the companies should accept a bit less profit as opposed to just immediately passing wage increase to prices.
A lot of companies are posting record profits. Perhaps they should make 100 million or a billion less and protect their employees a bit. Not as the employees at the bottom to suck it up and live tight for a few years.
I say this as until recently full card carrying Tory and company owner. I gave my employees above inflation pay rises and told directors no dividends of bonus this year.
Genuinely, bravo A lot of companies are posting record profits. Perhaps they should make 100 million or a billion less and protect their employees a bit. Not as the employees at the bottom to suck it up and live tight for a few years.
I say this as until recently full card carrying Tory and company owner. I gave my employees above inflation pay rises and told directors no dividends of bonus this year.
Massive respect to you ntiz
bearman68 said:
But the problem is that the BoE only have interest rates as a means of controlling inflation.
From a Government perspective there are other options that could, and possibly should be used. Tax rates being the most obvious one, but a combination of tax rates and infrastructure investment in places other than London might well increase the efficiency of the country, while keeping a control of inflationary pressures.
And like it or not, Brexit has increased the rate of inflation. Sure the war in Ukraine, and the big economy shutdown have had an effect, but there have been massive inflationary pressure due to cutting ourselves off from a huge market and skills supply.
Quite simply we have too much debt, government, household, company. And we facilitated this by keeping interest rates at emergency levels for a decade longer than needed. We then added another 25% to the debt pile by overreacting to a heavy cold. And that 25%(larger than the QE from the financial crisis) is the main reason behind our current inflation. And the debt for all of it has is now sucking ever larger amounts of taxes.From a Government perspective there are other options that could, and possibly should be used. Tax rates being the most obvious one, but a combination of tax rates and infrastructure investment in places other than London might well increase the efficiency of the country, while keeping a control of inflationary pressures.
And like it or not, Brexit has increased the rate of inflation. Sure the war in Ukraine, and the big economy shutdown have had an effect, but there have been massive inflationary pressure due to cutting ourselves off from a huge market and skills supply.
Lowering interest rates just kicks the can down the road while adding fuel to the debt fire. The country as a whole is going to have to pay more taxes and spend less. The current situation cannot continue as we are only creating a bigger problem which will be more painful to resolve in the future. That's if we have control of how that resolution happens.
The poster above also makes a very good point, that companies are going to have to take their share of the pain in this correction and accept lower profits.
skwdenyer said:
Your inflation theory assumes the inflation is demand-driven. There's little evidence that's true in the UK (it may be so in the US).
I
It’s always demand driven, as are the main negative effects of it, ie not being able to afford stuff, ie being poorer! I
Inflation could be 50% but if no one wanted to buy anything, people wouldn’t worry about it!
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff