Inflation crisis: Due to various factors including war in Ukraine and Covid-19.

Yew

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Indeed. Quite how MP's and other commentators expect rises in interest rates to take inflation caused by riding costs of imports is anyone's guess.

The best thing that government could do is to use what levers it has to promote domestic spending that's less reliant on imports.
Indeed, whilst I can understand the idea that increasing interest rates is a way on increasing liquidity preference, it's not going to make your home cheaper heat, your car more efficient, or your appetite smaller.
 
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ainsworth74

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Indeed. Quite how MP's and other commentators expect rises in interest rates to take inflation caused by riding costs of imports is anyone's guess.

The best thing that government could do is to use what levers it has to promote domestic spending that's less reliant on imports.
Governments plan appears to be for us to find better paid work or more hours. What you're supposed to do if you cannot do these things is not explained. Destitution and homelessness I suppose.

A government minister has suggested that people struggling with the cost of living could take on more hours or move to a better-paid job.

Rachel Maclean, the safeguarding minister, told Sky News' Kay Burley that those were some of the ways households could "protect themselves" as prices soar.

Downing Street defended her after opposition parties sharply criticised the comments.

 

DelayRepay

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Governments plan appears to be for us to find better paid work or more hours. What you're supposed to do if you cannot do these things is not explained. Destitution and homelessness I suppose.

Perfect, I will pass the government's advice on to my sister who is a care worker on a zero hours contract, earning just over the so called National Living Wage. She already works six days a week but I suppose she could work the seventh too. Or she could move to a better paid job and create yet another vacancy in a sector that is already struggling for staff (part of the reason she works six days is due to a staff shortage that pre-dates Covid-19 - the equivalent of railway rest day working I suppose)
 

yorksrob

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Governments plan appears to be for us to find better paid work or more hours. What you're supposed to do if you cannot do these things is not explained. Destitution and homelessness I suppose.




Doesn't sound like economic management really does it.

Perhaps they ought to appoint a "cost of living" minister in the hope that they will have the same effect as the "minister for drought" in 1976 (he had to become the minister for floods a week later).

One has to hope that once Russia's back in its box, the supply issues will be eased.
 

Wynd

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It is offical BOE policy now that wages fall to deal with inflation. As for food price inflation, its nice of the Bank to join the party. We saw 25% food inflation back in January.

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brad465

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Indeed. Quite how MP's and other commentators expect rises in interest rates to take inflation caused by riding costs of imports is anyone's guess.

The best thing that government could do is to use what levers it has to promote domestic spending that's less reliant on imports.
Indeed, whilst I can understand the idea that increasing interest rates is a way on increasing liquidity preference, it's not going to make your home cheaper heat, your car more efficient, or your appetite smaller.
Rates should never have got as low as they did in the first place. The only reason they did was because of neoliberalism's big failure in 2008, where rather than looking for an alternative way of doing things, they tried to keep the failed system on life support. And as for all the pretend money...
 

yorksrob

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The only thing that could be said to be "out of control" domestically is the housing market, although I suspect that there are better ways of controlling that.
 

Wynd

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Looks to be the American economist Adam Posen. (Former external member of the Bank of England’s Monetary Policy Committee between 2009 and 2012).
It is indeed. He makes a good point that wage preservation should be the policy, but the BOE and UKGov disagree and would rather see us poorer than wealthier. That of course is coming off the back of 15 years of low to stagnant real wage growth.

Average housing prices are tracking average joint earnings at 4.5x multiple, exactly as BOE policy and regulation says it should.

There are hotspots, but thats always been the case.
 

brad465

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The only thing that could be said to be "out of control" domestically is the housing market, although I suspect that there are better ways of controlling that.
Yeah, get rid of all the pretend money that is inflating asset values, but good luck getting the oligarchy to warm to sacrifices.
 

The Ham

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It is indeed. He makes a good point that wage preservation should be the policy, but the BOE and UKGov disagree and would rather see us poorer than wealthier. That of course is coming off the back of 15 years of low to stagnant real wage growth.

Average housing prices are tracking average joint earnings at 4.5x multiple, exactly as BOE policy and regulation says it should.

There are hotspots, but thats always been the case.

12 years ago, our house was about 3.6 times the value of our gross pay, now it's value has risen to about 4.6 times our gross pay.

Before anyone asks, our gross pay has increased quite significantly in that same timeframe, so wage stagnation hasn't been something that's caused us issues (down to luck rather than judgement due to the industries we work in).

The crazy thing is, house prices have risen so fast that we'd need to borrow the same as we did 12 years ago again to move from a 3 bed to 4 bed in the same area.
 

DynamicSpirit

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It is indeed. He makes a good point that wage preservation should be the policy, but the BOE and UKGov disagree and would rather see us poorer than wealthier. T

I'm pretty sure that neither the BOE nor the UKGov want to see us poorer. Why on Earth would anyone want that? It's more a question of, various circumstances have hit the UK, and neither the UK nor the Government can see an easy to avoid the current standard of living problems.
 

brad465

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I'm pretty sure that neither the BOE nor the UKGov want to see us poorer. Why on Earth would anyone want that? It's more a question of, various circumstances have hit the UK, and neither the UK nor the Government can see an easy to avoid the current standard of living problems.
In 2012 the Bank of England admitted that it's Quantitative Easing policy has benefitted the richest most (specifically the richest 5%), yet it continued doing it in years ahead, and certainly didn't withdraw the QE it had pumped in since 2008. It's also widely accepted that QE and low interest rates have fuelled housing and other asset/market bubbles to the point that they make up an unhealthily large proportion of our economy, and driven a reluctance from the BoE, and other western equivalents like the ECB and The Fed, to bring rates back to what was once deemed normal levels and get rid of everything they "printed". Now whether or not this has made people below a certain level poorer can be debated plenty, but this behaviour from Central Banks has no precedent in history going back over a century and has certainly deepened inequality through inflating richer asset holder's wealth much faster than groups below them. At least we in the UK avoided negative rates to be fair, but 0.1-0.75% is bad enough.

I would also not be surprised if the behaviour of Central Banks helped result in things like Brexit and Trump, and other so-called populist movements elsewhere. Whether one agrees with these or not, these movements would not have got anywhere if people believed that politicians before them were delivering for them, and to deliver usually means to improve standards of living.

I think there certainly is more the Government and Bank of England can and should be doing, even if they can't make things as good as they may have been say pre-covid. But a lot of what's driving inflation now could have been prevented or mitigated by actions/long term political strategies in the last 10-15 years (e.g. doing a lot of what we're doing to Russia now in 2014, and not throwing out previous pandemic strategies in favour of copying a police state's methods of pandemic "management"), that the current Governing party has overseen most of, and while the Bank Governor hasn't always been the same, they all could have done more.
 

Snow1964

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April Inflation jumped again,
is now 9.0% (CPI) or 11.1% (RPI),
CPIH has risen to 7.8%

May’s rate will be released 22nd June
 
Last edited:

yorksrob

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If they could somehow decouple the interest rates paid for loans on places of residence, from those paid for frivolous/speculative ventures, then the policy would have a lot less negative impact on ordinary working people.
 

Dai Corner

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If they could somehow decouple the interest rates paid for loans on places of residence, from those paid for frivolous/speculative ventures, then the policy would have a lot less negative impact on ordinary working people.
Loans secured on property are typically much cheaper than unsecured ones.

Barclays, for example, currently offer mortgages at around 2.5%, personal loans 8% and credit card borrowing 23% APR.
 

DynamicSpirit

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In 2012 the Bank of England admitted that it's Quantitative Easing policy has benefitted the richest most (specifically the richest 5%), yet it continued doing it in years ahead, and certainly didn't withdraw the QE it had pumped in since 2008. It's also widely accepted that QE and low interest rates have fuelled housing and other asset/market bubbles to the point that they make up an unhealthily large proportion of our economy, and driven a reluctance from the BoE, and other western equivalents like the ECB and The Fed, to bring rates back to what was once deemed normal levels and get rid of everything they "printed". Now whether or not this has made people below a certain level poorer can be debated plenty, but this behaviour from Central Banks has no precedent in history going back over a century and has certainly deepened inequality through inflating richer asset holder's wealth much faster than groups below them. At least we in the UK avoided negative rates to be fair, but 0.1-0.75% is bad enough.

I would also not be surprised if the behaviour of Central Banks helped result in things like Brexit and Trump, and other so-called populist movements elsewhere. Whether one agrees with these or not, these movements would not have got anywhere if people believed that politicians before them were delivering for them, and to deliver usually means to improve standards of living.

I think there certainly is more the Government and Bank of England can and should be doing, even if they can't make things as good as they may have been say pre-covid. But a lot of what's driving inflation now could have been prevented or mitigated by actions/long term political strategies in the last 10-15 years (e.g. doing a lot of what we're doing to Russia now in 2014, and not throwing out previous pandemic strategies in favour of copying a police state's methods of pandemic "management"), that the current Governing party has overseen most of, and while the Bank Governor hasn't always been the same, they all could have done more.

I think to a large extent that's true, but it doesn't change the point I was making, which was that there isn't a deliberate intended conspiracy by the Government to make us poorer. I was specifically replying to someone who claimed that the Government and the Bank of England wanted to make us poorer - a claim that is frankly absurd. The cost of living crisis is with us partly because of external issues and events beyond the UK's control (Covid and Russia), partly because of a long history of mistakes by successive Governments (not building enough houses, and not doing enough on insulation/energy-efficiency and not prioritising securing our energy supplies), partly because of a deliberate decision by the British public (Brexit, which people wanted for various reasons but which also had side-effects on the cost of living) and I'd argue also because of too much pumping money into the economy in a way that increased the money supply without increasing wealth (QE and more recently Covid-furlough - both things that you could argue were short term necessities but which have long-term consequences). I think there's a fair bit of economic incompetence by Governments built in there, but there's no malign intention: Despite what some people seem to imagine, no-one deliberately decided to make us all poorer in order to get some kind of kick out of doing so.
 

GS250

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I think its safe to say the next few years are going to be extremely tough for many. There's no need for the quite ridiculous statements such as "get a better job etc" when there are only so many better salaried positions out there in the first place. Added to this, companies have kept wages as low as possible for many workers with outsourcing and encouraging the opening up of the labour market to a wide a field as possible. Maybe we've been living in something of a dreamland for the last 25 years with some reckless spending habits etc.

Either way, its interesting hearing for the loud calls of 'nationalisation' for the energy companies. This from a number of people who have profiteered from the capitalist market with their property etc.
 

ainsworth74

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There's no need for the quite ridiculous statements such as "get a better job etc" when there are only so many better salaried positions out there in the first place.
It also ignores the problem that those low paid jobs are often extremely important. As @DelayRepay noted people involved in social care are often on or only marginally above the National Living Wage (note: this is not the same as the Living Wage) so what are we supposed to do if they all upped sticks to better paid jobs (even if such jobs were available)? It's just a nonsense suggestion from people who haven't got a clue (the fact it was apparently defended by Downing Street makes it even worse, just one minister I could write off as being an idiot!).

Either way, its interesting hearing for the loud calls of 'nationalisation' for the energy companies. This from a number of people who have profiteered from the capitalist market with their property etc.
I've always been quite sympathetic to that. Energy is, after all, a natural monopoly so does a profit motive and private sector involvement (at least significant private sector involvement anyway) really make sense when it can't operate as a proper market?
 

Wynd

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Service inflation @ 14%
Goods up 22%.

After 15 years of near stagnant wage growth, its difficult to see how this is going to be absorbed by households with delicate finances.


April Inflation jumped again,
is now 9.0% (CPI) or 11.1% (RPI),
CPIH has risen to 7.8%

May’s rate will be released 22nd June
 

ainsworth74

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After 15 years of near stagnant wage growth, its difficult to see how this is going to be absorbed by households with delicate finances.

Going to hurt those on benefits as well. Decade of zero or 1% rises behind us and the rise just gone was only 3%ish.

The Government seem to be applying their usual "it'll be alright on the night" policy of governance and hoping that this will all sort itself out without them needing to offer much more than platitudes. I'm not certain that's going to work personally...
 

GS250

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Going to hurt those on benefits as well. Decade of zero or 1% rises behind us and the rise just gone was only 3%ish.

The Government seem to be applying their usual "it'll be alright on the night" policy of governance and hoping that this will all sort itself out without them needing to offer much more than platitudes. I'm not certain that's going to work personally...

To be fair, relative salaries across private companies are absolutely nothing to do with Government. Can you imagine the utter outrage there would be from senior leaders across companies if governments actively started to dictate what they paid? Of course...taxation and NI amongst other things can influence what they decide to pay. I've no doubt there will be some real anger from the public over the next few years (if of course the predictions are correct, and we know in the past they have been wildly incorrect). There will be some justified criticised of the government. However, the corporate world needs to be bear a huge amount of responsibility too.
 

Dai Corner

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To be fair, relative salaries across private companies are absolutely nothing to do with Government. Can you imagine the utter outrage there would be from senior leaders across companies if governments actively started to dictate what they paid? Of course...taxation and NI amongst other things can influence what they decide to pay. I've no doubt there will be some real anger from the public over the next few years (if of course the predictions are correct, and we know in the past they have been wildly incorrect). There will be some justified criticised of the government. However, the corporate world needs to be bear a huge amount of responsibility too.
They are for the lowest paid on the statutory minimum wage who are likely to be the most affected by high price inflation.
 

Snow1964

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They are for the lowest paid on the statutory minimum wage who are likely to be the most affected by high price inflation.

Iconically the minimum wage seemed to make it worse for some, instead of paying what was needed to attract good staff, some companies seem to now treat it as a target amount not to be exceeded.

There were also some that it helped by boosting stupidly low pay.
 

GS250

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They are for the lowest paid on the statutory minimum wage who are likely to be the most affected by high price inflation.

Again...companies can choose NOT to pay the minimum wage to important employees. It may actually have the effect of motivating staff.
 

Dai Corner

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Iconically the minimum wage seemed to make it worse for some, instead of paying what was needed to attract good staff, some companies seem to now treat it as a target amount not to be exceeded.

There were also some that it helped by boosting stupidly low pay.
It's becoming the 'standard' rather than 'minimum' wage for those without specialist skills.

The news that vacancies exceed the numbers unemployed should in theory exert upward pressure on wages too.
 

GS250

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It's becoming the 'standard' rather than 'minimum' wage for those without specialist skills.

The news that vacancies exceed the numbers unemployed should in theory exert upward pressure on wages too.

The issues also arise as you start to climb the skills ladder. There are some semi-skilled positions that are effectively paying the same those on minimum, or as you put it 'standard' wage. We're talking 1st line IT, handypersons etc.
 

ABB125

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The issues also arise as you start to climb the skills ladder. There are some semi-skilled positions that are effectively paying the same those on minimum, or as you put it 'standard' wage. We're talking 1st line IT, handypersons etc.
This also applies to certain sectors of employer as well.
For example, I do (far too much, it must be said!) tech work (ie: theatre lighting, sound etc) at my university students' union. This is quite a skilled job, with a huge amount of specialist knowledge required. We (tech staff) get paid exactly the same hourly rate as bar staff, cleaners etc, roles which (without wishing to in any way suggest that these roles are inferior) require rather less skill/knowledge. The going day rate for tech staff in the real world is in the region of £250-£300 per day (plus overtime), which equates to well over £30/hr; over 3x more than we get paid!
There is, however, the completely valid argument that most of the work we do is paid for by student societies etc, who wouldn't be able to afford anything if tech staff costs suddenly tripled (there's already enoiugh disquiet about tech costs as it is!). Which would then mean no work at all...

I appreciate, however, that this is a somewhat niche example! :D
 

yorksrob

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I think its safe to say the next few years are going to be extremely tough for many. There's no need for the quite ridiculous statements such as "get a better job etc" when there are only so many better salaried positions out there in the first place. Added to this, companies have kept wages as low as possible for many workers with outsourcing and encouraging the opening up of the labour market to a wide a field as possible. Maybe we've been living in something of a dreamland for the last 25 years with some reckless spending habits etc.

Either way, its interesting hearing for the loud calls of 'nationalisation' for the energy companies. This from a number of people who have profiteered from the capitalist market with their property etc.

Our maybe we've been too relaxed about wealth flowing out of the country in the name of the "free market".
 

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