boroboy6872
Well-known member
100% agree
UK Inflation Rises to a 40 Year High of 9%
- Thread starter Fat_Dragon
- Start date
My understanding (i am no expert) of inflation is that rises are caused when the ratio between cash and goods increases?
The response to the pandemic was to close the economy down. Goods stopped being produced and to exaggerate the problem the government introduced an influx of money into the economy through a number huge quantative easing programmes. However, there are further factors at play such as fractional reserve banking and how money is created and added to the economy from thin air through loans/mortgages ect. As more and more people climb on to the housing ladder and houses become more expensive this means that more money is created at an ever increasing rate resulting in a snowball effect.
Other than hike up interest rates I'm not sure what else can be done to stop inflation turning into hyper inflation unless we rip up the rule book and find a better way to run the economy.
The response to the pandemic was to close the economy down. Goods stopped being produced and to exaggerate the problem the government introduced an influx of money into the economy through a number huge quantative easing programmes. However, there are further factors at play such as fractional reserve banking and how money is created and added to the economy from thin air through loans/mortgages ect. As more and more people climb on to the housing ladder and houses become more expensive this means that more money is created at an ever increasing rate resulting in a snowball effect.
Other than hike up interest rates I'm not sure what else can be done to stop inflation turning into hyper inflation unless we rip up the rule book and find a better way to run the economy.
sherlock
Well-known member
Why do you think raising interest rates will work?
I understand that this is pretty much the only tool that the BoE have but it won't work. Inflation is usually caused by excessive consumer spending ie when people have too much spare cash to spend on luxuries, so demand goes up and prices follow.
However, people are already struggling, they don't have spare cash. Raising interest rates will reduce any spare cash even more. The current inflation is driven largely by energy and fuel costs which are pushing up the prices of literally everything. Making people less able to buy even essentials by raising interest rates will have absolutely no effect whatsoever.
Colgates_shaving_foam
Well-known member
As usually happens, the people making decisions on rate rises have no idea or understanding on how it impacts on the median UK household, let alone the lower 50% of households.
Rate rises are absolutely pi**ing in the wind. Doing nothing more than piling further pressure on people who are already struggling.
Rate rises are absolutely pi**ing in the wind. Doing nothing more than piling further pressure on people who are already struggling.