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

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Comments

  • focuszing723
    focuszing723 Posts: 7,911
    Tick Tock...
  • focuszing723
    focuszing723 Posts: 7,911
    In summary.

    Fvck!
  • kingstongraham
    kingstongraham Posts: 27,760
    I still do not understand why deliberately making a recession worse is good for the economy.
  • rick_chasey
    rick_chasey Posts: 75,641
    edited November 2022
    kingstongraham said:

    I still do not understand why deliberately making a recession worse is good for the economy.

    Part of it is central bank credibility, part of is the idea that in the long run this is the less costly option.

    Would not underestimate the value of central bank credibility.
    _
  • kingstongraham
    kingstongraham Posts: 27,760
    rick_chasey said:

    kingstongraham said:

    I still do not understand why deliberately making a recession worse is good for the economy.

    Part of it is central bank credibility, part of is the idea that in the long run this is the less costly option.

    Would not underestimate the value of central bank credibility.
    Then I don't understand why central bank credibility is enhanced by announcing a stated aim of prolonging a recession.

    If this is just a lie, and we have to do it because it's what the Fed is doing, that's fair enough.
  • rick_chasey
    rick_chasey Posts: 75,641
    kingstongraham said:

    rick_chasey said:

    kingstongraham said:

    I still do not understand why deliberately making a recession worse is good for the economy.

    Part of it is central bank credibility, part of is the idea that in the long run this is the less costly option.

    Would not underestimate the value of central bank credibility.
    Then I don't understand why central bank credibility is enhanced by announcing a stated aim of prolonging a recession.

    If this is just a lie, and we have to do it because it's what the Fed is doing, that's fair enough.
    What's the remit of the BoE monetary policy?
    _
  • focuszing723
    focuszing723 Posts: 7,911
    Act much quicker to control inflation, when the writing was on the wall?

    Also, to take a pay cut when you are telling the population not to ask for a pay rise.
  • kingstongraham
    kingstongraham Posts: 27,760
    rick_chasey said:

    kingstongraham said:

    rick_chasey said:

    kingstongraham said:

    I still do not understand why deliberately making a recession worse is good for the economy.

    Part of it is central bank credibility, part of is the idea that in the long run this is the less costly option.

    Would not underestimate the value of central bank credibility.
    Then I don't understand why central bank credibility is enhanced by announcing a stated aim of prolonging a recession.

    If this is just a lie, and we have to do it because it's what the Fed is doing, that's fair enough.
    What's the remit of the BoE monetary policy?
    That is not relevant to my question.
  • focuszing723
    focuszing723 Posts: 7,911
    They didn't lead by example and were too late to the party too.
  • rick_chasey
    rick_chasey Posts: 75,641
    kingstongraham said:

    rick_chasey said:

    kingstongraham said:

    rick_chasey said:

    kingstongraham said:

    I still do not understand why deliberately making a recession worse is good for the economy.

    Part of it is central bank credibility, part of is the idea that in the long run this is the less costly option.

    Would not underestimate the value of central bank credibility.
    Then I don't understand why central bank credibility is enhanced by announcing a stated aim of prolonging a recession.

    If this is just a lie, and we have to do it because it's what the Fed is doing, that's fair enough.
    What's the remit of the BoE monetary policy?
    That is not relevant to my question.
    Eh? It's about the credibility of their remit.

    Their remit is inflation. If they let inflation run wild, then they lose credibility.
    _
  • kingstongraham
    kingstongraham Posts: 27,760
    edited November 2022
    rick_chasey said:

    kingstongraham said:

    rick_chasey said:

    kingstongraham said:

    rick_chasey said:

    kingstongraham said:

    I still do not understand why deliberately making a recession worse is good for the economy.

    Part of it is central bank credibility, part of is the idea that in the long run this is the less costly option.

    Would not underestimate the value of central bank credibility.
    Then I don't understand why central bank credibility is enhanced by announcing a stated aim of prolonging a recession.

    If this is just a lie, and we have to do it because it's what the Fed is doing, that's fair enough.
    What's the remit of the BoE monetary policy?
    That is not relevant to my question.
    Eh? It's about the credibility of their remit.

    Their remit is inflation. If they let inflation run wild, then they lose credibility.
    But if they purposefully prolong a recession because they only have one lever to pull, they don't.

    My point was that it's surely only within the boundaries that have been set that this is the only option. Their remit being only inflation isn't helpful, and if it were truly all they cared about, they should have jacked rates a while back.
  • pblakeney
    pblakeney Posts: 26,969
    The trouble with the current situation is that the lever is disconnected from the problem.
    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.
  • kingstongraham
    kingstongraham Posts: 27,760
    pblakeney said:

    The trouble with the current situation is that the lever is disconnected from the problem.

    "But we need to do something!"
  • pblakeney
    pblakeney Posts: 26,969
    "But we need to be seen to be doing something!"
    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.
  • rick_chasey
    rick_chasey Posts: 75,641
    edited November 2022
    kingstongraham said:

    rick_chasey said:

    kingstongraham said:

    rick_chasey said:

    kingstongraham said:

    rick_chasey said:

    kingstongraham said:

    I still do not understand why deliberately making a recession worse is good for the economy.

    Part of it is central bank credibility, part of is the idea that in the long run this is the less costly option.

    Would not underestimate the value of central bank credibility.
    Then I don't understand why central bank credibility is enhanced by announcing a stated aim of prolonging a recession.

    If this is just a lie, and we have to do it because it's what the Fed is doing, that's fair enough.
    What's the remit of the BoE monetary policy?
    That is not relevant to my question.
    Eh? It's about the credibility of their remit.

    Their remit is inflation. If they let inflation run wild, then they lose credibility.
    But if they purposefully prolong a recession because they only have one lever to pull, they don't.

    My point was that it's surely only within the boundaries that have been set that this is the only option. Their remit being only infiation isn't helpful, and if it were truly all they cared about, they should have jacked rates a while back.

    I know this is A level economics but I guess that's the level I'm at.



    So the only thing monetary can really do is affected aggregate demand (the AD lines). By making borrowing expensive you reduce the aggregate demand for stuff.

    So that chart there has inflation/prices on the y axis and real GDP on the bottom.

    As you can see, when you're bumping up at the limits of aggregate supply, most of the extra demand goes into higher prices/inflation, rather than growth.

    So assume we're really high up on the steep bit of that curve.

    Inflation is bad for all sorts of reasons, so their remit is to pull AD back down again. That's all the BoE can do. It's really up to the government to create the conditions that the capacity of the economy increases (supply side policies anyone?)


    The problem with the Kwarteng budget is mainly that AD was already on the steep bit of the AS curve and so by increasing spending & tax cuts you send it even higher up the AD curve.

    It wasn't really anything to do with supply side economics; they falsely suggeted that cutting taxes improves supply - no evidence to suggest that's the case.

    What you want to do is shift from AS' to AS in this graph



    Problem is, Brexit did the opposite, but anyway.

    In the meantime, we have mega high energy prices, which lifts AS on this graph.



    So you get stagflation.



    _
  • TheBigBean
    TheBigBean Posts: 21,525
    rick_chasey said:

    Lol King. A good candidate for Britain’s worst ever governor of the BoE

    He is more qualified to comment than most. You're welcome to put forward expert views to the contrary.
  • focuszing723
    focuszing723 Posts: 7,911
    Apologies for the repetitive historic IR chart. I won't do it anymore.
  • surrey_commuter
    surrey_commuter Posts: 18,867
    focuszing723 said:

    Apologies for the repetitive historic IR chart. I won't do it anymore.

    Thank you, I appreciate that.
  • focuszing723
    focuszing723 Posts: 7,911
    surrey_commuter said:

    focuszing723 said:

    Apologies for the repetitive historic IR chart. I won't do it anymore.

    Thank you, I appreciate that.
    No probs, I can be a bit of a pr@ sometimes, hard to believe, I know.
  • focuszing723
    focuszing723 Posts: 7,911
    (Reuters) - European stocks opened nearly flat on Thursday after minutes from the Federal Reserve's November meeting signalled a slowdown in its pace of interest rate hikes, with investors looking for fresh cues from the European Central Bank.

    The pan-European STOXX 600 index slipped 0.03% by 0808 GMT, with volumes likely thinned by a U.S. market holiday for Thanksgiving.

    Wall Street ended with solid gains on Wednesday after the U.S. central bank's meeting minutes showed a "substantial majority" of policymakers agreed it would "likely soon be appropriate" to slow the pace of interest rate hikes.
    https://uk.finance.yahoo.com/news/european-shares-struggle-direction-traders-082420687.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvLnVrLw&guce_referrer_sig=AQAAAGVVYMyUjJ4cBNv06S5W8Pro-VfnjJSsawPo1KhgJMh8FXx2V8kh1JAaW5mC5dv9eoafjzbgJAELvGkUPbUxohZH2-YIakoDhEIN2fM8mazUvh3cJW8ax9qKfMJsbbFnpRKwn_nrK4pX_CNB3KCnIf6S4iwxbl0klZLldldRSqK7

    Looking a bit more positive in terms of rapid rate rises.
  • pblakeney
    pblakeney Posts: 26,969
    Slowing the pace ≠ stopping.
    Just a thought.
    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.
  • TheBigBean
    TheBigBean Posts: 21,525
    A week or so ago, US inflation was lower than expected. Interest rates expectations across the world dropped quite a lot.
  • surrey_commuter
    surrey_commuter Posts: 18,867
    As this has been resurfaced I will attempt to shae with you the news that the magic money tree has started costing us money.

    It seems that it now costs the BofE more money to hold the QE bonds than it receives on them. This measured in billions and will only get worse as rates rise.

    I really don't properly understand this stuff so hopefully TBB will be along to explain it in laymans terms
  • wallace_and_gromit
    wallace_and_gromit Posts: 3,390
    pblakeney said:

    Slowing the pace ≠ stopping.

    True, but economic forecasts hinge on future expectations and so improve if the rate of worsening of a key input assumption even slows down.

    And also, the first step on the road to interest rate reductions is a reduction in the rate of increase. As an analogy, during our Covid-era graph studying phase, during each wave, we could start to breathe a little more easily when the second derivative on the daily new infections graph went negative as that meant the peak of the current wave could be predicted. Whilst it was non-negative, we could plausibly have been genuinely doomed.

  • mully79
    mully79 Posts: 904
    Does anyone know where the percentage increase figure comes from ? Ie +0.54%. I’m guessing it’s current price against the price 24hrs ago.

    I’m confused why they don’t just use the stock market opening value and compare against that until the market closes as that makes more sense to my primitive brain.


  • kingstongraham
    kingstongraham Posts: 27,760
    mully79 said:

    Does anyone know where the percentage increase figure comes from ? Ie +0.54%. I’m guessing it’s current price against the price 24hrs ago.

    I’m confused why they don’t just use the stock market opening value and compare against that until the market closes as that makes more sense to my primitive brain.


    On exchange rates, there is no stock market - there's always somewhere in the world open to trade it (monday to friday anyway), so there is no opening price.

    Don't know what that screen shot is doing - it's not change from midnight.
  • mully79
    mully79 Posts: 904


    It’s now gone to -0.91% and dramatically changed to red but the price is virtually the same.
  • kingstongraham
    kingstongraham Posts: 27,760
    mully79 said:



    It’s now gone to -0.91% and dramatically changed to red but the price is virtually the same.

    Must be 24 hour change on that site.
  • TheBigBean
    TheBigBean Posts: 21,525
    mully79 said:



    It’s now gone to -0.91% and dramatically changed to red but the price is virtually the same.

    If you look at a graph over a longer period, it becomes a bit clearer. Just over 24 hours ago there was a jump in price. When that jump became more than 24 hours in the past, the gain changed to a loss.
  • kingstongraham
    kingstongraham Posts: 27,760
    https://www.telegraph.co.uk/business/2023/01/20/strikers-home-workers-blame-britains-sky-high-inflation/

    Strikers and home workers are to blame for Britain’s sky-high inflation


    British workers now seem to regard loafing around in their pyjamas (or working from home, as it is officially known) as a divine right



    Astonishing revelations.

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