Macroeconomics, the economy, inflation etc. *likely to be very dull*

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  • focuszing723
    focuszing723 Posts: 7,207
    edited January 2022
    rick_chasey said:

    focuszing723 said:

    Inflation soars to 5.4% - highest rate in almost 30 years as cost of living squeeze intensifies
    https://news.sky.com/story/inflation-soars-to-5-4-highest-rate-in-almost-30-years-as-cost-of-living-squeeze-intensifies-12519674

    I won't post any charts.
    Are you blaming the BoE for keeping rates too low?
    No, I get it's a difficult balancing act.
  • rick_chasey
    rick_chasey Posts: 73,108
    edited January 2022
    focuszing723 said:

    rick_chasey said:

    focuszing723 said:

    Inflation soars to 5.4% - highest rate in almost 30 years as cost of living squeeze intensifies
    https://news.sky.com/story/inflation-soars-to-5-4-highest-rate-in-almost-30-years-as-cost-of-living-squeeze-intensifies-12519674

    I won't post any charts.
    Are you blaming the BoE for keeping rates too low?
    No, I get it's a difficult balancing act.
    The problem the BoE have (excuse the mansplaining as you presumably already know) is rates only really affect demand, but the inflation is from the supply-side.
    _
  • pblakeney
    pblakeney Posts: 25,986
    rick_chasey said:

    focuszing723 said:

    Inflation soars to 5.4% - highest rate in almost 30 years as cost of living squeeze intensifies
    https://news.sky.com/story/inflation-soars-to-5-4-highest-rate-in-almost-30-years-as-cost-of-living-squeeze-intensifies-12519674

    I won't post any charts.
    Are you blaming the BoE for keeping rates too low?
    The current factors are outside the control of the BoE.
    The above may be fact, or fiction, I may be serious, I may be jesting.
    I am not sure. You have no chance.
    Veronese68 wrote:
    PB is the most sensible person on here.
  • surrey_commuter
    surrey_commuter Posts: 18,867
    rick_chasey said:

    focuszing723 said:

    rick_chasey said:

    focuszing723 said:

    Inflation soars to 5.4% - highest rate in almost 30 years as cost of living squeeze intensifies
    https://news.sky.com/story/inflation-soars-to-5-4-highest-rate-in-almost-30-years-as-cost-of-living-squeeze-intensifies-12519674

    I won't post any charts.
    Are you blaming the BoE for keeping rates too low?
    No, I get it's a difficult balancing act.
    The problem the BoE have (excuse the mansplaining as you presumably already know) is rates only really affect demand, but the inflation is from the supply-side.
    yet that did not dampen your enthusiasm for QE and lower interest rates when a lack of demand was not due to people having no money
  • TheBigBean
    TheBigBean Posts: 20,790
    I haven't looked into the details, but two of the supply side elements contributing to inflation are clothing and furniture.
  • rick_chasey
    rick_chasey Posts: 73,108
    surrey_commuter said:

    rick_chasey said:

    focuszing723 said:

    rick_chasey said:

    focuszing723 said:

    Inflation soars to 5.4% - highest rate in almost 30 years as cost of living squeeze intensifies
    https://news.sky.com/story/inflation-soars-to-5-4-highest-rate-in-almost-30-years-as-cost-of-living-squeeze-intensifies-12519674

    I won't post any charts.
    Are you blaming the BoE for keeping rates too low?
    No, I get it's a difficult balancing act.
    The problem the BoE have (excuse the mansplaining as you presumably already know) is rates only really affect demand, but the inflation is from the supply-side.
    yet that did not dampen your enthusiasm for QE and lower interest rates when a lack of demand was not due to people having no money
    Sure, why would it dampen my enthusiasm?

    QE isn't causing the inflation here. It's a mixture of massive fiscal expansion and severely restricted global supply chains.
    _
  • surrey_commuter
    surrey_commuter Posts: 18,867
    TheBigBean said:

    I haven't looked into the details, but two of the supply side elements contributing to inflation are clothing and furniture.

    In a sample size of one wine producer they have forced through a price rise in Jan with Tesco) and I presume the others) due to increased shipping costs. So I am assuming more bad news to follow.
  • TheBigBean
    TheBigBean Posts: 20,790
    surrey_commuter said:

    TheBigBean said:

    I haven't looked into the details, but two of the supply side elements contributing to inflation are clothing and furniture.

    In a sample size of one wine producer they have forced through a price rise in Jan with Tesco) and I presume the others) due to increased shipping costs. So I am assuming more bad news to follow.
    Yes, I understand the idea, but I think there must be demand for the wine as well.
  • surrey_commuter
    surrey_commuter Posts: 18,867
    December debt interest for December was £8.1bn which was up from £2.7bn last year.

    Just think the annual revenue from 1% on the base tax rate gone in one month
  • TheBigBean
    TheBigBean Posts: 20,790
    surrey_commuter said:

    December debt interest for December was £8.1bn which was up from £2.7bn last year.

    Just think the annual revenue from 1% on the base tax rate gone in one month

    Usual question - how much was paid by the treasury to itself?
  • surrey_commuter
    surrey_commuter Posts: 18,867
    TheBigBean said:

    surrey_commuter said:

    December debt interest for December was £8.1bn which was up from £2.7bn last year.

    Just think the annual revenue from 1% on the base tax rate gone in one month

    Usual question - how much was paid by the treasury to itself?
    No idea what quantity of index linked gilts they have.

    Usual question - why do they not keep going with QE? you invent free of charge money that you use to annul your debt and then collect the interest on it, why on earth would you not keep going?
  • TheBigBean
    TheBigBean Posts: 20,790
    surrey_commuter said:

    TheBigBean said:

    surrey_commuter said:

    December debt interest for December was £8.1bn which was up from £2.7bn last year.

    Just think the annual revenue from 1% on the base tax rate gone in one month

    Usual question - how much was paid by the treasury to itself?
    No idea what quantity of index linked gilts they have.

    Usual question - why do they not keep going with QE? you invent free of charge money that you use to annul your debt and then collect the interest on it, why on earth would you not keep going?
    You know why. Eventually, the currency will be junked with hyper inflation.

    But you understand the point that £8.1bn may only cost the treasury £6bn, so it is strange that this is never considered. A bit like that £350m on the side of a bus.
  • TheBigBean
    TheBigBean Posts: 20,790
    Inflation seems to be kicking off and rates rising.
  • Pross
    Pross Posts: 41,006
    I really struggle with economics but in particular at the moment I don't see the thinking behind rate rises when the inflationary pressure (as far as I understand) is pretty much entirely due to factors outside of consumers' control. It's not like everyone is out spending on luxury items so I assume it is just because the BoE have to be seen to be trying to doing something to curb inflation.
  • pblakeney
    pblakeney Posts: 25,986
    Pross said:

    I really struggle with economics but in particular at the moment I don't see the thinking behind rate rises when the inflationary pressure (as far as I understand) is pretty much entirely due to factors outside of consumers' control. It's not like everyone is out spending on luxury items so I assume it is just because the BoE have to be seen to be trying to doing something to curb inflation.

    A 0.5% interest rate when inflation is at 5%+ does appear to be tokenism.
    The above may be fact, or fiction, I may be serious, I may be jesting.
    I am not sure. You have no chance.
    Veronese68 wrote:
    PB is the most sensible person on here.
  • focuszing723
    focuszing723 Posts: 7,207
    TheBigBean said:

    Inflation seems to be kicking off and rates rising.

    Can I post my interest rate graph?
  • TheBigBean
    TheBigBean Posts: 20,790
    focuszing723 said:

    TheBigBean said:

    Inflation seems to be kicking off and rates rising.

    Can I post my interest rate graph?
    You've forgotten again and need reminding?
  • focuszing723
    focuszing723 Posts: 7,207
    TheBigBean said:

    focuszing723 said:

    TheBigBean said:

    Inflation seems to be kicking off and rates rising.

    Can I post my interest rate graph?
    You've forgotten again and need reminding?
    I will take that as a no.
  • kingstongraham
    kingstongraham Posts: 26,458
    Pross said:

    I really struggle with economics but in particular at the moment I don't see the thinking behind rate rises when the inflationary pressure (as far as I understand) is pretty much entirely due to factors outside of consumers' control. It's not like everyone is out spending on luxury items so I assume it is just because the BoE have to be seen to be trying to doing something to curb inflation.

    Won't the fuel price rises more effectively do the job that would previously have been done by mortgage rate rises? Only with the unfortunate side effect of increasing inflation.

    I also can't see what good it does.
  • surrey_commuter
    surrey_commuter Posts: 18,867
    kingstongraham said:

    Pross said:

    I really struggle with economics but in particular at the moment I don't see the thinking behind rate rises when the inflationary pressure (as far as I understand) is pretty much entirely due to factors outside of consumers' control. It's not like everyone is out spending on luxury items so I assume it is just because the BoE have to be seen to be trying to doing something to curb inflation.

    Won't the fuel price rises more effectively do the job that would previously have been done by mortgage rate rises? Only with the unfortunate side effect of increasing inflation.

    I also can't see what good it does.
    mortgage rate is in the basket of goods so raising interest rates actually raises inflation.

    Half of the problem with inflation is that it is self perpetuating which makes it very difficult to break the cycle.

    Hopefully the Guv'nor asking for pay restraint will work.
  • surrey_commuter
    surrey_commuter Posts: 18,867
    Pross said:

    I really struggle with economics but in particular at the moment I don't see the thinking behind rate rises when the inflationary pressure (as far as I understand) is pretty much entirely due to factors outside of consumers' control. It's not like everyone is out spending on luxury items so I assume it is just because the BoE have to be seen to be trying to doing something to curb inflation.

    He has to signal to the markets that he is trying to do something or the rates on Gilts will go up. They have of course driven the price of Gilts down by buying the same amount, through QE, they have been issuing. They have of course denied this but the pretence will be harder to maintain as QE is an expansionary (ie inflationary measure).

    They could hold interest rates and cut or even reverse QE but then they will need to find a buyer for the record peacetime levels of debt being issued.
  • TheBigBean
    TheBigBean Posts: 20,790
    surrey_commuter said:

    kingstongraham said:

    Pross said:

    I really struggle with economics but in particular at the moment I don't see the thinking behind rate rises when the inflationary pressure (as far as I understand) is pretty much entirely due to factors outside of consumers' control. It's not like everyone is out spending on luxury items so I assume it is just because the BoE have to be seen to be trying to doing something to curb inflation.

    Won't the fuel price rises more effectively do the job that would previously have been done by mortgage rate rises? Only with the unfortunate side effect of increasing inflation.

    I also can't see what good it does.
    mortgage rate is in the basket of goods so raising interest rates actually raises inflation.

    Half of the problem with inflation is that it is self perpetuating which makes it very difficult to break the cycle.

    Hopefully the Guv'nor asking for pay restraint will work.
    This isn't true. Prior to the switch to CPI, the BoE used RPIX (X being the exclusion of mortgage costs). CPIH includes private housing costs through some mechanism and is therefore more similar to RPI.
  • Jezyboy
    Jezyboy Posts: 2,981
    surrey_commuter said:

    kingstongraham said:

    Pross said:

    I really struggle with economics but in particular at the moment I don't see the thinking behind rate rises when the inflationary pressure (as far as I understand) is pretty much entirely due to factors outside of consumers' control. It's not like everyone is out spending on luxury items so I assume it is just because the BoE have to be seen to be trying to doing something to curb inflation.

    Won't the fuel price rises more effectively do the job that would previously have been done by mortgage rate rises? Only with the unfortunate side effect of increasing inflation.

    I also can't see what good it does.
    mortgage rate is in the basket of goods so raising interest rates actually raises inflation.

    Half of the problem with inflation is that it is self perpetuating which makes it very difficult to break the cycle.

    Hopefully the Guv'nor asking for pay restraint will work.
    I'm not sure the guvnor gets how pay reviews work.
  • TheBigBean
    TheBigBean Posts: 20,790
    Pross said:

    I really struggle with economics but in particular at the moment I don't see the thinking behind rate rises when the inflationary pressure (as far as I understand) is pretty much entirely due to factors outside of consumers' control. It's not like everyone is out spending on luxury items so I assume it is just because the BoE have to be seen to be trying to doing something to curb inflation.

    Increasing the base rate, increases the cost of borrowing for banks. This means they can't lend as much which reduces the money supply (the total amount of money in existence). This is deflationary - there just aren't as many pounds to go round.

    Note also that multiple rate increases are expected this year in multiple countries. So, it is not just UK that is tightening. The UK is expected (as in implied by the markets) to increase rates three more times whilst the Fed is expected to raise rates by 25bps five times. The Fed may even unwind some QE. Shocking stuff.

    Another factor is unemployment. It is very low which worries central bankers as it can end up being inflationary.
  • TheBigBean
    TheBigBean Posts: 20,790
    kingstongraham said:

    Pross said:

    I really struggle with economics but in particular at the moment I don't see the thinking behind rate rises when the inflationary pressure (as far as I understand) is pretty much entirely due to factors outside of consumers' control. It's not like everyone is out spending on luxury items so I assume it is just because the BoE have to be seen to be trying to doing something to curb inflation.

    Won't the fuel price rises more effectively do the job that would previously have been done by mortgage rate rises? Only with the unfortunate side effect of increasing inflation.

    I also can't see what good it does.
    This is a fuller answer than you probably want or care about. Written before the recent hike.

    https://validusrm.com/will-the-boe-end-sterlings-party/

    “Monetary policy cannot solve supply-side problems – but it will have to act and must do so if we see a risk, particularly to medium-term inflation and to medium-term inflation expectations,” – Andrew Bailey During an online panel in October 2021.

    “The Bank of England has long stressed that central bank policies are not the cause of low rates, but responses to them. We are actors in a play written by others.” – Mark Carney (Former Governor of the BoE).


    Another quote from the same people. Tl;dr inflation is no longer considered short-term.


    At the start of 2021, “transitory inflation” was the phrase on the tip of every central banker’s tongue – the start to 2022 couldn’t be more different. With the term “transitory” all but banned by the Federal Reserve, we have seen a great repricing of market expectations for the path of rates over the coming months.

  • TheBigBean
    TheBigBean Posts: 20,790
    edited February 2022
    And my view is that the world can't print a load of money, then expect everything to cost the same in devalued currencies. That doesn't mean that printing was wrong - just that it isn't without cost, but I think I have consistently stated that.
  • rick_chasey
    rick_chasey Posts: 73,108
    edited February 2022
    Pross said:

    I really struggle with economics but in particular at the moment I don't see the thinking behind rate rises when the inflationary pressure (as far as I understand) is pretty much entirely due to factors outside of consumers' control. It's not like everyone is out spending on luxury items so I assume it is just because the BoE have to be seen to be trying to doing something to curb inflation.

    BoE only has one mandate and that is curbing inflation with monetary policy.

    TheBigBean said:

    And my view is that the world can't print a load of money, then expect everything to cost the same in devalued currencies. That doesn't mean that printing was wrong - just that it isn't without cost, but I think I have consistently stated that.

    What evidence is there that the inflation is caused by qe rather than correlation?

    (Nor is QE printing money)
    _
  • rick_chasey
    rick_chasey Posts: 73,108
    https://www.gailfosler.com/why-quantitative-easing-is-not-printing-money-and-why-it-matters
    _
  • TheBigBean
    TheBigBean Posts: 20,790
    rick_chasey said:

    Pross said:

    I really struggle with economics but in particular at the moment I don't see the thinking behind rate rises when the inflationary pressure (as far as I understand) is pretty much entirely due to factors outside of consumers' control. It's not like everyone is out spending on luxury items so I assume it is just because the BoE have to be seen to be trying to doing something to curb inflation.

    BoE only has one mandate and that is curbing inflation with monetary policy.

    TheBigBean said:

    And my view is that the world can't print a load of money, then expect everything to cost the same in devalued currencies. That doesn't mean that printing was wrong - just that it isn't without cost, but I think I have consistently stated that.

    What evidence is there that the inflation is caused by qe rather than correlation?

    (Nor is QE printing money)
    Back to your conspiracy theory.
  • rick_chasey
    rick_chasey Posts: 73,108
    Not so much a conspiracy but the advantage of placing chief economists at big financial institutions is you can pick their brain every now and then 🙃
    _

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