"just accept that you are poorer"

[ska invita]

Yes, I more or less agree. But bear in mind the guy is an economist so he's just quoting economic theory. He didn't intend to throw workers under the bus, as will be clear for anyone who listens to the full thing.

Which economic theory? Here's Communist fringe group the Intentnational Monetary Fund:

The IMF did a massive study and found no meaningful correlation between wage increase and inflation- no spiral.

"The IMF study “address these questions by creating an empirical definition of a wage-price spiral and applying this on a cross-economy database of past episodes among advanced economies going back to the 1960s.” So over 60 years and in many countries.

What did the IMF find: “Wage-price spirals, at least defined as a sustained acceleration of prices and wages, are hard to find in the recent historical record. Of the 79 episodes identified with accelerating prices and wages going back to the 1960s, only a minority of them saw further acceleration after eight quarters. Moreover, sustained wage-price acceleration is even harder to find when looking at episodes similar to today, where real wages have significantly fallen. In those cases, nominal wages tended to catch-up to inflation to partially recover real wage losses, and growth rates tended to stabilize at a higher level than before the initial acceleration happened. Wage growth rates were eventually consistent with inflation and labor market tightness observed. This mechanism did not appear to lead to persistent acceleration dynamics that can be characterized as a wage-price spiral.”

And there’s more: “We define a wage-price spiral as an episode where at least three out of four consecutive quarters saw accelerating consumer prices and rising nominal wages.”

And the IMF finds that “Perhaps surprisingly, only a small minority of such episodes were followed by sustained acceleration in wages and prices. Instead, inflation and nominal wage growth tended to stabilize, leaving real wage growth broadly unchanged. A decomposition of wage dynamics using a wage Phillips curve suggests that nominal wage growth normally stabilizes at levels that are consistent with observed inflation and labor market tightness. When focusing on episodes that mimic the recent pattern of falling real wages and tightening labor markets, declining inflation and nominal wage growth increases tended to follow – thus allowing real wages to catch up.“

What does the IMF conclude? “We conclude that an acceleration of nominal wages should not necessarily be seen as a sign that a wage-price spiral is taking hold.”

 

[SpookyFrank]

And morons at the BoE putting up interest rates to try and slow inflation.

Yeah because the problem is clearly that everyone has too much money right now.

 

[brogdale]

Which economic theory? Here's Communist fringe group the Intentnational Monetary Fund:

The IMF did a massive study and found no meaningful correlation between wage increase and inflation- no spiral.

"The IMF study “address these questions by creating an empirical definition of a wage-price spiral and applying this on a cross-economy database of past episodes among advanced economies going back to the 1960s.” So over 60 years and in many countries.

What did the IMF find: “Wage-price spirals, at least defined as a sustained acceleration of prices and wages, are hard to find in the recent historical record. Of the 79 episodes identified with accelerating prices and wages going back to the 1960s, only a minority of them saw further acceleration after eight quarters. Moreover, sustained wage-price acceleration is even harder to find when looking at episodes similar to today, where real wages have significantly fallen. In those cases, nominal wages tended to catch-up to inflation to partially recover real wage losses, and growth rates tended to stabilize at a higher level than before the initial acceleration happened. Wage growth rates were eventually consistent with inflation and labor market tightness observed. This mechanism did not appear to lead to persistent acceleration dynamics that can be characterized as a wage-price spiral.”

And there’s more: “We define a wage-price spiral as an episode where at least three out of four consecutive quarters saw accelerating consumer prices and rising nominal wages.”

And the IMF finds that “Perhaps surprisingly, only a small minority of such episodes were followed by sustained acceleration in wages and prices. Instead, inflation and nominal wage growth tended to stabilize, leaving real wage growth broadly unchanged. A decomposition of wage dynamics using a wage Phillips curve suggests that nominal wage growth normally stabilizes at levels that are consistent with observed inflation and labor market tightness. When focusing on episodes that mimic the recent pattern of falling real wages and tightening labor markets, declining inflation and nominal wage growth increases tended to follow – thus allowing real wages to catch up.“

What does the IMF conclude? “We conclude that an acceleration of nominal wages should not necessarily be seen as a sign that a wage-price spiral is taking hold.”

Exactly; the austerity of the consolidator state is nothing to do with any economic theory, it is merely the chosen political outcome of state players whose primary motivation is giving confidence to the money markets to continue to lend.

 

[ska invita]

...which is why i say again, the comments aren't tone deaf, they are a deliberate signal to shut up and eat shit within our ever worsening economic reality.

There's an obvious elephant in the room of this comments:....

“So somehow in the UK, someone needs to accept that they’re worse off and stop trying to maintain their real spending power by bidding up prices, whether higher wages or passing the energy costs through on to customers.
And what we’re facing now is that reluctance to accept that, yes, we’re all worse off, and we all have to take our share.”

....not everyone is worse off or taking their share (paying tax), because as ever the richest are doing better than ever

Presumably as "he's an economist" he knows that. I know sod all about economics and even I know that the last 3 or 4 years have seen record profits and wealth increase for the rich.

 

[andysays]

The bank of England is a public sector employer. He's not running a business or anything. Honestly he should know better, but he works for you and me as a civil servant.

The idea that the head of the BoE, or indeed any top civil servants, work for "you and me" is either naive or disingenuous.

You'll be telling us next that we're all in this together...

 

[smmudge]

I mean he used to be a managing director at Goldman Sachs.

But I'm sure he joined BoE to give something back to The People.



i.e. a kick in the face

 

[Cat Fan]

And morons at the BoE putting up interest rates to try and slow inflation.

Yes, those morons at the BoE, US Federal Reserve, ECB, Bank of Australia....

Are you a fan of Erdogan economic policy instead? Inflation not doing so well there

 

[NoXion]

Yes, those morons at the BoE, US Federal Reserve, ECB, Bank of Australia....

Are you a fan of Erdogan economic policy instead? Inflation not doing so well there

Because the only alternative to neoliberal orthodoxy is to copy Erdogan? False dilemma much?

 

[Cat Fan]

Because the only alternative to neoliberal orthodoxy is to copy Erdogan? False dilemma much?

There are two options, raise interest rates or don't raise interest rates. That's a classic dilemma for you.

 

[Chilli.s]

Thanks ska invita very well referenced

I suppose the BOE are a tool of politics so no surprise that they want the poorer majority to swallow down their cheap gruel rather than rock the boat

 

[Cat Fan]

“So somehow in the UK, someone needs to accept that they’re worse off and stop trying to maintain their real spending power by bidding up prices, whether higher wages or passing the energy costs through on to customers.

When he says "someone" hear he's talking about both workers and companies, as is clear in the bit after the comma. He's saying one way to stop inflation would be if companies stopped passing higher costs through to consumers. So companies share the blame.

That's the part that got lost in the media firestorm.

Completely agree that the 1% are getting richer but that's a separate topic to how to get inflation back to its target. The bank's only goal is to get inflation under 2% and the only lever they have is to raise interest rates.

 

[Kevbad the Bad]

There are two options, raise interest rates or don't raise interest rates. That's a classic dilemma for you.

Or lower interest rates

 

[SpookyFrank]

Or execute the oligarchy.

 

[Serge Forward]

Or lower interest rates

Which makes 3. A fourth option would be to abandon the capitalist model completely.

 

[Serge Forward]

Or execute the oligarchy.

Which now makes 5. Only two options. Pah!

 

[mojo pixy]

Abolish interest on loans, 6

 

[Cat Fan]

All good ideas

 

[redsquirrel]

I suppose the BOE are a tool of politics so no surprise that they want the poorer majority to swallow down their cheap gruel rather than rock the boat

They are not a tool of politics, they are a key part of the politics of capitalism.

 

[Chilli.s]

They are not a tool of politics, they are a key part of the politics of capitalism.

Same thing?

 

[andysays]

Which makes 3. A fourth option would be to abandon the capitalist model completely.

You're obviously not the Head of the Bank of England with crazy ideas like that

 

[Kevbad the Bad]

You're obviously not the Head of the Bank of England with crazy ideas like that

But who knows? There may well be a vacancy there soon.

 

[bmd]

A man on £180k a year telling me to accept that I'm poorer. A man who props up Capitalism and the death of the planet telling me to accept that I'm poorer. A man whose friends will have become richer whilst I became poorer. A man who supports the businesses who have helped me to get to this poorer place. I should take your advice?

 

[redsquirrel]

Same thing?

It's a nuance but IMO an important one.

To say the BoE (and economics in a more general sense) is the tool of politics has the implication that a politics of the right sort could use the BoE to the 'right' ends. That there is an escape via economics.
That's not true, it is economics that is the problem, that creates the exploitation in our society.

 

[B.I.G]

Which economic theory? Here's Communist fringe group the Intentnational Monetary Fund:

The IMF did a massive study and found no meaningful correlation between wage increase and inflation- no spiral.

"The IMF study “address these questions by creating an empirical definition of a wage-price spiral and applying this on a cross-economy database of past episodes among advanced economies going back to the 1960s.” So over 60 years and in many countries.

What did the IMF find: “Wage-price spirals, at least defined as a sustained acceleration of prices and wages, are hard to find in the recent historical record. Of the 79 episodes identified with accelerating prices and wages going back to the 1960s, only a minority of them saw further acceleration after eight quarters. Moreover, sustained wage-price acceleration is even harder to find when looking at episodes similar to today, where real wages have significantly fallen. In those cases, nominal wages tended to catch-up to inflation to partially recover real wage losses, and growth rates tended to stabilize at a higher level than before the initial acceleration happened. Wage growth rates were eventually consistent with inflation and labor market tightness observed. This mechanism did not appear to lead to persistent acceleration dynamics that can be characterized as a wage-price spiral.”

And there’s more: “We define a wage-price spiral as an episode where at least three out of four consecutive quarters saw accelerating consumer prices and rising nominal wages.”

And the IMF finds that “Perhaps surprisingly, only a small minority of such episodes were followed by sustained acceleration in wages and prices. Instead, inflation and nominal wage growth tended to stabilize, leaving real wage growth broadly unchanged. A decomposition of wage dynamics using a wage Phillips curve suggests that nominal wage growth normally stabilizes at levels that are consistent with observed inflation and labor market tightness. When focusing on episodes that mimic the recent pattern of falling real wages and tightening labor markets, declining inflation and nominal wage growth increases tended to follow – thus allowing real wages to catch up.“

What does the IMF conclude? “We conclude that an acceleration of nominal wages should not necessarily be seen as a sign that a wage-price spiral is taking hold.”

Is this the same study that says it does not represent the views of the IMF?

And also studied wage-price spirals. Is that the same as saying there is no link between wage increases and inflation?

 

[Pickman's model]

Is this the same study that says it does not represent the views of the IMF?

And also studied wage-price spirals. Is that the same as saying there is no link between wage increases and inflation?

If you're asking a question like that it doesn't fill me with confidence that you have investigated wage-price spirals at even a superficial level

 

[B.I.G]

If you're asking a question like that it doesn't fill me with confidence that you have investigated wage-price spirals at even a superficial level

Do you agree with what ska invita says below that the study on wage-price spirals found no meaningful correlation between wage increase and inflation?

Which economic theory? Here's Communist fringe group the Intentnational Monetary Fund:

The IMF did a massive study and found no meaningful correlation between wage increase and inflation- no spiral.

"The IMF study “address these questions by creating an empirical definition of a wage-price spiral and applying this on a cross-economy database of past episodes among advanced economies going back to the 1960s.” So over 60 years and in many countries.

What did the IMF find: “Wage-price spirals, at least defined as a sustained acceleration of prices and wages, are hard to find in the recent historical record. Of the 79 episodes identified with accelerating prices and wages going back to the 1960s, only a minority of them saw further acceleration after eight quarters. Moreover, sustained wage-price acceleration is even harder to find when looking at episodes similar to today, where real wages have significantly fallen. In those cases, nominal wages tended to catch-up to inflation to partially recover real wage losses, and growth rates tended to stabilize at a higher level than before the initial acceleration happened. Wage growth rates were eventually consistent with inflation and labor market tightness observed. This mechanism did not appear to lead to persistent acceleration dynamics that can be characterized as a wage-price spiral.”

And there’s more: “We define a wage-price spiral as an episode where at least three out of four consecutive quarters saw accelerating consumer prices and rising nominal wages.”

And the IMF finds that “Perhaps surprisingly, only a small minority of such episodes were followed by sustained acceleration in wages and prices. Instead, inflation and nominal wage growth tended to stabilize, leaving real wage growth broadly unchanged. A decomposition of wage dynamics using a wage Phillips curve suggests that nominal wage growth normally stabilizes at levels that are consistent with observed inflation and labor market tightness. When focusing on episodes that mimic the recent pattern of falling real wages and tightening labor markets, declining inflation and nominal wage growth increases tended to follow – thus allowing real wages to catch up.“

What does the IMF conclude? “We conclude that an acceleration of nominal wages should not necessarily be seen as a sign that a wage-price spiral is taking hold.”

 

[Bahnhof Strasse]

He's saying one way to stop inflation would be if companies stopped passing higher costs through to consumers. So companies share the blame.



Completely agree that the 1% are getting richer...

Cos they own the companies that are are not sucking up the higher costs.

 

[Pickman's model]

Do you agree with what ska invita says below that the study on wage-price spirals found no meaningful correlation between wage increase and inflation?

That won't answer your previous question, will it? A shoddy increase in your postcount

 

[existentialist]

That won't answer your previous question, will it? A shoddy increase in your postcount

If not the number of likes, which I note remains resolutely unaffected.

 

[B.I.G]

If not the number of likes, which I note remains resolutely unaffected.

So do you think ska invita has represented the report accurately? When they said "The IMF did a massive study and found no meaningful correlation between wage increase and inflation- no spiral."

Do you agree that is what the report found? That there was no meaningful correlation between wage increase and inflation.

Which economic theory? Here's Communist fringe group the Intentnational Monetary Fund:

The IMF did a massive study and found no meaningful correlation between wage increase and inflation- no spiral.

"The IMF study “address these questions by creating an empirical definition of a wage-price spiral and applying this on a cross-economy database of past episodes among advanced economies going back to the 1960s.” So over 60 years and in many countries.

What did the IMF find: “Wage-price spirals, at least defined as a sustained acceleration of prices and wages, are hard to find in the recent historical record. Of the 79 episodes identified with accelerating prices and wages going back to the 1960s, only a minority of them saw further acceleration after eight quarters. Moreover, sustained wage-price acceleration is even harder to find when looking at episodes similar to today, where real wages have significantly fallen. In those cases, nominal wages tended to catch-up to inflation to partially recover real wage losses, and growth rates tended to stabilize at a higher level than before the initial acceleration happened. Wage growth rates were eventually consistent with inflation and labor market tightness observed. This mechanism did not appear to lead to persistent acceleration dynamics that can be characterized as a wage-price spiral.”

And there’s more: “We define a wage-price spiral as an episode where at least three out of four consecutive quarters saw accelerating consumer prices and rising nominal wages.”

And the IMF finds that “Perhaps surprisingly, only a small minority of such episodes were followed by sustained acceleration in wages and prices. Instead, inflation and nominal wage growth tended to stabilize, leaving real wage growth broadly unchanged. A decomposition of wage dynamics using a wage Phillips curve suggests that nominal wage growth normally stabilizes at levels that are consistent with observed inflation and labor market tightness. When focusing on episodes that mimic the recent pattern of falling real wages and tightening labor markets, declining inflation and nominal wage growth increases tended to follow – thus allowing real wages to catch up.“

What does the IMF conclude? “We conclude that an acceleration of nominal wages should not necessarily be seen as a sign that a wage-price spiral is taking hold.”