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<p style="text-align: left;">Only one chancellor in recent times has paid off debt and not made a complete pigs ear of it.</p>
I'm talking sovereign 'debt' specifically.
You think yet again this might be natural territory for the Labour party.
But no, nothing. Crumbs, tinkering etc.
No one is looking out for you these days are they?
Wholesale collapse coming soon.
Starmer was busy at a Murdoch dinner party though.
Also, interesting contradictions on wage information on the BoE inflation report.
"The pick-up in annual pay growth since the time of the May Report had been concentrated in higher-paying sectors such as financial and business services. Pay growth in lower-paid sectors... had been broadly flat."
https://twitter.com/meadwaj/status/1671896730428928000?t=mIqH23w4Dkj4_964uHognQ&s=19
Yep, even my current account has been going up every month.
You think yet again this might be natural territory for the Labour party.
But no, nothing
Indeed. We need a proper opposition in Westminster - who can quickly articulate the issues at hand.
As someone on twitter observed, the opposition now consists of Carol Vorderman, Gary Lineker, Dom Joly, etc
Why does the UK not have a nationalised bank, that could provide the services of high street banks but with more favourable terms for everyone?
Plus the SNP jonv
Gauss - no money in it for tories friends,. We do have credit unions
Why does the UK not have a nationalised bank
You mean like the US? Seems amazing that the US, the supposed pinnacle of free market cutthroat capitalism, has a more progressive and stable mortgage market than we do.
From Observer:
"Pay rises for the top 10% of UK earners, including City bosses, have clearly outstripped those for the rest of the workforce and been prime drivers of recent inflation and soaring interest rates, according to new analysis of official figures."
Ah. Right then.
The wealthy have been driving inflation then. (But not news to me) These ****s are responsible for all manner of shit.
Too many years of accepting trickle-down means they can get away with anything these days.
They've worked on the principle (successfully) you can con the working class to believe orthodox economics is best everyone, and even ribbed them into believing we should still support the rich currently.
Wonder what is coming next?
The replacement for Neoliberalism might be much worse.
These AI chat bots still agreeing with each other?
In one corner we have Alphabet’s Distributed Articulate Zealot Heuristic
In the other corner we have Meta’s Repetitious Opinion Neural Engine
LOLz
Just out of interest. What does ‘holding my nerve’ look like when it comes to interest rate rises.
Asking for a friend…
Quite. What utter shit
0% pay rise here across both wage earners. Coming out of a fixed deal in December. Luckily we can cope with the expected increase.
more worryingly, our eldest is looking to buy his first house, we've had two vague friends who were aware get in touch to offer their houses. They are both paying SVR on interest only mortgages and have been for many years and don't have the funds to manage a normal sale process. One is badly in arrears. Why these poor sods didn't throw the keys at the bank years ago I'll never know
And more importantly what items are increasing due to high demand and which of those items demand will be lowered due to interest rate rises? It is none isn’t it….
As I understand it, it takes money out of peoples pockets which would otherwise be spent chasing a limited supply of goods.
I personally know different people who have recently postponed or cancelled plans to: move to a bigger house, get a new kitchen, buy a new car (bought used instead), buy an eMTB, take the kids to Disney.
Just out of interest. What does ‘holding my nerve’ look like when it comes to interest rate rises.
Asking for a friend…
The worst thing I've heard someone say this year in politics.
Total and utter contempt for their electorate.
All this whilst the top earners are doing just swell, and to factor in the government can stop interest rate rises.
This BoE independence - is another truly pointless, anti-democratic charade.
You see, Liz Truss's screaming ideas were shot down before they began because of ... oooh markets - whereas Sunak's approach is to make you suffer in real terms, and has not been met with the same scorn.
As I understand it, it takes money out of peoples pockets which would otherwise be spent chasing a limited supply of goods.
I personally know different people who have recently postponed or cancelled plans to: move to a bigger house, get a new kitchen, buy a new car (bought used instead), buy an eMTB, take the kids to Disney.
Ignoring house purchase as that doesn't count but is there a limited supply of new kitchens, Disney tickets etc,. That is my point, how does not getting a new kitchen or not going to Disney help inflation?
What specific goods are in limited supply and directly causing inflation? Is it actually none because it is not a demand issue inflation?
(These are rhetorical questions...)
I've been waiting for a "we're all in this together" equivalent from Rishi. I wouldn't put it passed him to say something similar after "hold your nerve". WTF does he think is actually happening to people? He has no ****ing idea what it's like to live payday to payday. I'm not struggling (yet) but this could get lumpy for a lot of people.
I'd rather Labour were calling this out for what it is than trying not to look financially illiterate in front of the traditional Tory voters but I can sympathise with their dilemma.
WTF does he think is actually happening to people?
They assume that everyone has a savings pot to dip into during tough times. If they don't, then it's their fault for not planning ahead and they can go f*** themselves. Labour aren't much better, the main difference is they say 'we're really sorry and understand your problems, but there's nothing we can do because we can't afford it'. Outright cutthroat callousness, or barely disguised patronising mendacity, that is the choice before voters these days.
What specific goods are in limited supply and directly causing inflation?
Well for a trip to Disney, there's flights, accommodation. Which will be sold at a premium when demand is high, and prices knocked down at slack times.
"I want people to be reassured that we've got to hold our nerve, stick to the plan and we will get through this."
I can't help thinking Rishi's just stolen a line from the kids movie 'Storks'...
His hold your nerve comments aren't directed at the mortgage holders, they are aimed at everyone else, what he's saying is don't get spooked by the people with mortgages and rate rises they can't afford being in dire financial difficulty. I'm sure in Richi's head he's already written them off as a lost cause, a price worth paying to allow him to fulfil his promise to halve inflation. Meanwhile back in the real world people need sustained deflation to see their incomes return to previous levels of prosperity.
I imagine that the 0.1% are looking at this as an opportunity to buy up a load of bargain basement repositions and capitalise on the misery of those looking for a house to rent after they've been forced out of their home. Will make the 5% base rate look like chicken feed.
We do have credit unions
And building societies
His hold your nerve comments aren’t directed at the mortgage holders
ah, i get it. it was aimed at the bankers...
thanks for clearing that up.
ah, i get it. it was aimed at the bankers…
And retired Tory voters, what he's saying is don't abandon me now just because of some bad headlines, it won't affect you so keep the faith. He couldn't give a stuff about those in danger of going under.
Also an interesting point made on Radio 4's more or less program. People keep saying interest rates were much worse in the 90s, they were, but the current impact on household income now is comparable as people have been forced to borrow such large multiples of salary to afford a house.
Outright cutthroat callousness, or barely disguised patronising mendacity, that is the choice before voters these days.
So what is your solution? Bring down interest rates which stokes inflation (making people poorer), or raise interest rates to bring down inflation (which makes people poorer) or an as yet undiscovered magic third way?
No one seems to have a pain free fix for the current situation.
Average house price in the UK in 92 was £53k, average household income was ~£20k - 2.5:1 borrowing rate. Assume 10% deposit , £48k loan over 25y at 7% (this is actually above what it was) is 339 a month, so around 20-25% of after tax household income.
Average house price in 2022 was £293k, average household income was £43k - 6.8:1 borrowing rate. Assume 10% deposit , £264k loan over 25y at 7% is £1864 a month, so around 40-45% of after tax household income. Even with two people working full time, this is still 4.5:1, so almost double.
but the current impact on household income now is comparable as people have been forced to borrow such large multiples of salary to afford a house.
It's not even remotely comparable. Rates need to be below 3% for it to be comparable and that's what people don't seem to understand. Wages, house prices and rates are all interrelated. Either wages and interest rates go up or house prices come down. You can't just ram rates up or you'll create a crash which will kill the economy.
Even equating wages, rates, etc isn't enough - living these days is just simply more expensive - food, fuel, transport, services are all more expensive.
So what is your solution? Bring down interest rates which stokes inflation..
Raising or lowering interest rates isn't the only option available to control inflation. It's a massive blunt instrument which disproportionately benefits those with assets. When you combine energy bills and extra mortgage repayments I'm going to be approx 10k a year worse off than a couple of years ago. That's 10k I'm not spending in the economy going direct to banks and energy companies. It's pretty obvious where the money is going, and the govt has the power to get it back. It needs a combination of redistributive fiscal policy, price caps and controls, and regulation to punish profiteers. The market isn't working and needs radical intervention from govt.
No one seems to have a pain free fix for the current situation.
As long as the pain is being felt by everyone then I could accept that. It's not though is it?
So what is your solution? Bring down interest rates which stokes inflation (making people poorer), or raise interest rates to bring down inflation (which makes people poorer) or an as yet undiscovered magic third way?
Increase the higher rates of tax
This would have an immediate impact on spending vs the 18 months it takes for interest rate rises to have in impact. Plus it would target those people who have higher levels of disposable incomes vs those families struggling to make ends meet on lower incomes.
Its just not going to be implemented as its a vote loosing policy, especially for traditional Tory voters.
(i'm saying this as a higher rate tax payer, as being lucky enough to fix my mortgage 18 months ago into a 5 year deal. Interest rate rises are having zero negative effect on my spending habits)
Interest rates did need to go up to correct many things in the economy, but very few people would have planned for them in increase by so much in a short period of time.
As long as the pain is being felt by everyone then I could accept that. It’s not though is it?
It never is and never will be as people have different circumstances...
Increase the higher rates of tax
Tricky when we're supposed to have the BoE manage inflation and tax rates are set by the Chancellor...
So what is your solution? Bring down interest rates which stokes inflation
How about not treating everyone like children who need to have their allowance docked until they learn to spend it in a way defined appropriate by the banks?
How about forcing a little more rigour into the modelling which underpins CPI and a communication to the markets and the people requesting wage rises that this is a lingering effect and will dampen over time?
How about a suspension of VAT for 6 months to reduce inflationary rises in goods pricing and then a law which levies taxes on egregious profits which're driving inflation, but won't be known until financial results are disclosed next year? A discouragement of prices rises, just because everyone is doing it.
There are MANY things which could be done with political will. This current response is just a lazy, historic response deemed acceptable to/by the markets and in the interest of the banks at the expense of the people. AGAIN!
How about a suspension of VAT for 6 months to reduce inflationary rises in goods pricing
Would that actually work?
Companies could just up prices to increase profits and if there are supply side limits, the price would rise regardless...
Tricky when we’re supposed to have the BoE manage inflation and tax rates are set by the Chancellor…
So get rid of the charade of BoE 'independence' and start joining up policy. It's been an unmitigated failure and was only ever enacted to show the markets that Gordon Brown was a safe pair of hands.
Increase the higher rates of tax
Needs both a hike in highest rate taxes, adjustment of thresholds and a tax cut for low earners. Also reform of VAT to have differential rates on different types of goods. Target the action on the areas of the economy which are driving inflation rather than using the nuclear bomb of interest rates to treat the economy as a single entity.
So what is your solution? Bring down interest rates which stokes inflation
Evidence is currently showing the opposite to be true.
Companies could just up prices to increase profits and if there are supply side limits, the price would rise regardless…
So legislate to prevent companies doing that. Force them to pass on tax cuts and other forms of stimulus.
Tricky when we’re supposed to have the BoE manage inflation and tax rates are set by the Chancellor…
Economics 101: Monetary & Fiscal policy should be aligned
Would that actually work?Companies could just up prices to increase profits and if there are supply side limits, the price would rise regardless…
Not if you made a law which essentially enshrined increased corporate taxation or fines based on economic profiteering in times of crisis. Laws against war profiteering are commonplace, why not against disruption based economic profiteering and fraud?
Economics 101: Monetary & Fiscal policy should be aligned
Not least for total transparency and democracy.
Government makes policy for the market to operate in.
They can always change the policy.
They can always change the policy
Indeed.
And sadly, a lot of policy at present is to the enrichment of a few at the cost of the many.
Indeed.
And sadly, a lot of policy at present is to the enrichment of a few at the cost of the many.
Boils my piss.
They are currently spelling it out too - we need a recession.
Markets are tools - there is zero reason other than ideology we couldn't have state back mortgages at a super low rate of 1-2% - if they wanted it to be the case. The consumer should not have to hunt around based on government shenanigans of interest rate policy filtering through greedy commercial banks.
It doesn't need to be a competitive market along with energy, train tickets etc.
They made it that way - unmake it.
Finance sector - digging a hole in and being paid to fill it in whilst sucking up useful resources and labour - and charging you for the privilege.
there is zero reason other than ideology we couldn’t have state back mortgages at a super low rate of 1-2% – if they wanted it to be the case. The consumer should not have to hunt around based on government shenanigans of interest rate policy filtering through greedy commercial banks.
But we kinda do... All of the banks & building society's pricing their mortgages at Base Rate + risk margin. If you're a low risk customer you can easily get a mortgage at Base Rate +0.5% (thats a low margin for the banks to operate in)
The BoE/Goverment "could" hold interest rates at 1-2%
What you're not factoring in is international money markets. If the ECB/Fed have their rates at 4-5% then all the liquidity would leave the UK seeing higher risk free returns overseas.
Then the value of the £ vs EUR/USD would also plummet, which would push inflation higher given we're a net importer of goods.
So legislate to prevent companies doing that. Force them to pass on tax cuts and other forms of stimulus.
how the hell would that work? For every business caught fiddling, hundreds more would get away with it. Just look at what happened during Covid - companies popping up, getting money through support then disappearing. There isn’t the manpower to ‘legislate’ effectively.
how the hell would that work?
The same way most laws work. You make the penalties serious enough to deter people/companies from breaking the law in case they get caught. Funny isn't it how when simple stuff like this is proposed people shout 'it'll never work, it's impossible, there isn't the manpower!', yet only a couple of years ago we managed to prop up the entire economy whilst people had to stay at home for months, saving millions of jobs and businesses from disappearing, and we did that in a couple of weeks. Try harder FFS, this isn't difficult!
Seriously? I can’t be bothered to look for the numbers right now but there’s been millions written off by HMRC due to fraud during Covid.
Here you go
https://amp.theguardian.com/world/2022/feb/23/uk-lost-up-to-16bn-due-to-and-error-in-covid-loans-schemes
Ignoring house purchase as that doesn’t count but is there a limited supply of new kitchens, Disney tickets etc,. That is my point, how does not getting a new kitchen or not going to Disney help inflation?
What specific goods are in limited supply and directly causing inflation? Is it actually none because it is not a demand issue inflation?
(These are rhetorical questions…)
Well for a trip to Disney, there’s flights, accommodation. Which will be sold at a premium when demand is high, and prices knocked down at slack times.
Exactly.
Kitchens need wood, factory time and machinery to manufacture, transport, tradespeople to fit. Cars need metal, chips, factory time and machinery, transport, tyres. There is only so much of those that is available, and making more available creates further demand on secondary things e.g. production of factory machinery and lorries.
Houses do count. There's a limited number available, and there are limits on the rate of production (e.g. materials, land, planning permission, capacity to do construction and planning work). Demand can be reduced by stopping families upgrading to bigger houses, stopping people moving out from their parents or from a house shares etc. It's not nice but it works.
Someone I follow on YouTube runs a business using a lot of financed equipment and buildings, he's regularly complaining that interest costs are hitting him. Yet he is continuously replacing equipment and vehicles that are just two years old, with new ones. That's an an example of unnecessary demand he is causing.
I'm not sure about the demand-pull vs. cost-push inflation stuff. It does seem to me however that giving people less money to spend (going on mortgage instead), encouraging them to save, and scaring them a bit about their job security (so they have a harder time getting payrises) will help cool things down a bit.
I’m not sure about the demand-pull vs. cost-push inflation stuff. It does seem to me however that giving people less money to spend (going on mortgage instead), encouraging them to save, and scaring them a bit about their job security (so they have a harder time getting payrises) will help cool things down a bit.
Again, it all depends on what they are buying and what supply shortages are causing issues. Without even trying to understand that and just using interest rates it is not really doing much and stopping someone going for a holiday in Disney is really not going to help (i.e book online, get on a plane that already has seats and then spend a lot of money in another country)
I’m not sure about the demand-pull vs. cost-push inflation stuff. It does seem to me however that giving people less money to spend (going on mortgage instead), encouraging them to save, and scaring them a bit about their job security (so they have a harder time getting payrises) will help cool things down a bit.
Maybe eventually, but in the medium terms as demonstrated - paying interest income to people with assets adds money to the economy for people with the ability to spend.
So there's a tipping point where things will break but it has to defeat the inflationary effects of adding more money to the economy at the new price level set by interest rates.
(This is reckoned to be 6%.)
Lifting interest rates has the same effect as deficit spending but you're basically giving people money (who have money) without the directed investment on the government's behalf.
Here is a US chart showing how the Fed is funnelling money into the economy via rate rises. (300-400Bn+ per year.)
https://twitter.com/wbmosler/status/1673440379176099841?t=BYEshx95d_zyFIiy5Rc_9A&s=19
Things aren't exactly the same for us but the Fed's policy is almost the same as the BoE.
It's as simple as the interest payments go somewhere.
Currently the US by its own metrics is doing very well. Because the more the government spends (whether through deficit spending or interest payments) puts money in the economy. Obviously things are exacerbated with supply shortages but things are catching up.
The UK is a bit more of a mess.
The UK is a bit more of a mess.
I note that Rachel Reeves has come out and said she has full confidence in the BoE. Hardly a surprise given she used to work there. How bad do things have to get before someone in our political establishment questions whether our system of monetary/fiscal policy is fit for purpose?
The top of the Labour party is essentially Blairite and devolving monetary policy to the BoE was one of the first acts of the Blair regime; so pretty consistent
For those hoping for innovative, progressive or helpful fiscal and monetary policy out of the Labour Party between now and the election, forget it. They can see how the Tories are making a total mess of the economy all by themselves and the proven electoral strategy at this stage of the Parliamentary cycle is to stand by and watch, shake your head, say it wouldn't have happened under your guidance, and then trust the electorate to believe it can only be better with a change of government. Giving firm policy commitments will only leave them open to attack from the Tories (or theft of the idea before the election).
For those hoping for innovative, progressive or helpful fiscal and monetary policy out of the Labour Party between now and the election, forget it.
And then when they're in power they'll come up with some excuse as to why they can't do anything so my question still stands. How bad does it have to get before they consider changing a system which is clearly not fit for purpose?
Didn’t Liz truss try to do something different and was laughed out of no.10?
I don’t see much hope of anyone else trying to go against the established ways of working
How bad does it have to get before they consider changing a system which is clearly not fit for purpose?
The system will never change.
Over my lifetime (40+ years) we've always had a centre right Government, and that seems to be the following of the majority of voters in England. (Scotland/Wales tend to be a bit more on the left, and NI just need to sort themselves out)
In the highly probable scenario that Labour win the next election, they are going to continue on a very similar path. The electorate showed clearly at the last election that they didnt want a Corbin/left wing government.
The system will never change.
It's changed massively in our lifetimes. The move to liberalised markets in the 80s, the switch to QE-based govt intervention in markets in 2008-2020, not to mention various reforms such as making the BoE independent. There's loads of scope for further change. In fact it has to change, because the economy changes and things happen that need to be dealt with: The banking crisis, brexit, covid, Ukraine, and in future decarbonistion and mitigation of the impact of climate change. Any political party which doesn't grasp that doesn't deserve to be in govt.
Didn’t Liz truss try to do something different and was laughed out of no.10?
I don’t see much hope of anyone else trying to go against the established ways of working
Yes - but what happened shouldn't have happened on a democratic level- the government enables the market not the other way around.
Despite her clearly going in daft direction - she shouldn't have been defeated by what happens in the market. (And technically it was corrected with the BoE anyway. )
We've got the power struggle the wrong way around. Markets are tools - and just because some Pension system sits on the brink of silly amounts of leverage to basically make money for an institution - doesn't make it valid for the rest of us.
Also the system will have to change because a population with no spending power is no good in our economy. There is no money without government deficit spending. So if everyone is cool with a downward trajectory then let's carry on not doing a thing to correct disfunctional market behaviour.
This is what Sunak meant by 'holding our never' - that is holding our nerve that they know what they're doing is not a good thing but for the market.
Markets are simply engrained as the mechanism by which many voters assume the only way. But they're tools and they're failing all the time. More to come I think.
The system needs massive government intervention to correct.
The electorate showed clearly at the last election that they didnt want a Corbin/left wing government.
We are in a different universe now.
If they want their lives to improve there is no choice to push back against Neoliberalism, and its net is now getting wider.
I note that Rachel Reeves has come out and said she has full confidence in the BoE. Hardly a surprise given she used to work there. How bad do things have to get before someone in our political establishment questions whether our system of monetary/fiscal policy is fit for purpose?
Lol - she has confidence in the BoE but at the same time is suggesting tinkering with mortgage payments schedules.
She doesn't see the contradiciton in her brain.
I think next stage down - perhaps Winter - we will be on a sinking ship. I think either Labour or the Tories will have their hand forced eventually. It's a game of chicken within the capitalist shores of the UK.
I honestly thought the Pandemic would re-write the lansdscape but it didn't - given the level of state support.
It’s changed massively in our lifetimes
Only for the benefit of the super rich. Wealth inequality has only increased due to any of those policies.
If they want their lives to improve there is no choice to push back against Neoliberalism, and its net is now getting wider.
But what are the choices on the ballot box?
Either continue with what we currently have, or choose someone else who is very similar but a different colour?
Unless you have millions of people voting for someone like the Green party, theres unlikely to be any seismic change in my lifetime.
What you’re not factoring in is international money markets. If the ECB/Fed have their rates at 4-5% then all the liquidity would leave the UK seeing higher risk free returns overseas.
Then the value of the £ vs EUR/USD would also plummet, which would push inflation higher given we’re a net importer of goods.
Inflation is current being driven by policy anyway what's the difference?
The thing with currency - is it tends to move up and down in trends and simply gets bought back when it gets low or shorted when it gets high, within a range. It's another market that just does its own thing and occaisonally reflects strength.
Again, governments should concentrate on strengthening/investing their domestic affairs and currency strength follows. It shouldn't be used a guide for controlling domestic policy - and it isn't really anyway.
Admittedly this all assumes your country is working well!
But what are the choices on the ballot box?
Well that's why I'm a critic of Starmer. He's not read the room.
You could argue that if he gets elected then he has indeed read the room. People don't want left wing governments as they take all their money away remember.
Yes – but what happened shouldn’t have happened on a democratic level- the government enables the market not the other way around.
1) what was democratic about Liz Truss becoming PM and setting about doing things that the public were never consulted on?
2) fantasy politics often goes pop when it contacts the real, interconnected, world... see all the promises of Brexit
“1) what was democratic about Liz Truss becoming PM and setting about doing things that the public were never consulted on?”
But that’s our electoral system - a party with a majority (or coalition) forms the government.
Within that system we don’t elect a PM or get to be consulted on policy - the MPs of the Government can withdraw support for the PM or force a change.
Another example of this is when Brown took over from Blair - again… the public weren’t consulted either on the change in PM or changes in policy - remember Blair’s repeated promise to give the public a free vote on closer integration with Europe? Brown went ahead and took the decision without a public say.
Having said that it’s increasingly looking like Truss’ policies may have been correct (lowering tax).
The perceived wisdom from people who said they were the “grown ups” was to raise taxes in order to control inflation - Joe Biden was particularly bullish on this and went to some lengths to trash Truss.
As it now turns out, inflation is not only still around but the tax rises haven’t don’t anything to reduce it - pointing to further tax rises to cover the rapidly increasing costs of servicing government debt.
Likewise the sideshow of LDI Gilts debacle can now be see for what it actually was - a systemic risk known about by the Bank of England years before, one which it failed to act on, and one which treasury officials / ministers had little or no visibility of.
As it now turns out, inflation is not only still around but the tax rises haven’t don’t anything to reduce it
Sorry but you have this completely the wrong way round. Truss didn't cut taxes, they never came into effect, so they didn't rise to reduce inflation they stayed the same. Assuming interest rates remain the same, then to reduce inflation we need to raise taxes, but only in the areas of the economy that are inflating (eg energy prices), rather than everything, and then use that extra money to reduce the burden on those who can't afford the higher prices. If Truss's bonkers tax cuts for the wealthy had gone through, these would have amplified the inflation we're seeing now.
1) what was democratic about Liz Truss becoming PM and setting about doing things that the public were never consulted on?”
That's the way government works, for better or for worse.
Far worse is the BoE choosing pain for us - which both Labour and Tories support.
There's nothing democratic about that.
Tax cuts would exacerbate inflation at the high end for sure.
Interest rate rises have the same affect. Paying money out to people with money.
That's why it's important that the government funnels money into areas that can absorb the slack with resources and labour.
It's really not that complex. It's markets that have made a hash of things pretending they know better.
Truth is these markets can only operate because policy let's them.
Having said that it’s increasingly looking like Truss’ policies may have been correct
🤣
Beyond parody.
There’s nothing democratic about that.
The BofE is entirely democratically controlled. They act based on goals set them by the government. If the government pursues aims that when put into effect as Treasury policy are at odds with the goals they have given the BofE, that's on them. Sort your policies out. Joined up policy is required. Tell the BofE what those policies mean as regards their goals and the measures they can take. Truss thought that she could act as if working for a policy think tank... government is much harder than that, and you are responsible for making things work. Step one is to include the people in your departments paid to understand how to implement all this stuff when making your plans.
Tax cuts would exacerbate inflation at the high end for sure.
Interest rate rises have the same affect. Paying money out to people with money.
This. And this.
The BofE is entirely democratically controlled.
Does Andrew Bailey look or sound like a man who is democratically accountable? The govt uses BoE independence as a convenient excuse to shirk their responsibility to protect the economy in the interests of the vast majority. They've essentially outsourced one of the most important and impactful areas of policy to a group of people who have spent their entire lives working in the most well-paid, exclusive and out of touch sectors of the economy. And then we wonder why bankers pay is through the roof and why working people are being screwed while the top 1% get ever richer.
Does Andrew Bailey look or sound like a man who is democratically accountable?
He looks like exactly the kind of man who his political masters would choose (Johnson & Javid).
Sunak and Hunt can remove him, or change his remit. If they don't have faith in him, they can act. It's all down to them in the end.
The BofE is independent in the same way many other civil servants are... they're given a set task.. they get on with it*.. the government can at any time tell them to change course, or move them on. They work for the government doing its biding, but only their general direction is set by ministers, day to day decisions are left to them** until the government decides otherwise.
[ *in this case, very badly in my opinion; he's the wrong man doing the wrong job... but most alternative candidates weren't seen as nearly Brexity enough at the time of his appointment... **but back to interest rate changes, he doesn't make that call alone ]
Radio 4’s More or Less programme did a small piece about mortgage rates last week. Well worth a listen.
I got my first house in 87, (it was actually a static caravan, as we coudlnt afford a house), it was stated that 1988 was the worst year for affordability, along with 2007. 2023 is getting there, but not as bad as some people believe. IIRC, the current increases have added a 5% cost to the average borrowers mortgage fees. They also said if rates got above double figures, the economy would virtually collapse,(reading between the lines) as there will be so many that cannot afford to pay their debts, the Banks will fail, so the BoE will definitely keep the rates below 10%. Listen here:
https://www.bbc.co.uk/programmes/m001n1nl
I'm not sure all the people who voted against Corbyn did so because of his economic policies, I think they were much more concerned about some of his crazier ideas on national security and maybe even anti Semitism. McDonald his shadow chancellor actually had some pretty coherent ideas on economy.
So interest rises so far adding to inflation, the exact opposite of what the monetarists/central bankers expect -Adding to the price level of money.
Of course there are distributional effects (I.e more wealthy people have savings. ) And eventually interest rates will reach a tipping point but:
https://twitter.com/BenChu_/status/1676177321269637120?t=X--V7Njv_nlcuEN2-p6y_Q&s=19
When fixed rates expire there might be a different picture.
that only considers mortgages vs savings. What about un-secured debt. There's £300bn of that, and a lot of it will be on variable interest rates (fixed are less common in un-secured market) - the average interest rate on all those loans would only have had to of risen by ~3% to wipe out the gap between those 2 lines.