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

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  • Dorset_Boy
    Dorset_Boy Posts: 7,390
    kingstongraham said:

    I know that it's all that the BoE has, but why would raising interest rates help just now? Inflation is increasing because of increased input prices, particularly energy costs - is this going to do anything about that? Or just make the expected recession worse, and combine that with inflation?

    When inflation comes back down as input costs come back down, do they look out at the wasteland and pat themselves on the back as a job well done?

    Interest rate differentials between countries have an impact on the currency rates. so with the US having increased their interest rates significantly, the US$ has become significatly stronger, and as almost all commodities are priced in US$, that adds to worldwide inflation.

    By reducing the interest rate differential, the theory is your currency strengthens (or becomes less weak if you like), and therefore imports become cheaper, helping to keep a lid on inflation.

    Whether the theory works or not might be a different issue. As always there are then vast numbers of other factors to build in.
  • surrey_commuter
    surrey_commuter Posts: 18,867
    rick_chasey said:

    In fairness to this gov't, they could not have predicted the biggest land war in Europe since WW2, nor could they have predicted COVID.

    It's all the earnings lost before that to help cushion the blow that troubles me.

    If I was in charge I would predict that something terrible would happen to the economy every 10 years and plan accordingly.
  • focuszing723
    focuszing723 Posts: 7,918
    surrey_commuter said:

    rick_chasey said:

    In fairness to this gov't, they could not have predicted the biggest land war in Europe since WW2, nor could they have predicted COVID.

    It's all the earnings lost before that to help cushion the blow that troubles me.

    If I was in charge I would predict that something terrible would happen to the economy every 10 years and plan accordingly.
    I just want to take this opportunity to say the Bee Gee's were never terrible and should have never been neglected.
  • rjsterry
    rjsterry Posts: 29,091
    edited August 2022
    surrey_commuter said:

    rick_chasey said:

    In fairness to this gov't, they could not have predicted the biggest land war in Europe since WW2, nor could they have predicted COVID.

    It's all the earnings lost before that to help cushion the blow that troubles me.

    If I was in charge I would predict that something terrible would happen to the economy every 10 years and plan accordingly.
    This. Although the pandemic was predicted. And the war started in 2014 when we were still best mates with Xi and Putin. So I don't think 'nobody could have predicted' should wash.
    1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
    Pinnacle Monzonite

    Part of the anti-growth coalition
  • webboo
    webboo Posts: 6,087
    focuszing723 said:


    surrey_commuter said:

    rick_chasey said:

    In fairness to this gov't, they could not have predicted the biggest land war in Europe since WW2, nor could they have predicted COVID.

    It's all the earnings lost before that to help cushion the blow that troubles me.

    If I was in charge I would predict that something terrible would happen to the economy every 10 years and plan accordingly.
    I just want to take this opportunity to say the Bee Gee's were never terrible and should have never been neglected.
    They were terrible, they sounded like castrated cats.
  • focuszing723
    focuszing723 Posts: 7,918
    edited August 2022
    webboo said:

    focuszing723 said:


    surrey_commuter said:

    rick_chasey said:

    In fairness to this gov't, they could not have predicted the biggest land war in Europe since WW2, nor could they have predicted COVID.

    It's all the earnings lost before that to help cushion the blow that troubles me.

    If I was in charge I would predict that something terrible would happen to the economy every 10 years and plan accordingly.
    I just want to take this opportunity to say the Bee Gee's were never terrible and should have never been neglected.
    They were terrible, they sounded like castrated cats.
    That's a pretty vacant attitude towards greatness if you ask me, annnnnd they wrote lots of famous songs for other people.

    The $ex Pistols sounded like a sack of cats.
  • focuszing723
    focuszing723 Posts: 7,918

    Well, I think it's time to post the historic interest rate chart again.
  • focuszing723
    focuszing723 Posts: 7,918
    Interest Rate in the United Kingdom averaged 7.15 percent from 1971 until 2022, reaching an all time high of 17 percent in November of 1979 and a record low of 0.10 percent in March of 2020.
    https://tradingeconomics.com/united-kingdom/interest-rate#:~:text=Interest Rate in the United,percent in March of 2020.
  • focuszing723
    focuszing723 Posts: 7,918
    edited August 2022
    During the 18th century, interest rates in the UK were stable, remaining at 4-5% regardless of the issue. The instability came about in the 19th century, where there was more volatility in the interest rates that saw it moving anywhere between 4 and 10%. The start of the 20th century was no different, with the same instability and constant flux between 5 and 10% instead.
    https://thinkplutus.com/uk-interest-rate-history/

    It was not financially prudent to assume interest rates would just skip around near 0-1%. Crazy.
  • focuszing723
    focuszing723 Posts: 7,918
    At one point they were even considering ZIRP.
  • webboo
    webboo Posts: 6,087
    focuszing723 said:

    webboo said:

    focuszing723 said:


    surrey_commuter said:

    rick_chasey said:

    In fairness to this gov't, they could not have predicted the biggest land war in Europe since WW2, nor could they have predicted COVID.

    It's all the earnings lost before that to help cushion the blow that troubles me.

    If I was in charge I would predict that something terrible would happen to the economy every 10 years and plan accordingly.
    I just want to take this opportunity to say the Bee Gee's were never terrible and should have never been neglected.
    They were terrible, they sounded like castrated cats.
    That's a pretty vacant attitude towards greatness if you ask me, annnnnd they wrote lots of famous songs for other people.

    The $ex Pistols sounded like a sack of cats.
    Are you sure your taking enough salt as that’s not a healthy attitude.
  • kingstongraham
    kingstongraham Posts: 27,760
    Dorset_Boy said:

    kingstongraham said:

    I know that it's all that the BoE has, but why would raising interest rates help just now? Inflation is increasing because of increased input prices, particularly energy costs - is this going to do anything about that? Or just make the expected recession worse, and combine that with inflation?

    When inflation comes back down as input costs come back down, do they look out at the wasteland and pat themselves on the back as a job well done?

    Interest rate differentials between countries have an impact on the currency rates. so with the US having increased their interest rates significantly, the US$ has become significatly stronger, and as almost all commodities are priced in US$, that adds to worldwide inflation.

    By reducing the interest rate differential, the theory is your currency strengthens (or becomes less weak if you like), and therefore imports become cheaper, helping to keep a lid on inflation.

    Whether the theory works or not might be a different issue. As always there are then vast numbers of other factors to build in.
    That may be reality, and if it is, then it will only get worse because the USA is doing pretty well just now, their job figures show they have returned to pre-pandemic levels and inflation is genuinely an issue that will probably need some further interest rate increases to deal with it.

    But the BoE's justification is that it can see signs that inflation is starting to feed itself domestically. I don't know about anyone else, but I'm not expecting an inflation busting pay rise this year.
  • focuszing723
    focuszing723 Posts: 7,918
    edited August 2022
    webboo said:

    focuszing723 said:

    webboo said:

    focuszing723 said:


    surrey_commuter said:

    rick_chasey said:

    In fairness to this gov't, they could not have predicted the biggest land war in Europe since WW2, nor could they have predicted COVID.

    It's all the earnings lost before that to help cushion the blow that troubles me.

    If I was in charge I would predict that something terrible would happen to the economy every 10 years and plan accordingly.
    I just want to take this opportunity to say the Bee Gee's were never terrible and should have never been neglected.
    They were terrible, they sounded like castrated cats.
    That's a pretty vacant attitude towards greatness if you ask me, annnnnd they wrote lots of famous songs for other people.

    The $ex Pistols sounded like a sack of cats.
    Are you sure your taking enough salt as that’s not a healthy attitude.
    Actually, come to think of it, people with superpowers* tend to have a weakness, so mine is probably salt. I should investigate further really.

    *The ability to hear music at the same quality (sometimes) when it has stopped playing.


  • mully79
    mully79 Posts: 904
    Anyone else considering hedging their soon to be ridiculous energy bill by cancelling their direct debit and pouring £400 a month into Crypto or the stock market ?

    I’ll be damned paying them into positive credit so they can make even more money out of me.
  • rick_chasey
    rick_chasey Posts: 75,647
    edited August 2022
    If the constant failures of crypto businesses and other coins and schemes being outed as Ponzi schemes, you would be absolutely crazy to put your money into crypto.

    Luckily asset managers had the worst quarter in q2 in 76 years.
    _
  • focuszing723
    focuszing723 Posts: 7,918
    SHANGHAI, Aug 15 (Reuters) - China's central bank unexpectedly cut a key interest rate for the second time this year and withdrew some cash from the banking system on Monday, to try to revive credit demand to support the COVID-hit economy.

    Economists and analysts said they believe Chinese authorities are keen to support the sluggish economy by allowing a widening policy divergence with other major economies that are raising interest rates aggressively.

    The People's Bank of China (PBOC) said it was lowering the rate on 400 billion yuan ($59.33 billion) of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points (bps) to 2.75%, from 2.85%.

    In a poll of 32 market watchers last week, all respondents had forecast the MLF rate would be left unchanged and 29 had predicted there would be a partial rollover. read more

    "The rate cut surprises us," said Xing Zhaopeng, senior China strategist at ANZ.

    "It should be a response to the weak credit data on Friday. The government remains cautious about growth and will not let go."
    https://www.reuters.com/world/china/china-unexpectedly-cuts-2-key-rates-withdraws-cash-banking-system-2022-08-15/
  • focuszing723
    focuszing723 Posts: 7,918
    edited August 2022

    I still can't get over the negligence of assuming interest rates couldn't/wouldn't have to rise. I mean, come on, they were at an historic low. It's just casino economic governance.
  • focuszing723
    focuszing723 Posts: 7,918
    !! NEAR ZERO PERCENT IS NOT NORMAL !!
  • focuszing723
    focuszing723 Posts: 7,918
    !! 1800-2022 !!
  • focuszing723
    focuszing723 Posts: 7,918
    !! 222 years !!
  • Jezyboy
    Jezyboy Posts: 3,537
    I'm not sure anyone thought they wouldn't rise.

    But I'm sure plenty of people will be getting scared about remortgaging.

  • focuszing723
    focuszing723 Posts: 7,918
    edited August 2022
    That certainly wasn't the view. It was all about how historically low rates are sustainable, like I said that's just bloody negligence, you cannot look that that graph and not get shivers down your spine. No words are required, kind of like how Phil Collins required no jacket either, because he was singing drumming God.

    I can feel it commmings in the air tonight, oh Lord...
  • rjsterry
    rjsterry Posts: 29,091
    focuszing723 said:

    That certainly wasn't the view. It was all about how historically low rates are sustainable, like I said that's just bloody negligence, you cannot look that that graph and not get shivers down your spine. No words are required, kind of like how Phil Collins required no jacket either, because he was singing drumming God.

    I can feel it commmings in the air tonight, oh Lord...

    Every time you post that graph I'm less convinced that you understand it.
    1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
    Pinnacle Monzonite

    Part of the anti-growth coalition
  • focuszing723
    focuszing723 Posts: 7,918
    rjsterry said:

    focuszing723 said:

    That certainly wasn't the view. It was all about how historically low rates are sustainable, like I said that's just bloody negligence, you cannot look that that graph and not get shivers down your spine. No words are required, kind of like how Phil Collins required no jacket either, because he was singing drumming God.

    I can feel it commmings in the air tonight, oh Lord...

    Every time you post that graph I'm less convinced that you understand it.

    There isn't anything not to get, it's self evident.
  • focuszing723
    focuszing723 Posts: 7,918
    focuszing723 said:

    rjsterry said:

    focuszing723 said:

    That certainly wasn't the view. It was all about how historically low rates are sustainable, like I said that's just bloody negligence, you cannot look that that graph and not get shivers down your spine. No words are required, kind of like how Phil Collins required no jacket either, because he was singing drumming God.

    I can feel it commmings in the air tonight, oh Lord...

    Every time you post that graph I'm less convinced that you understand it.

    There isn't anything not to get, it's self evident.

    Yep, just need to look at it.
  • rjsterry
    rjsterry Posts: 29,091
    edited August 2022
    Draw a trend line on that graph. I'm sure you can get the data as a csv file and bung it in Excel to do it for you.

    Add to that trend that there is a strong correlation shown between recession and very low interest rates. We are likely about to head into another recession.
    1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
    Pinnacle Monzonite

    Part of the anti-growth coalition
  • focuszing723
    focuszing723 Posts: 7,918
    Like I said all you need to do is look at that graph.
  • Jezyboy
    Jezyboy Posts: 3,537
    FWIW it looks like the high rates from 1955 to 2008 may be an anomoly.

    Even with the current interest rate rises, they are still at rates that would be considered low at other times.


  • focuszing723
    focuszing723 Posts: 7,918
    edited August 2022
    focuszing723 said:

    !! 1800-2022 !!

    For the graph. The BoE has been setting the base rate in the UK since 1694, so 328 years.
  • rick_chasey
    rick_chasey Posts: 75,647
    Don't worry about your kid's A levels, guys.

    Nowadays by far the biggest predictor of success is inherited wealth, not performance at school!
    _

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