The economic causes of the cost of living crisis
- Thread starter Smokeandsteam
- Start date
Smokeandsteam
Working Class First
Record profits for the 4 monopoly grain producers. Fortunately, commentators are on hand to explain that this is purely coincidental and not price gouging:
www.theguardian.com
Record profits for grain firms amid food crisis prompt calls for windfall tax
Sales at world’s top four traders have soared, raising concerns of profiteering and speculation
hitmouse
music obfuscation technology
New report from Unite:
Pickman's model
Starry Wisdom
and when you handed it back to the child who gave it you, i hope you said they needed a more sophisticated analysis but it was a good effort
Smokeandsteam
Working Class First
Energy producers profits re likely to be £170 Billion over the next 2 years according to the Treasury. Interesting data to grapple with for those carping about a windfall tax on the bastards:
brogdale
Coming to terms with late onset Anarchism
wealth creators
Pickman's model
Starry Wisdom
Lower than I thought it'd be.
Backing this up is a recently published paper by the IMF which I saw referred to by Michael Roberts, where the authors looked for evidence of wage-price spirals historically and essentially found nothing much.Critisticuffs doing their thing:
Critisticuffs — There is no Wage-Price Spiral
critisticuffs.org
Whether this will travel far enough down the chain of entrail readers to reach the luminaries of the Bank of England for example remains to be seen, doubt it will shake their certainty that wages must be suppressed one way or the other anyway.IMF said:
ska invita
back on the other side
Critisticuffs doing their thing:
Critisticuffs — There is no Wage-Price Spiral
a thought...in the Death of the Left podcast smokey posted the authors of that book complain about the supposed lack of focus by "the left" on economics...leaving them aside or the accuracy of that complaint, there is an issue regarding economics which is that it is very complicated and beyond most people.
that cristicuffs thing is written clearly and simply, they've really tried to make it accesible - but its still too much for me to really understand with any certainty, happy though i am to go along with their conclusions. I'm probably a bit above average in terms of trying to understand stuff like this, in that i've tried repeatedly, i've read a few economics books over the years, i read articles on economics etc.
with Marx for example there is no day in my life i am ever going to read Capital. It will never happen - i've had a look and its too hard. I understand the basic principles, and the core necessity to redistribute is obvious and needs no explanation.
my point is that discussing economics with normal (noneconomist) people is really hard and in most cases is two people who both dont really know what they are talking about giving their impressions. the false household budget analogies are a good example of that. i know they are false but i couldnt tell you more about "borrowing" in any meaningful way.
this is a problem with 'the left' making bigger economic arguments - they need to be simplistic (tax justice, redistribution, tobin tax, increase public spending etc), but when they get refuted with other simplicities no magic money tree, cupboard is bare, live within means etc,) those criticisms can sound reasonable to many. its a hard dynamic to break through
SpookyFrank
A cheap source of teeth for aquarium gravel
Note that it says excess profits.
brogdale
Coming to terms with late onset Anarchism
There’s a reason why working class kids are never taught about how the economy they will have to engage with works.
ska invita
back on the other side
its a good point
never even learned about stuff like pensions
i was struck watching the 7 up series a couple of years back that even aged 7 one of the kids was checking stock prices in the newspaper!! okay probably got that from their parents, but it is two different worlds
was talking about this just the other day, i had no career advice up until the week i was leaving school! had no idea about career paths or any attempt at planning for a future. again by contrast in 7 up those kids aged 7 knew what schools they would go on to and where they would study at university and what subject even! That sounds a bit prescriptive but even so, just talking about these things as possibilities is powerful. I guess parents play a big role in this, but yeah I finished school without the first clue what next.
Back to wage price spirals - IMF did a massive study and found no meaningful correlation:
The wage price spiral refuted
Do ‘excessive’ wage rises lead to rising inflation and thus drive economies into a wage-price spiral? Back in 1865, at the International Working Men’s Association, Marx debated with IWMA Coun…
thenextrecession.wordpress.com
"The IMF “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.”
redsquirrel
This Machine Kills Progressives
Smokeandsteam
Working Class First
The IMF is predicting that the UK will be the only major economy not to grow this year. The media are reporting this through the prism of the Truss budget and Hunt tax rises.
www.theguardian.com
But the causes are actually much longer run. As Adam Tooze has noted ‘for most of the last 60 years when critics have spoken of decline they have tended to exaggerate the extent of the malaise. GDP and per capita income actually continued to increase. In the 1970s they did so quite buoyantly. By contrast, since 2009 there is nothing exaggerated about declinist talk. For a significant part of the British population real incomes actually fell. The shocking novelty lies in the fact that decline and stagnation are not figures of speech, but a literal reality.’
Put another way - in terms of absolute social mobility - over 90% of children born in the 1940s, for example, earned more as adults than their parents did, regardless of whether they moved up any quintiles. As real wages and family incomes increased across the board, almost everybody lived better than their parents. But only about half of those born in 1980 have family incomes greater than their parents, and it’s even worse for those born since then (down to about 40%)
The consequences on household income are clear:
As are the underlying causes, which remain utterly unaddressed in politics and in the media coverage of the collapse of the British economy:
Britain the only G7 economy forecast to shrink in 2023
IMF says UK economy is likely to contract 0.6% as rising interest rates and higher taxes take toll
But the causes are actually much longer run. As Adam Tooze has noted ‘for most of the last 60 years when critics have spoken of decline they have tended to exaggerate the extent of the malaise. GDP and per capita income actually continued to increase. In the 1970s they did so quite buoyantly. By contrast, since 2009 there is nothing exaggerated about declinist talk. For a significant part of the British population real incomes actually fell. The shocking novelty lies in the fact that decline and stagnation are not figures of speech, but a literal reality.’
Put another way - in terms of absolute social mobility - over 90% of children born in the 1940s, for example, earned more as adults than their parents did, regardless of whether they moved up any quintiles. As real wages and family incomes increased across the board, almost everybody lived better than their parents. But only about half of those born in 1980 have family incomes greater than their parents, and it’s even worse for those born since then (down to about 40%)
The consequences on household income are clear:
As are the underlying causes, which remain utterly unaddressed in politics and in the media coverage of the collapse of the British economy:
Smokeandsteam
Working Class First
Here is the other side of the cost of living crisis. Annual profits for Shell of £32Bn….
I’m sure the Tories and economic editors will be along shortly to explain why this is a little unfortunate when millions are terrified to put the heating on.
Later today the Bank of England will be raising interest rates again. They are likely to increase their base rate from 3.5% to 4% extracting more money from those who can least afford it and despite all of the evidence that the inflation rate is already falling in the UK, US and EU.
The markets hidden hand is working its magic again..
news.sky.com
I’m sure the Tories and economic editors will be along shortly to explain why this is a little unfortunate when millions are terrified to put the heating on.
Later today the Bank of England will be raising interest rates again. They are likely to increase their base rate from 3.5% to 4% extracting more money from those who can least afford it and despite all of the evidence that the inflation rate is already falling in the UK, US and EU.
The markets hidden hand is working its magic again..
Shell announces record annual profits of £32.2bn after energy price surge
Pressure over profits as consumers struggle with a cost of living crisis has led to the company being hit with an estimated $2.3bn (£1.86bn) in windfall taxes for the full year.
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ska invita
back on the other side
some choice quotes from the bbc
"It has heaped pressure on firms to pay windfall taxes" lol
"Despite the government's windfall tax, Shell previously said it did not expect to pay any UK tax this year as it is allowed to offset decommissioning costs and investments in UK projects against any UK profits.
But the BBC understands that it will now say that it has paid some tax in 2022 and expects to pay hundreds of millions in UK tax in 2023" - how public spirited
"Earlier this year, Shell said it would pay tax in the UK for the first time since 2017 as a result of the new windfall tax." seems legit
"It has heaped pressure on firms to pay windfall taxes" lol
"Despite the government's windfall tax, Shell previously said it did not expect to pay any UK tax this year as it is allowed to offset decommissioning costs and investments in UK projects against any UK profits.
But the BBC understands that it will now say that it has paid some tax in 2022 and expects to pay hundreds of millions in UK tax in 2023" - how public spirited
"Earlier this year, Shell said it would pay tax in the UK for the first time since 2017 as a result of the new windfall tax." seems legit
Smokeandsteam
Working Class First
An excellent report from Unite exploring how profiteering, price gouging and corporate greed has fuelled the cost of living crisis. As the report makes clear: “Rampant corporate profiteering has fuelled the cost-of-living crisis. As the pandemic eased in 2021, many companies managed to push up their prices and profits. Corporate profiteering – not workers’ wages – has helped drive inflation “spirals”. And even as the economy now heads towards recession, many companies, in many industries, continue to make high profits”
Smokeandsteam
Working Class First
Inflation 10.1%
Food inflation 19% (highest rate for over 50 years)
Certain basic food stuffs (milk, cheese, eggs) 30%
As expected no word from labour on any of it. But where is the trade union/left mass campaign demanding real terms wage rises, price controls on essential items and increased tax on increased profits. Let alone a cogent set of arguments on the need for energy supply and food sourcing restructuring.
brogdale
Coming to terms with late onset Anarchism
And always worth remembering that low income households always spend a much greater proportion of their income on food/drink than those in higher deciles, so it's 19% inflation on a 20 to 40% chunk of expenditure.
Elpenor
a clown’s heart and a mandolin
Don’t worry everyone, the banks are still making money
HSBC profit more than doubles as interest rates rise
The Bank of England, which has raised rates 13 times in a row, is expected to hike them again on Thursday.
www.bbc.co.uk
Smokeandsteam
Working Class First
Don’t worry everyone, the banks are still making money
HSBC profit more than doubles as interest rates rise
The Bank of England, which has raised rates 13 times in a row, is expected to hike them again on Thursday.www.bbc.co.uk
Translation of the analysis by the commentating class...
1. The $21.7Bn accumulated by HSBC in the first 6 months of the year is a necessary and brave direct transfer of money from the poorest 90% to the richest 10% who will use the money (paid in the form of salaries, bonuses and shareholder dividends) to boost their offshore wealth or to buy up more property or to support suppliers of luxury commodities. This has no impact on inflation (in the same way that rampant price gouging by multinationals also has no impact on inflation) unlike, say, cleaners on minimum wage asking for a pay rise that increases their wages in line with mysterious enemy, inflation.
2. The sucking out of £50Bn out of the pockets of workers by the banks in the first 6 months will stop the proles overheating the economy by wastefully splurging money on frivolities like food, gas bills, rent/mortgages or supporting local business.
3. We can tentatively hope THE MARKET approves of the effects of the BoE policy. What we now need is a good, deep recession. Should this be delivered we can begin to see victory in the brave fight put up by the Government against inflation.
brogdale
Coming to terms with late onset Anarchism
On the day when the state's BoE crippled the UK economy with yet another interest rate hike, this was an interesting counterpoint to the UK mantra...
ska invita
back on the other side
Rob Ray
Weight is meaningless
The FT today demonstrating that as far as the ruling classes' economic viewpoint is concerned, the only anti-inflationary lever on the table is more interest rates. Quite impressively crap that they'd publish this meandering propaganda bilge by economics editor Chris Giles under the title:
What can the UK do about its inflation problem?
What can the UK do about its inflation problem?
Talking of blatant profiteering...
www.standard.co.uk
Pret ramps up prices as gross profits climb 83%
The price of an egg mayo sandwich is up 72% since 2020, compared to CPI inflation of 20% over the same period
www.standard.co.uk
Furrowed brows at the Bank of England, those Pret workers must be raking it inTalking of blatant profiteering...
Pret ramps up prices as gross profits climb 83%
The price of an egg mayo sandwich is up 72% since 2020, compared to CPI inflation of 20% over the same period
brogdale
Coming to terms with late onset Anarchism
Of course, they're calling for an acceleration of public money poured into private asset management funds (registered beyond the UK's fiscal jurisdiction). Sounds like they're gearing up for the next New Labour administration.
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