SmallTown
Well-known member
Bloomberg - Are you a robot?
www.bloomberg.com
Recession, inflation and interest rates
- Thread starter LaPennaBianca
- Start date
Dybuk
Well-known member
Agree with the sentiment but they're not all MEN
Liv Garfield at STW and Sarah Bentley aren;t anyway. Not sure why the capitalisation is MEN
Pak_Doo_Ik
Well-known member
The worrying thing is the BoE were saying inflation would hit around 5% just 6 months ago, when the world and his wife could see it was always going to hit nearly double that, so now they are going to extremes in the other direction by taking about a 5 year recession etc
Raising interest rates is what we have always done and the BoE know no other way of trying to address the current situation, its using 19th and 20th Century fiscal policies to deal with 21st Century issues, a bit like Bill Gates putting more ink in his ink well because Microsoft has having software issues.
The energy thing is just plain bonkers, of course we could just cap the cost. The suppliers would then be forced to put pressure on the producers. Oil and gas production needs an outlet just like any other product and if the biggest nations got together they could force this to happen, but they won't as they are lining their own pockets and do not want to miss out on this current licence to print cash and build even bigger reserves of cash.
Raising interest rates is what we have always done and the BoE know no other way of trying to address the current situation, its using 19th and 20th Century fiscal policies to deal with 21st Century issues, a bit like Bill Gates putting more ink in his ink well because Microsoft has having software issues.
The energy thing is just plain bonkers, of course we could just cap the cost. The suppliers would then be forced to put pressure on the producers. Oil and gas production needs an outlet just like any other product and if the biggest nations got together they could force this to happen, but they won't as they are lining their own pockets and do not want to miss out on this current licence to print cash and build even bigger reserves of cash.
Jonny_Rondos_Disco_pants
Well-known member
BP made massive changes over the last few years, they’re pulling in big profits generated in Oman, Egypt, Azerbaijan etc. if you want a fair society the surely those profits should also be part distributed in those nations too? 
MolteniArcore
Well-known member
The BoE have been pretty crap under Andrew Bailey. They were slow to react to inflation at the start and are now playing catch up. Their forecasts have been on the low side regarding inflation and they refuse to mention the 'B' word when it comes to things effecting economic growth.
The BoE are always terrible. Economists in general are terrible at predicting anything. It is almost impossible to create a model that predicts rapid change. They are always too short on the way up and when the curve starts to flatten thy are too long. When we look back in 10 years time they'll have an immaculate model telling us exactly what happened, what the triggers were etc but looking forward with any kind of accuracy is next to impossible for them. They would be better off just using their judgement than a model.
On top of that, they only have one thing to do and that is increase/decrease interest rates and they only have one metric to control, inflation (and confidence in the money but that is driven by inflation). They don't care how interest rate changes will affect people, they care how it will affect inflation. It's the Government's job to care about people.
Centralscrutinizer
Well-known member
It varies from country to country but a country gets somewhere between 60 and 90 % of the revenue from their oil and gas production.BP made massive changes over the last few years, they’re pulling in big profits generated in Oman, Egypt, Azerbaijan etc. if you want a fair society the surely those profits should also be part distributed in those nations too?
DidsburySmog92
Active member
I am not really sure how an independent BoE could predict the global pressures and issues that are contributing adding to inflationary pressures. This is not the pre 1990 when a country could consider itself responsible and have absolute influence over it's own fiscal policy. Our economy is more global now than it ever has been so any expectation that the BoE has a crystal ball or any absolute power to solve it is grossly naïve.
Bowing to political pressure to introduce price caps have, in the long term, proven to destroy provider competition by making it impossible to enter the market, especially at a time of energy price fluctuation. The UK would never be in a position to renationalise providers and even if it was it would not sort the source price highs. Let's take the French (who never let go of their infrastructure companies - always kept a % of ownership) they have stepped in to regulate prices. In the long term that will be an inflationary pressure. They might not experience the level of inflation Germany or the UK are feeling now but it will come with the level of national debt required to regulate that market.
Meanwhile global pressures on gas and oil especially the impact on European gas supply from Russia is having a major impact on the market. Price of wheat due to the conflict in Ukraine and fertiliser is having a ~60% increase in prices of essential foods.
This is very different to 2008. The only similarity is that it is a global cause. 2008 was triggered by a credit crunch and a system contraction. This is much more commodity led. I am not sure how much a nation state can do to ease the burden. Tax cuts? Will add to inflation. Interest rate hikes? Will bring down inflation but put pressure on the housing market. Government intervention? Will ease the least well off but will elongate the inflationary pressures.
And then there is Brexit. Which is a uniquely UK shaped mess, walking away from it's largest trading block and biggest economic union in the world. That said - each nation state has uniquely different inflation issues at the moment (between 6-20%) for multiple reasons.
Then there is Putin who can see all this happening and knows its the first to blink that wins the prize.
Bowing to political pressure to introduce price caps have, in the long term, proven to destroy provider competition by making it impossible to enter the market, especially at a time of energy price fluctuation. The UK would never be in a position to renationalise providers and even if it was it would not sort the source price highs. Let's take the French (who never let go of their infrastructure companies - always kept a % of ownership) they have stepped in to regulate prices. In the long term that will be an inflationary pressure. They might not experience the level of inflation Germany or the UK are feeling now but it will come with the level of national debt required to regulate that market.
Meanwhile global pressures on gas and oil especially the impact on European gas supply from Russia is having a major impact on the market. Price of wheat due to the conflict in Ukraine and fertiliser is having a ~60% increase in prices of essential foods.
This is very different to 2008. The only similarity is that it is a global cause. 2008 was triggered by a credit crunch and a system contraction. This is much more commodity led. I am not sure how much a nation state can do to ease the burden. Tax cuts? Will add to inflation. Interest rate hikes? Will bring down inflation but put pressure on the housing market. Government intervention? Will ease the least well off but will elongate the inflationary pressures.
And then there is Brexit. Which is a uniquely UK shaped mess, walking away from it's largest trading block and biggest economic union in the world. That said - each nation state has uniquely different inflation issues at the moment (between 6-20%) for multiple reasons.
Then there is Putin who can see all this happening and knows its the first to blink that wins the prize.
Funny how they changed their tune in 2008 when they quantitively eased and printed hundreds of billions of pounds which they handed to their pals in the banking sector who kept it for themselves. I wonder if they would print some spare cash for me or you next time we fall on hard times
All governments should be frightened of their people.
The French populace periodically remind their governments not to take the pi$$
MolteniArcore
Well-known member
This recent crisis has shown that competition in the energy market doesn't work. And with all these companies failing I am not sure when things calm down there will be a rush to re-enter the market.
Same with water (WTF!! How were we ever going to get competition)
Same with rail
Same with post
Currently with energy we have the worst of 2 worlds. No competition and no state ownership to soften the blow - they just make money and it flows to shareholders. It is a disgrace.
I'm not sure how we sleepwalked into selling all our public utilities and didn't plan for this kind of issue.
Jonny Ingbar
Well-known member
It wont.
The bank of england's purpose is to control inflation, but the only tool they have to do so is interest rates.
It's like a builder trying to build the eiffel tower with a hammer.
Pak_Doo_Ik
Well-known member
When we hit recession things will get really interesting, as the obvious and usual move is to cut interest rates, but as inflation will still be climbing this isn’t really an option, the BoE will be like a dog chasing it’s tail.
Also on the subject of energy prices I see OFGEM have refused to move the price cap back to being 6 monthly, which would give us a further 3 months at the current price and they’re supposed to be on the side of the consumers
Also on the subject of energy prices I see OFGEM have refused to move the price cap back to being 6 monthly, which would give us a further 3 months at the current price and they’re supposed to be on the side of the consumers
HarryVegas
Well-known member
This is what happens when you sell off all your public utilities. They become part of the world of big business - more like obscenely massive business, actually - and their sole job is to make as much profit as they possibly can. To quote Billy Bragg, “Capitalism is like fire: keep it under control and it will give you heat and light; leave it unattended and it will consume everything in its path.”
Jonny I don't really understand economics and stuff but would be interested in what you think what other tools should the BoE have
Traditionally the tools to control the economy were monetary policy and fiscal policy. Now the BoE controls monetary policy, and the government controls fiscal policy.
So currently the BoE is trying to control inflation by increasing interest rates, while the Tory leadership candidates are planning to cut taxes.
There may have been good reason to separate the BoE's responsibility from the government, but now they are cancelling each other out.
So currently the BoE is trying to control inflation by increasing interest rates, while the Tory leadership candidates are planning to cut taxes.
There may have been good reason to separate the BoE's responsibility from the government, but now they are cancelling each other out.
I know people want to blame the government , but they have to remember this is going to be an issue for the whole of Europe.
Why are energy prices going sky high for everyone ? A large portion of it can be blamed on an evil **** deciding to invade Ukraine and large sections of Europe making themselves dependent on their energy .
It will be a tough winter , but hopefully europe will have severed ties with the evil ****** completely the next winter after
Why are energy prices going sky high for everyone ? A large portion of it can be blamed on an evil **** deciding to invade Ukraine and large sections of Europe making themselves dependent on their energy .
It will be a tough winter , but hopefully europe will have severed ties with the evil ****** completely the next winter after
Jonny Ingbar
Well-known member
The B of England are obviously independent of government now, but therein lies the rub; whatever additional powers they are given would be to the detriment of governments ability to shape economic policy.
So it ain't going to happen.
But what is needed is proper government policy, which so far has been absent.
Not an expert by any measure, but it seems fairly rudimentary to me?
MolteniArcore
Well-known member
Meanwhile in France:
f24.my
Inflation 6.5%... Maintained energy price cap, rent increases limited to 3.5%, pensions and benefits up 4%, fuel duty slated by 30c per litre, private companies encouraged to offer bonuses of up to 6000 euros.
In the UK:
The Prime Minister and the Chancellor are both on their summer holidays. But that is Tories for you. I'm alright Jack.
French MPs approve 20 billion-euro package to help with soaring inflation
French lawmakers on Wednesday approved a 20 billion-euro ($20.3-billion) package of measures to help struggling households cope with rising energy and food prices.
f24.my
Inflation 6.5%... Maintained energy price cap, rent increases limited to 3.5%, pensions and benefits up 4%, fuel duty slated by 30c per litre, private companies encouraged to offer bonuses of up to 6000 euros.
In the UK:
The Prime Minister and the Chancellor are both on their summer holidays. But that is Tories for you. I'm alright Jack.