Inflation
- Thread starter Wizaard
- Start date
SeasideKurt
Well-known member
It's not going well but you know what pisses me off the most?
"How did you vote for the Tories?" Brigade that have the shortest memories in history. And never actually tell you who they voted for.
"How did you vote for the Tories?" Brigade that have the shortest memories in history. And never actually tell you who they voted for.
Lytham_fy8
Well-known member
YEAHBUTUNDERCOMRADECORBYNWE'DALLBELIVINGINSHEDSTHEMAILSAIDSOWHYDOYOUHATETHISCOUNTRY?
seasideone
Well-known member
Just like blaming the financial crisis on Labour is rediculous, blaming inflation on the Tory's now is just as stupid.
Wizaard
Well-known member
They don't have to increase the tax burden, they could do something about fuel prices, and of course, Brexit plays no part at all. These are three major factors, but they do nothing.
I guarantee that come the next election, inflation would have come down by a couple of points and they'll be going to the polls saying how they manage the economy so much better than Labour.
If I was cynical, I'd say it's almost as if they are bumping it up now, to be able to quote a reduction in a couple of years time...
Lytham_fy8
Well-known member
As an owner of a VIP lane PPE supplier I think the economy is doing brilliantly and we're hoping to ship those masks in the next 18 months.
Curryman
Well-known member
Watching the news last night and seeing that the Unions were asking for a 20% rise in wages for their Bin Operatives (is that the correct term?) in Eastbourne, who have been on strike after being offered 7%, is it any wonder that inflation will rise? It appears they settled, in the end, for 11%,
This reminds me greatly of the time of the disputes in the 1970's. Wilson/Heath parliaments when the Miners held the country to ransom with a claim for a 43% rise in 1972, eventually settling for 20% and then battled again for a further rise, in 1974, of 35% brought down Heath in a General election who had offered 10.5%. Wilson settled with them on his election.
Remember the 3 day week?
Remember the power cuts?
Remember the rampant inflation?
Remember who came to power and defeated the miners and has been hated ever since?
Be careful what you ask for!
Footnote: most of the economies in the world are currently seeing increased inflation due to various reasons following the effects of the Pandemic and the vast increases in the price of gas and other fuels.
This reminds me greatly of the time of the disputes in the 1970's. Wilson/Heath parliaments when the Miners held the country to ransom with a claim for a 43% rise in 1972, eventually settling for 20% and then battled again for a further rise, in 1974, of 35% brought down Heath in a General election who had offered 10.5%. Wilson settled with them on his election.
Remember the 3 day week?
Remember the power cuts?
Remember the rampant inflation?
Remember who came to power and defeated the miners and has been hated ever since?
Be careful what you ask for!
Footnote: most of the economies in the world are currently seeing increased inflation due to various reasons following the effects of the Pandemic and the vast increases in the price of gas and other fuels.
seasideone
Well-known member
Brexit was voted for by the British people from both sides of the divide and has very little to do with this.
Current inflation is mainly down to an over supply of money and congestion in the supply chain - generally caused by Covid (If it was mainly down to Brexit the rest of the world wouldn't have it - but the US is running at 7%)....and if the countries haven't currently hit a problem it is defo in the post!!
Governments around the world have put to much money into economies through furlough, business grants and QE in the last few years.
Throw in low interest rates as countries chase growth globally and it's a recipe for bad things.
This is a global problem like the financial crisis was and not local to the UK.
Removing the 5% VAT on fuel (wouldn't have been allowed if we were still in the EU) in reality will not make much of, if any difference in the big scheme of things - although it would allow some political point scoring.
Interestingly, if you calculated US inflation the same way they calculated it in the early 80's it would currently be over 15%.
poolseasider
Well-known member
Inflation in the EU also running at 5% with an energy crisis also happening.
Pasta in Italy for example has risen by 40%!
Pasta in Italy for example has risen by 40%!
Mexboroseasider
Well-known member
I seem to recall recent posts telling us that one Brexit Benefit was the end of freedom of movement and presence of foreign workers, which meant that wages for Brits would go up.
But now that’s a bad thing it seems?
R
rockontommy
Guest
Haha... Did you think this last two years of Covid cult jamboree - paying people not to work, unlimited Covid shots for all and closing whole sectors of the economy - came for free? Amazing that anyone would play party politics on this one.
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seasideone
Well-known member
If only we had someone (or if we had a time
Machine the real one) like Maggie
now.The country would be in a far better state
Curryman
Well-known member
I'm sorry Mex that is nonsense. Everyone wants a rise in pay. But rises have to be reasonable, and I include the top brass. Captains of industry or whatever you wish to call the upper echelons.
As others have pointed out, we have just come through unprecedented times and are still suffering from the effects of the crisis.
I'm fortunate, to a point, that I have savings and a couple of private pensions which top up my government pension and I feel for those who will be struggling to heat their homes and eat, such ridiculous claims as the one I mention make things one hell of a lot worse for those who cannot expect such rises in their incomes.
Jefflynnessongsheet
Well-known member
Bet the idiots who’ve bought overpriced new houses with a mortgage are sh1tting themselves. It’ll be 7% before March and 10% before end of year. The pandemic was the pin that is bursting the bubble.
Oil prices are rocketing again and wholesale gas prices are also rising sharply meaning more steep rises for us over the next few months.
Get ready for a rough ride people, the worst hasn’t hit us yet. One bonus they’ll be lots of nearly new houses up for auction before years end.
Oil prices are rocketing again and wholesale gas prices are also rising sharply meaning more steep rises for us over the next few months.
Get ready for a rough ride people, the worst hasn’t hit us yet. One bonus they’ll be lots of nearly new houses up for auction before years end.
Wizaard
Well-known member
Martin Lewis saying that the true price of gas is 76% higher than last year. Worrying times.
Limechase
Well-known member
Its greed as far as I can see with Gas...
It isnt costing more to produce/mine/get out of the ground, its Gasprom wanting to buy another football club, & put footballers on unrealistic salaries that any normal person would take a lifetime to earn what they do in a month....
It isnt costing more to produce/mine/get out of the ground, its Gasprom wanting to buy another football club, & put footballers on unrealistic salaries that any normal person would take a lifetime to earn what they do in a month....
1966_and_all_that
Well-known member
Good to see the first part of your post One. However, I believe the Labour policy of light touch governance contributed to the lax disciplines in the UK finance industry prior to the financial crisis. Equally, whilst the Tory Government has not been responsible for the rising costs of living, I do believe they should now be doing more (as per Wizaard's post, above) to ameliorate the situation.
Costero Poderoso
Well-known member
Inflation isnt really a true metric of anything, simply because the nature of its measurement is changed on a failry regular basis. The best demonstration of this is the fact that since 2008 eleventy squillion pounds has been dropped into the economy through QE (multiple), bailouts, or the various furlough programmes and inflation did not shift, every economic orthodoxy said that inflation should be increasing significantly. On the other hand cost of living has increased, even when stagflation was supposedly at play.
The current reporting to me is simply a means to maintain pressure against wage increases.
One of the key drivers for low inflation is an unemployment rate of between 5 and 8%, which leads to the conclusion that it is beneficial that around 20-25% of the workforce have to be either unemployed or in insecure employment.
That should have an effect on various aspects of consumerism but it doesn't, because credit is very cheap, but credit is cheap because inflation is low, and argument can be made that interest rates are kept low because the goal for most economic models is low inflation.
The current reporting to me is simply a means to maintain pressure against wage increases.
One of the key drivers for low inflation is an unemployment rate of between 5 and 8%, which leads to the conclusion that it is beneficial that around 20-25% of the workforce have to be either unemployed or in insecure employment.
That should have an effect on various aspects of consumerism but it doesn't, because credit is very cheap, but credit is cheap because inflation is low, and argument can be made that interest rates are kept low because the goal for most economic models is low inflation.
Tangerinemoss
Well-known member
You mean economic modelling can be wrong?? But epidemiological modelling is not allowed to be?
Great post, by the way, I always read your economic comments with interest, particularly since reading about the origins of economic models which were over simplistic nonsense.
Why? If they locked in their mortgage at a low fixed rate and are watching their debt being inflated away, they are laughing at this.
Wizaard
Well-known member
With 7 million on zero hours contracts/ variable hours contracts, we probably are at 20% or more.
Lost Seasider
Well-known member
Who set up the light touch regulation system?
Costero Poderoso
Well-known member
i did do the research at one point, as to how many freelance and short term and zero hour contracts i think its actually higher than 20% in the UK
seasideone
Well-known member
Maggie started the de-regulation.
Also, the problems started in the US with credit rating agencies giving AAA to junk investments.
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Costero Poderoso
Well-known member
the problems started at the point of banking deregulation, particularly the Glass Steigal act in the US in the 90's, there is a direct line to the financial collapse from de-regualtion. The problems with the ratings agencies and their impact on the financial markets was more a symptom of de-regulation than an actual cause of the problem, if you were to compare the finacial crisis to an illness, de-regulation is the primary infection, which creates secondary infections such as the credit ratings agency issues.
however you can't really blame any of the governments for monetary policy any more because it has been outsourced to central banks for the last 20 years.
Lost Seasider
Well-known member
That was to do with the stock markets, not the banking sector.
And it was the light touch regime that left us so exposed to the consequences.
seasideone
Well-known member
All the markets and investments effect each other and are intrinsically connected.
Maggie started the de-regulation and Labour continued it.
The real problem was not actually the de-regulation or light touch initially, it was the fact the investment side of the banks were not separated from retail - nobody had thought about what the consequences would be, or never considered it a possibility that the investment side could fail so spectacularly.
Therefore, when the investment banks were putting money into what they thought was AAA stuff as graded by the US credit rating agencies, that was actually worthless - it was always going to end one way.
Throw in the fact the banks were coming up with products so complicated nobody understood them!!!
The banks were investing in AAA financial products that were worth the square root of zero.
The other big problem was/is that the most banks work on a fractional banking system which allows significant leverage of the banks finances.
In simple terms, the banks only had to hold on reserve a certain amount in case of bad debt. This was calculated as a multiplier based on their previous bad debt history.
If that multiplier is 10 then the bank would be allowed to lend 10x the money it actually has on reserve (generally borrowing the rest from other banks or the boe or fed etc and adding a margin for their profit .). A multiplier of ten would suggest that less than 10% of loans or investments would ever go bad, therefore the banks should always be able to cover any losses if they had reserves of 10% of the loan and investment book.
The reality was the multipliers the banks were using were way to high, so when it all went to crap they simply didn't have the cash to pay back where they borrowed the extra capital from.
Which in other words was a margin call that they couldn't match (remember Barings).
The losses of the investment sides were so large they brought down the retail side as well which is why the governments had to step in.
It wasn't to save the bankers, it was to save the average person in the street.
Which is now why the investment side of all banks is now separated from the retail side.
So the point that I was trying to say - is that it was all connected and a global issue - and not just the government of the time.
It started even earlier with the US authorities ordering banks to offer mortgages to people who couldn't afford them, particularly black people, in the name of equity.
Lost Seasider
Well-known member
http://econ.tu.ac.th/archan/rangsun...sons/Lessons from 2007 Financial Crisis 2.pdf
In the UK, the problems were aggravated by:
1. a flawed Tripartite arrangement between the Treasury, the Bank of England and the Financial Services Authority (FSA) for dealing with financial crises;
2. supervisory failure by the FSA;
3. flaws in the Bank of England’s liquidity-oriented open market policies (too restrictive a definition of eligible collateral and an unwillingness to try to influence market rates at maturities longer than overnight, even during periods of serious lack of market liquidity);
4. flaws in the Bank of England’s discount window operations (too restrictive a definition of eligible collateral; only overnight lending; too restrictive a definition of eligible discountwindow counterparties)
Costero Poderoso
Well-known member
i think you are mistaken on a number of things here
Consumer banking was until the 90s largely separated from investment / commercial banking and regulated strictly until the 90s by Glass Steigal, there was a similar but not as strong regulation n the UK. Glass Steigal was broken down in the early 90s.
Most western banks do not operate on a Fractional Reserve system, but they are generally regulated on the fractional reserve system - there are still some western banks operating on the intermediary model, smaller savings and loans type banks, credit unions etc. Most western banks now functionally operate on a credit creation model (Richard Werner). There is no effective regulatory or legislative mechansim to put any restrictions on banks under this model of operation, other than the absolute fact that only a sovereign entity can create currency. Under that basis it is assumed that no bank can create money, but there is a case study of Barclays Bank creating around 6 billion pounds to lend to a middle eastern sovereign fund to enable them to sell shares to that sovereign fund. RIchard Werner describes it in one his papers and a few lectures.
The bail outs were specifically done to save the banking system and the large banks, it may have had the effect of underpinnning the consumers trust in banks, but pretty much all the QE went directly into the banks and stayed there.
Consumer /Retail banking is not separated from the investment / commercial banking side, however their are numerous reccomendations that consumer banking is ring fenced, however all the big banks are resisting this. The situation today might actually be worse. mortgages and particularly sub-prime are still being put into various structured products but they are no longer called CDO's. in addition Auto loans again particularly sub primes, and credit cards again particularly sub primes as well as a lot of other consumer lending are being put into similar products.
When it fails next time, and it will- its just a matter of time, it will be magnitudes of times worse. The Eurozone in particular will be truly fucked, but the UK is not in a good position. The asset footprint of the main UK banks is around 3.5 times the size of UK GDP. Because the ECB still isnt really functioning as a proper central bank it is reliant on the German economy through its banking system being the back stop to the euro. the asset footprint across the vaious nations of the eurozone is generally around the same as in the UK some a bit higher some a bit lower. The AF of the main erozone banks i think is around 9 times bigger than the GDP in germany. The next crash cannot be bailed out.
its all connected as you say, and it makes depressing reading.
P
Positive and proud
Guest
The left cry out for a lockdown and then Moan when we have to pay for it afterwards 
seasideone
Well-known member
Not quite sure what you are trying to prove here - as Maggie still started the deregulation and everything is still intrinsically connected.
The financial crisis was global and not caused by Labour.
seasideone
Well-known member
I'll come back to you on this tomorrow as it's way past my bedtime
I will also read up on that story about Barclays as I do not know much or anything about that.
I agree the banks are audited on a fractional model and we can be pedantic about how they operate ....... but they still are only allowed to leverage a fixed number of times based on the risk profile and previous history.
Geestar
Well-known member
Totally agree. Fancy houses and fancy cars on credit. They will be totally screwed soon. Low interest rates have sucked these people into a huge forthcoming financial black hole. I have absolutely no sympathy for these people. I do feel sorry for pensioners having to pay the huge price rises in energy. My gas bill has soared, however I am lucky that I can stand the cost, but millions of people will suffer fuel poverty shortly. They are the people who deserve help, not the fools living beyond their means.
Lost Seasider
Well-known member
I never said otherwise, what I did say is that Brown's "soft touch" regulation of the banks left us exceptionally vulnerable to its effects.
We still own over half of the Nat West Group (RBS) BTW, how many other countries had to nationalise their banks? How many countries still have them on their books 15 years later?
Costero Poderoso
Well-known member
I would say most modelling is wrong because the data is never complete. The difference maybe between epidemiological modelling and economic is that health professionals are making provisions to affect the outcome. Economists are generally quite passive.You mean economic modelling can be wrong?? But epidemiological modelling is not allowed to be?
Great post, by the way, I always read your economic comments with interest, particularly since reading about the origins of economic models which were over simplistic nonsense.
Costero Poderoso
Well-known member
Brown did make everything significantly worse.
The Spanish, french, Irish and several other countries still have nationalised banks on their books. The US federal gov has numerous financial institutions that it underwrites and I think that there are still owned by federal and state govs.
Costero Poderoso
Well-known member
An interesting piece of info from some research I was doing a while ago. Around a half of all UK households in the UK are living paycheque to paycheque. A sudden £400 expense for the majority of those households could not be covered without sacrificing in other areas or taking on credit. 20% of all UK households could not last a single week if their income was suddenly lost. The number of people who have 90 days of financial security is less than 30%.
Costero Poderoso
Well-known member
Its not that banks are audited on the fractional model, they are regulated on that model. Its not pedantic how they operate, if they are operating in one way but regulated on another, then audits and leveraging are moot. To footballify it if a rugby team were playing in the championship and basically playing rugby but the refs were only looking to penalise the players playing football you would have a similar scenario.I'll come back to you on this tomorrow as it's way past my bedtime
I will also read up on that story about Barclays as I do not know much or anything about that.
I agree the banks are audited on a fractional model and we can be pedantic about how they operate ....... but they still are only allowed to leverage a fixed number of times based on the risk profile and previous history.
seasideone
Well-known member
The vast majority of banks work on a leveraged model which is fractional banking.
You can try and dress it up as anything you like, but each bank has to work to strict ratios which is a lot tougher than it used to be.
The regulators do audit the banks as well (or contract outside companies to do it) which is where stress testing comes in.
WIZARD OF TANGERINE
Well-known member
I hate the Tories ,but the fuel prices can't be helped or are all these firms going to the wall just to undermine the government ?
Shandypants
Well-known member
I feel for some families who are in poverty through poor work opportunities but I see too often people living well above their means to live a lavish lifestyle. I just don't get it, strange mindset.
Wizaard
Well-known member
Many of the companies were speculators who latched onto what was seen as a quick way to make money and have overstretched themselves. That's capitalism in action right there.
Costero Poderoso
Well-known member
We have as a society been continually encouraged to live beyond our means for decades. The consumerist economy falls apart if people dont live beyond their means.
seasideone
Well-known member
One of the big problems was very poor management and lack of future foresight.
They could have hedged / bought the future supply at a guaranteed price.
...many didn't as they could never foresee prices going the way they did.
Airlines do it all the time with fuel.
Everyone knows that brexit plays no part in the global inflation problem. Why pretend it does?
Costero Poderoso
Well-known member
I think you are missing something. Regulations have been tightened in the financial sector, granted: so the banks have to pass their various financial health checks, and financial advisers and the like are subject to more regulatory processes. But the core legislation in the financial sector is useless in actually regulating banks and their activities. A core tenet of monetary policy / activity is that only sovereign entities can create money, monetary value is based on that principle if we could all create momey then it would have no value. The credit creation model which is the bay banks function, its not just dressed up that way, is actually creating money within the banks not from the sovereign entities. The argument from the banks is that credit isn't actually money, and so far (unless it has changed in the last twelve months) the various authorities have accepted that point, for good reason. The issues in the finacial sector are myriad but key to it is that the cannot be properly regulated and, because they are not properly regulated, banks can report relatively low risk in the bank, and in individaul products (passing health cheques) but systemic risk is being increased.
The inadequacies of the regulatory processes go the other way as well. Germany has always had a strong tradition of community banking, which operate on the intermediary model, and the various methods of underwriting are completely different but since the crisis those community banks are now regulated in the same way as the big banks, (the fractional reserve model) which means the community banks cant compete and are either going under or are being merged together or merged into the big banks.
BigHandsOliverKahn
Well-known member
No but it plays a part in the UK inflation problem and when that figure is higher than the EU's figure, people will point to Brexit.
Jaffa_The_Hut
Well-known member
I’am no Tory but the UK economy has recovered much quicker than anyone ever predicted and in much better shape than all the other EU countries.
Surprised no one has brought this up.
Shandypants
Well-known member
Really? Prior to brexit goods moved with zero hassle. More bureaucracy and red-tape has ensued, what happens then?? Extra costs and increased prices.....