The Bank of England: don’t believe its claims about inflation.
Wage increases for striking public workers won’t increase inflation, no matter what Tory MPs say, because the government won’t add them to the cost of any products.
That’s the claim below, anyway – and it seems a good one.
The government creates money (well, orders it from the Bank of England, which then lends it to the government… it’s an over-complicated process, really) and uses taxation to keep the supply of cash within the economy at a reasonable level, thereby controlling inflation (as much as it can; the current situation is a special case, mostly caused by Brexit and foreign influences).
So it should be possible for the government to pay striking nurses (for example) as much as they want.
For commercial enterprises, matters may be different – but that’s only a possibility too:
To anyone arguing that taxes will necessarily have to increase to “pay for” public sector increases, that’s not where the government gets its spending money from…
or as little as it wishes, but in doing so, it (maybe without realising it) is setting the price level. If it spent 10% more each year on the same quantity of goods and services it IS going to cause inflation to be around 10%, unless it can force down the prices of everything
I had a similar thought – at least some of the increased wages would be spent in the economy. But, some might also be saved or used to pay off debt, plus it will all (eventually) be taxed back anyway without necessarily increasing tax rates.
But this depends on greedy private enterprises deciding to raise their prices because they know people have more money to spend, which is poor business; taking people’s spare cash away the instant they get it means they won’t be able to support as many different parts of the economy as they would otherwise and ultimately the lot would overbalance (which is what it’s doing now, in fact).
Also, I didn’t notice prices falling when the government was stamping on everybody else’s wages.
Finally, I notice the International Monetary Fund is saying wage-price spirals are historically rare:
And wage price spirals are very rare in the historical record, say those looney lefties at the IMF. https://t.co/THfX8jAxzO
So what’s my verdict on the Tory claim that paying back to public sector workers the wages that have been taken away from them over the past 13 years will cause another inflation spike?
The so-called “House of Commons hooligan” Jonathan Gullis, Tory MP for Stoke-on-Trent North since 2019, has made another of his famously misguided attacks – this time at bishops in the House of Lords.
His outburst came after all the Anglican bishops in the Upper House said the Tory government’s Rwanda deportation policy, which was endorsed as “lawful” by the High Court earlier this week, should “shame us as a nation”.
They signed a letter saying, “The shame is our own, because our Christian heritage should inspire us to treat asylum-seekers with compassion, fairness and justice, as we have for centuries.”
In fairness, even the Home Office seems to have accepted that many of those who arrive in the UK by illegal routes still have a claim for asylum; the majority of them are accepted as genuine refugees and are permitted to remain in the UK.
The problem lies in the fact that they have to take illegal routes – making them prey for the Tory government’s deportation policy – because there are no legal routes; the Tories have closed them all off in order to be able to pursue this inhumane mistreatment of people who are already victims.
Gullis’s response may be found here:
So: first he flung some whataboutery into the ether, claiming that the Church should be dealing with abuse claims against its own clergy. How does he know that it isn’t? And isn’t that more a problem for the Catholic clergy?
Then he said: “Too many people are using the pulpit to preach from.” Does he not know that preaching is exactly what the pulpit is for?
This man used to be a teacher but gave up when he was elected into Parliament. He said pupils at the school where he had been working were “probably happy to see me go” – perhaps because they were already better-educated than he was?
He also said the bishops were unelected. Correct – but everybody has an understanding of what constitutes fairness and justice, and nobody needs to be elected to put forward their opinion of what that is.
Furthermore, these are people who sit as experts on law and political matters in the Upper House of Parliament, and their words have weight whether Gullis likes it or not.
Instead of spouting ignorant nonsense, he should learn respect – not just for the bishops who have far more experience and understanding than he does, but also for the people his policies are victimising.
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The Bank of England has put interest rates up again – claiming that this is an attempt to fight inflation.
But inflation caused domestically – within the UK – is much lower than the 10.7 per cent rate that has been announced during the week, and falling (from 6.5 per cent to 6.3 per cent).
The higher rate is caused by price increases that cannot be changed by interest rate rises within the UK; we simply have to wait for these prices to drop. They are the result of political decisions to put the UK at the mercy of foreign businesses and influences.
Let’s have an example of mainstream media reporting on this:
And now the view from one of our favourite political economists:
So, it’s confirmed. The Bank of England is intent on trashing the economy, small businesses, households and the life chances of millions and nothing they’re doing will make any difference to the rate of inflation we are suffering. Callousness on this scale is hard to make up https://t.co/Ncf6ckFBVt
Yes, that’s right. The inflation we’re suffering will be unaffected by UK interest rate rises.
All this decision will do is create further hardship for homeowners and small businesses, and prolong the recession that stupid Tory political decisions have caused.
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One of the strangenesses of running a political website as a commercial endeavour is that one is reliant on the articles to pull in advertising revenue, and this means more popular items take priority.
More meaningful items then take a back seat until such time as they can be funded by the other material – but fortunately, today, lots of people are enjoying the Suella De Vil song, so I have an opportunity to look at why the Bank of England is hiking interest rates and worsening the UK recession.
I’m taking the information from Professor Simon Wren-Lewis’s Mainly Macro article (link below), which suggests the most likely reason I’ve seen so far – and it isn’t to stop energy price inflation, nor is it to stop food price inflation.
No – it’s to stop wage inflation. The aim is to impoverish you by increasing the difference between what things cost and what you can afford.
Here’s Prof Wren-Lewis:
A UK recession will do almost nothing to bring energy and food prices down. Instead what has worried the Bank for some time is that the UK labour market appears pretty tight, with low unemployment and high vacancies, and that this tight labour market is leading to wage settlements that are inconsistent with the Bank’s inflation target.
You can see the reasoning behind this, just with the forthcoming strike by the Royal College of Nursing, that is calling for a 17 per cent pay increase. The Bank’s inflation target is just two per cent, and has been for many years.
The article continues:
Earnings growth is around 7.5% in the wholesale, retail, hotels and restaurants sector, about around 6% in finance and business services and the private sector as a whole.
Domestic firms are under no obligation to compensate their employees for high energy and food prices, over which they have little control and which are not raising their profits. As a result, if firms were free to choose and there was abundant availability of labour, they would offer pay increases no higher than the increases we saw during 2019.
Average private sector earnings running at around 6% are not a problem for the Bank because it is anti-labour, but because it believes wage growth at that level is inconsistent with its inflation target of 2%… Earnings growth will slow as the UK recession bites.
What this means in layperson’s terms is that, by increasing interest rates, the Bank intends to make it harder for many firms to survive in the hope that they will lay off staff, forcing more people back onto the labour market.
Then, firms would be able to offer whatever wages they wanted (above the minimum, of course) on a take-it-or-leave-it basis, and if you couldn’t make ends meet, then that would be your problem.
It is a premeditated, deliberate attempt to worsen poverty for millions upon millions of UK residents.
I wonder whether this is another unintended consequence of Brexit? When the UK was obligated to accept workers from the European Union, employers benefited from exactly the kind of loose labour market that allowed them to offer subsistence, or lower-than-subsistence, wages.
Now those workers have gone and employers are forced to take on native workers, the pendulum has swung the other way. It’s a thought, isn’t it?
Prof Wren-Lewis goes on to explain that developments in economic thinking mean that the tight labour market should not require an interest rate hike to “correct” it (his word).
nowadays macroeconomists believe it is possible to end a boom [in this case an over tight labour market] and bring inflation down without creating a downturn or recession, because once the boom is brought to an end a credible inflation target will ensure wage inflation and profit margins adapt to be consistent with that target.
The lags in the economic system mean a central bank should stop raising rates while inflation is still increasing. If a central bank believes it will lose credibility by doing this, and feels it has to continue raising rates until inflation starts falling, this will lead to substantial monetary policy overkill and an unnecessary recession.
If that is why central banks in the UK and the Euro area keep raising interest rates as the economy enters a recession, then the truth is central banks are throwing away a key advantage of a credible inflation target. Credibility is not something you constantly have to affirm by being seen to do something, but something you can use to produce better outcomes. Furthermore central banks are more likely to lose rather than gain credibility by causing an unnecessary recession.
Of course raising interest rates to 3% is not enough on its own to cause a prolonged recession. Probably more important is the cut to real incomes generated by higher energy and food prices, which is enough on its own to generate a recession. On top of that we have a restrictive fiscal policy involving tax increases and failing public services. Both together should be more than enough to correct a tight labour market. To have higher interest rates adding to these already large deflationary pressures seems at best very risky, and at worst extremely foolish.
This will affect you all.
Sadly, as I indicated at the top of the article, only a few of you are likely even to have read any of the information here – certainly not to the end. So very few of you are likely to make any preparations for it.
For the rest, the next few years are going to be very difficult indeed.
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The bank of England has just imposed the biggest interest rate rise in a generation – increasing the base rate to three per cent.
There’s no reason for it. The inflation we’re facing isn’t caused by any reasons that an interest rate rise can combat – and energy prices are falling back to normal levels. The hike in interest rates will not affect the cost-of-living crisis in any way.
Instead, it will prolong the recession that the Bank of England has already said will be the worst in many years – if not the worst ever:
Coordinated interest rate rises of the type we are now seeing central bankers deliver have only one goal. That is to drive down consumer spending whilst supposedly increasing the return to financial capital in the world.
In that case the only consequence of interest rate increases (which take up to two years to reduce prices, so poor a tool are they) will be to crush the economy long after inflation will have already gone. But the central bankers are still imposing the rate rises, anyway.
And this will affect you – as Martin Lewis explained on Good Morning Britain:
Buckle up, buttercup! It’s going to be a long, hard winter – because the bankers (who, by the way, have had their ability to give themselves unlimited bonuses restored by the Tories) want you to suffer.
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When the government is accused of creating a “material risk to UK financial stability” by the Bank of England, you know things have come to a pretty pass indeed.
Watch the clip below to see how bad it really is:
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Now you see them: but after their disastrous ‘fiscal event’, politics-watchers are now being forced to play a new game. You might call it ‘Where’s Lizzie?’, or ‘Where’s Kwasi?’
What a stunning headline to write.
The Tory government is sticking by its tax-cuts-for-the-rich, make-the-poor-pay plan, even after the Bank of England had to step in with a plan to buy bonds in order to save the economy from collapsing altogether, after Kwasi Kwarteng’s worst-budget-ever last Friday (September 23).
Government departments are already being asked to find spending cuts, though – it’s looking bad for your NHS (which, by the way, is looking like an extremely enticing purchase for US investors now the Pound has plummeted to parity-or-below with the Dollar).
Meanwhile Liz Truss hasn’t been seen for nearly a week; her only communication being to congratulate a fascist on an election victory in Italy.
And Kwasi Kwarteng has similarly dropped off the map; apart from an excruciating non-response when asked how he’d solve the problems he created last Friday, he appears to be cowering in his office, waiting for the P45 to slide under the door.
Conservative MPs – along with the rest of us – have picked up on the fact that Rishi Sunak, the former Chancellor and Liz Truss’s rival in the leadership contest on which the Tories decided to waste the summer rather than do any actual work, predicted this chaos.
He said, “Borrowing your way out of inflation isn’t a plan – it’s a fairy tale.”
Liz Truss can't say she wasn't warned that her plan was a fairy tale.
Rishi Sunak(former Chancellor) – "We have to be honest. Borrowing your way out of inflation isn't a plan – it's a fairy tale." pic.twitter.com/8AerErsXaY
It is against this backdrop that Kwarteng will have to give a speech to the Conservative Party Conference on Monday.
Well, his tenure as Chancellor looks like becoming one of the shortest in history, so he might as well make the shortest-ever speech.
“I resign” comprises only two words.
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The Bank of England: its interest rate rise will hit you hard in the wallet.
The Bank of England has increased interest rates by a huge (for these times) 0.5 per cent in an apparently inexplicable move that won’t do anything to stop the current enormous increases in the cost of living.
What can possibly have possessed the Monetary Policy Committee at Threadneedle Street to do this monstrous thing?
The bank’s own forecasters are predicting that inflation will remain above 10 per cent until at least October 2023, putting huge pressures on ordinary people.
The bank is already predicting that the UK will fall into recession this year, and the interest rate rise will prolong it – so that, in three years’ time (after the next general election, take note), unemployment is expected to stand at six per cent of the workforce – and rising.
Energy prices – the main cause of the cost-of-living crisis – are expected to fall back during this period, although the predictions don’t take this into account. The hike in interest rates will not reduce the cost-of-living crisis in any way.
And the ultimate result, as Professor Simon Wren-Lewis points out in his latest Mainly Macro article, will be to reduce inflation to a point far lower than the Bank of England’s two-per-cent mandate permits. Who benefits from that?
Professor Wren-Lewis adds that it is possible the bank expects a new Tory prime minister – whoever that may be – to introduce support for people on low incomes in a bid to stop the excessive inflation and recession.
But there is no indication from either Liz Truss or Rishi Sunak that they will do that; tax cuts promised by Truss will go to rich people and/or corporations.
And, as Professor Wren-Lewis points out,
Excessive monetary tightening based on a guess of fiscal loosening is a dangerous game to play.
Sadly for most of us, the danger applies only to the poor, working people who actually keep the economy moving.
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The Bank of England: it seems, behind this imposing facade, there lurks a circus complete with clowns.
It seems the economists at the Bank of England don’t have much of a clue.
They say they have raised interest rates to make it more expensive for consumers and businesses to borrow, so people start spending less, helping cool demand for goods and services and, in turn, slowing the pace of price rises; it’s a bid to curb inflation.
But people are already reining in their spending, because of inflation!
So the interest rate increase is pointless. Right?
Furthermore, as people are choosing to save (where they can), rather than spend, the growth of the economy is slowing – which is what the interest rate rise aims to do anyway. So it isn’t needed.
In fact, it may throw the economy into reverse, sending us into a recession.
And economists have warned that increases in interest rates may have little effect given rising global oil and gas prices, over which domestic changes can have little effect.
So there seems to be only one possible reason for the Bank’s decision:
Insanity.
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The Bank of England: it’s raising interest rates in what looks like another bonus for the super-rich – and penalty for the rest of us.
Yes, it seems interest rates are set to rise to their highest point in 13 years but for those of us with mortgages and loans to pay, it’s only likely to go up to one per cent.
It’s potentially good news for those of us with savings – and remember that such people are expected to use their savings to smooth over the cost-of-living increases that are being forced on us by Boris Johnson and Rishi Sunak – because it means we’ll have higher interest payments.
That’s if our savings last long enough for any interest to be recorded, of course. Otherwise it’s just another bonus for the super-rich.
The Bank of England is expected to increase its base interest rate to the highest level in 13 years in a bid to tackle inflation.
It is predicted to rise to 1% amid soaring food, energy and fuel prices that saw inflation hit a 30-year high of 7% in March.
Markets expect the bank rate to hit 1.25% later this year, going up to 1.5% by mid-2023.
There’s no explanation in the Sky News report (quoted above) of exactly how increasing interest rates will tackle inflation, so This Writer will believe it when I see it happen.
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