Smokeandsteam
Working Class First
Well, the IMF is well to the left of the Labour Party who’ve set absolutely nothing on this. Instead it’s boldly announced that it’ll cut investment.
How is raising interest rates supposed to help with the kind of inflation we are having now?
- Thread starter bimble
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Well, the IMF is well to the left of the Labour Party who’ve set absolutely nothing on this. Instead it’s boldly announced that it’ll cut investment.
bimble
floofy
This thing says that “on average” the interest rate hikes are doing the opposite of what they’re supposed to do - That they’ve created more spare money than they’ve sucked out of the system, so far.
www.bloomberg.com
Says basically that people with savings are benefiting whilst people with debts haven’t yet felt the full impact, and that there’s a lot of people in the uk with savings.
In this country talking about the average person when it cones to financials doesn’t really tell you anything useful does it.
Savings Lift Helps Blunt UK Household Mortgage Pain
The Bank of England’s interest-rate increases are benefitting savers more than they’re costing mortgage payers — for now at least.
www.bloomberg.com
Says basically that people with savings are benefiting whilst people with debts haven’t yet felt the full impact, and that there’s a lot of people in the uk with savings.
In this country talking about the average person when it cones to financials doesn’t really tell you anything useful does it.
Yes (albeit it’s more complicated than that, but essentially yes), and that’s why banks can’t just automatically increase the savings rate by the same as the mortgage rate. They have to balance it based on debtors to creditors.
bimble
floofy
This makes sense to me:
threadreaderapp.com
He is saying that the raising of interest rates has the exactly opposite effect to the one the government and BOE intends and his argument seems logical.
Thread by @RichardJMurphy on Thread Reader App
@RichardJMurphy: We face a cost-of-living crisis created by events outside the UK triggering rates of inflation that many in this country have never witnessed before. In the face of these rising prices the Bank of E...…
threadreaderapp.com
He is saying that the raising of interest rates has the exactly opposite effect to the one the government and BOE intends and his argument seems logical.
brogdale
Coming to terms with late onset Anarchism
Yes, but he does accept what they're really up to with their one lever:This makes sense to me:
Thread by @RichardJMurphy on Thread Reader App
@RichardJMurphy: We face a cost-of-living crisis created by events outside the UK triggering rates of inflation that many in this country have never witnessed before. In the face of these rising prices the Bank of E...…
He is saying that the raising of interest rates has the exactly opposite effect to the one the government and BOE intends and his argument seems logical.
ska invita
back on the other side
"The Bank of England is, then, undertaking a massive redistribution of income and wealth right now at cost to those on lower incomes. But also, the country as a whole. And this matters as well. "This makes sense to me:
Thread by @RichardJMurphy on Thread Reader App
@RichardJMurphy: We face a cost-of-living crisis created by events outside the UK triggering rates of inflation that many in this country have never witnessed before. In the face of these rising prices the Bank of E...…
He is saying that the raising of interest rates has the exactly opposite effect to the one the government and BOE intends and his argument seems logical.
....i can only believe the tories want to deliberately immiserate the working to lower middle classes of britain, policy after policy has this effect, whilst the upper classes continue to boom. The narrative that these are necessary steps to take in the face of external forces doesn't hold up - it can only be deliberate wrecking.
tommers
Fuck it, it's fine.
The cynical part of me would say that inflation eats wealth - your savings buy less and less as prices rise.
And then it would be asking who has the most to lose from inflation and who happens to coincidentally control the "levers of the economy".
ska invita
back on the other side
Ive never read it but in Britannia Unchained theres stuff about how British people have got too lazy and presumably that means too wealthy... the plan seems to be immiserate and then sweat the workers so as to be more like Asia..."stimulate innovation" by immiserating them
en.wikipedia.org
Britannia Unchained - Wikipedia
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Cat Fan
Cats and stats
Inflation is very bad for the wealthy. It means their wealth and savings can buy less. That is why the government is so determined to bring it down, because governments all around the world are strongly influenced by wealthy donors.
A bit of (wage) inflation could be what we need to flatten a bit of wealth inequality and put more power back in the hands of workers.
But the inflation we have at the moment is mostly outrageous profiteering by companies. Raising interest rates is unlikely to help anytime soon because the big companies are borrowing over the long term which gives them a cushion, and their market power is so strong anyway that they can always raise prices to pass on their higher borrowing costs (like the examples given of car leases and car insurance going up)
A bit of (wage) inflation could be what we need to flatten a bit of wealth inequality and put more power back in the hands of workers.
But the inflation we have at the moment is mostly outrageous profiteering by companies. Raising interest rates is unlikely to help anytime soon because the big companies are borrowing over the long term which gives them a cushion, and their market power is so strong anyway that they can always raise prices to pass on their higher borrowing costs (like the examples given of car leases and car insurance going up)
MickiQ
In My Defence I was left Unsupervised
No-one benefits from a recession, I would imagine the argument goes along the lines of a recession will hurt but at least it won't last forever and will get the pain out of the way.
Cat Fan
Cats and stats
Someone always benefits. Look who benefited from the last (2008) recession. Banks, tech companies and the globally wealthy, who could take advantage of all the "financial stimulus" measures and cheap money.
There’s no one answer to that, bimble. As you can see already, people will each chip in from their own ideological stance. There is a modern-day drive to treat economics as objective and ideologically neutral, but don’t fall for this. Nothing is neutral, there is always a wider framework, a model of reality that the ideas exist within that provide hidden assumptions about what things are and should be.
So let’s start with your question. First things first: what actually is inflation and what is a recession? Are these well-defined, unambiguous, valid, consistent, coherent concepts? Do they describe objective phenomena? Well, not really. They are artefacts of the way we measure things we’re interested in, but (a) those things are tricky to pin down and agree on, and (b) they aren’t obvious how to measure. So notice this: the everyday use of certain words (like “recession”) has created the sense that the things they refer to are tangible, concrete realities rather than abstract concepts. (In other words, they have been reified, if you’re into that kind of thing).
First, what actually is inflation and where does it come from? Tricky, and I’m not about to do a primer on that. But note this: if there are exactly as many pounds in a particular place at a particular time as there were yesterday, and exactly the same supply of a particular good or service and exactly the same demand for that good or service then that good or service will cost the same. So when we measure the rate of change of the cost of that good, we could be saying something about the supply or demand of the good or the supply of the money itself. All three of these things are complicated outputs of a complex dynamic system, which each deserve individual inspection and have different consequences. Measuring just the price change is thus a very blunt tool.
“Recession” is even trickier a beast. It refers to consecutive reductions in GDP. But what is GDP? Nothing useful or obvious, I can tell you that. Like, if we made our train service brilliant, efficient and flawless, that would reduce GDP. Crazy, right? Because GDP was never invented to be a measure of how well a country was “performing”, whatever that means. It was developed in its current form to meet the need to understand the economic impacts of the Second World War.
So is “inflation” worse than “recession”? You’re asking if a “high” value (whatever that means) of a clumsy measurement of the artefact of complex interlocking systems is worse than a negative value of a fairly arbitrary measurement of those same set of processes. In truth, both measurements involve the ideological choice to concentrate on one artefact of the system.
What I can give you is something of the BoE’s perspective. The BoE have some control over the supply of money. Money is not created by printing it. It’s about 95% not really even created by governments any more. It’s created when people and businesses take out loans. And it’s destroyed when people and businesses pay back loans. So if the BoE want to reduce inflation — which is their only remit from the government, remember—they can seek to do it by reducing the money supply, which is theoretically possible by discouraging the creation of new loans and encouraging the paying back of existing loans. If all else remains equal, that will deflate prices. (But remember what I said about inflation being a blunt measurement of complex phenomena, so all else will not remain equal, of course).
If you reduce the money supply by discouraging loans, though, that means the money that the loans were for is not going to be employed in economic activity. By the way GDP is measured, that will mean you measure a recession. Does this matter? Again, it depends on what that missing money supply was for. If it was to prompt a housing speculation bubble then not really. If it was to pay for hospitals then most definitely. Again, you just have to remember to focus on the things that matter and not just a measurement that (like all measurements) has ideological origins.
TL;DR: dunno, it’s complicated.
brogdale
Coming to terms with late onset Anarchism
I think it's probably more helpful to ask who perceives they will suffer from inflation, rather than focus on who might benefit from the BoE's claimed recessionary cure.
UK governments attempt to create a macro-economic environment that will favour the continued accumulation by their political donors in fincap, the asset management corps and other financialised businesses. If they preceive a threat to the value of their assets, their credit, their returns or their accumulation from high rates of inflation then the target will be set to reduce it, whatever the cost to working people or households.
brogdale
Coming to terms with late onset Anarchism
I don't really agree with that. Those financialised corporations that make their money from around the world will hardly be bothered about a few dodgy quarters of -ive GDP growth in 1 polity. And, after all, in the medium term after a rise in unemployment, they will benefit from a cowed labour pool forced to accept even lower rewards for their labour
bimble
floofy
Idk if that makes sense really. If you’re rich and a business owner, or even a buy to let landlord or even just a home owner tbh, aren’t you more likely to worry about the increased cost of credit (borrowing) more than you’ll care about the increased cost of food. Not sure ‘they’re doing it for their doners’ or even for their supporters really adds up. Higher interest rates are bad for business and for property values.
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Depends if you’re a debtor. Even if you are, depends if that cost of credit is fixed. Depends if is floating, for that matter. Depends what your alternative options are, including the tax arrangements of those alternative options.
bimble
floofy
the government's own cost of borrowing is getting screwed by their interest rate rises as well.
FT:
FT:
whether they care at all about this, the cost of their own borrowings, idk.
Psychology. Not that it necessarily should be but it is. Indeed, some strands of psychology adopt all the epistemological constraints of natural science. (For the record, I don’t approve of this, but there it is)
Economics is in no way a science. What is the positivist reality it would even be trying to describe?
ska invita
back on the other side
But how can it be studied through a positivist ontological lens? I would say that what we refer to as “the economy” comprises a web of social relations that both constitute and are constructed by dynamic, contextual human activity, including choice. This means there is no universality to be specified or codified about “the economy”, and the scientific method is fundamentally ill-suited as a way of deriving knowledge about it.
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Puddy_Tat
naturally fluffy
but what's bad for business can be good for hedge funds and vulture capital, and what's bad for property values can be good for people who are already sitting on a pile of money who can buy cheap during the slump...
SpookyFrank
A cheap source of teeth for aquarium gravel
Psychology has some scientific basis to it.
Economics doesn't even claim to be evidence based.
brogdale
Coming to terms with late onset Anarchism
The right party of (financialised) capital know that credit for the consolidator state is the lifeblood of profit for the bond management corporations; that’s why public debt rises under the vermin. The cost of that borrowing is largely irrelevant as it will essentially just generate further debt.
Cat Fan
Cats and stats
Microeconomics has some science behind it, but macroeconomics is really just a bunch of competing "theories".
I would put it in the same category as sociology or history.
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