Detournement Posted December 16, 2021 Share Posted December 16, 2021 Interest rates up because of inflation is the headline across the media. No explanation of how higher interest rates reduces inflation anywhere as far as I can see. It's just another tool of austerity. 0 Quote Link to comment Share on other sites More sharing options...
Billy Jean King Posted December 16, 2021 Share Posted December 16, 2021 Interest rates up because of inflation is the headline across the media. No explanation of how higher interest rates reduces inflation anywhere as far as I can see. It's just another tool of austerity. Take it you didn't do o-grade economics ??? 1 Quote Link to comment Share on other sites More sharing options...
Detournement Posted December 16, 2021 Share Posted December 16, 2021 5 minutes ago, Billy Jean King said: 8 minutes ago, Detournement said: Interest rates up because of inflation is the headline across the media. No explanation of how higher interest rates reduces inflation anywhere as far as I can see. It's just another tool of austerity. Take it you didn't do o-grade economics ??? It might have worked in 19 canteen but it definitely won't work now. International prices of oil, gas, food and raw materials won't be impacted by British interest rates. All that will happen is that households will have less to spend and businesses will lose sales and have higher borrowing costs. 0 Quote Link to comment Share on other sites More sharing options...
coprolite Posted December 16, 2021 Share Posted December 16, 2021 4 minutes ago, Detournement said: Interest rates up because of inflation is the headline across the media. No explanation of how higher interest rates reduces inflation anywhere as far as I can see. It's just another tool of austerity. Mainstream- Inflation = too much money in system Interest rates = price of money Increasing price should reduce demand for money so income is diverted to savings. Or put another way it should encourage savings as a substitute for consumption MMT- Interest is ultimately on gilts and is analogous to tax and removes money from circulation reducing inflation. Different perspectives of the same thing. It takes money out of circulation. 0 Quote Link to comment Share on other sites More sharing options...
Detournement Posted December 16, 2021 Share Posted December 16, 2021 10 minutes ago, coprolite said: Mainstream- Inflation = too much money in system Interest rates = price of money Increasing price should reduce demand for money so income is diverted to savings. Or put another way it should encourage savings as a substitute for consumption MMT- Interest is ultimately on gilts and is analogous to tax and removes money from circulation reducing inflation. Different perspectives of the same thing. It takes money out of circulation. If they wanted to take money out of circulation they would have ended QE. The MMT perspective of inflation is that comes from demand outstripping supply eg the 70s oil shock. The current level of inflation is clearly not due to consumer demand. It's all supply issues. 0 Quote Link to comment Share on other sites More sharing options...
Detournement Posted December 16, 2021 Share Posted December 16, 2021 Also the higher interest rates on personal and business debts doesn't lead to money leaving the system it just ends up as profits for banks who will use it to pump up asset prices even further. 0 Quote Link to comment Share on other sites More sharing options...
coprolite Posted December 16, 2021 Share Posted December 16, 2021 24 minutes ago, Detournement said: If they wanted to take money out of circulation they would have ended QE. The MMT perspective of inflation is that comes from demand outstripping supply eg the 70s oil shock. The current level of inflation is clearly not due to consumer demand. It's all supply issues. Price rises are not inflation. 0 Quote Link to comment Share on other sites More sharing options...
Detournement Posted December 16, 2021 Share Posted December 16, 2021 3 minutes ago, coprolite said: Price rises are not inflation. Is this crackpot Chicago economics? 0 Quote Link to comment Share on other sites More sharing options...
coprolite Posted December 16, 2021 Share Posted December 16, 2021 28 minutes ago, Detournement said: Is this crackpot Chicago economics? No, it's just what inflation is. A reduction in the value of money. It can be caused in part by price (and wage) rises and show up in price (and wage) rises but that's not what it is. 0 Quote Link to comment Share on other sites More sharing options...
Soapy FFC Posted December 16, 2021 Share Posted December 16, 2021 2 hours ago, Detournement said: It might have worked in 19 canteen but it definitely won't work now. International prices of oil, gas, food and raw materials won't be impacted by British interest rates. All that will happen is that households will have less to spend and businesses will lose sales and have higher borrowing costs. The explanation I heard on the radio today was, that once non-controllable international influences such as oil and gas are removed, the core inflation rate is still high and increasing. So the rise is to try and lower the elements of the overall inflation figure that are 'controllable' by the BoE. I'm not defending it, but interest rates are still at an incredibly low rate from what they historically have been. When I moved house in 1998, my mortgage was capped at 15%, with the normal variable rate at that time about 17-18%, and the BoE base rate about 14%. 0 Quote Link to comment Share on other sites More sharing options...
yoda Posted December 16, 2021 Share Posted December 16, 2021 (edited) 3 hours ago, Billy Jean King said: 3 hours ago, Detournement said: Interest rates up because of inflation is the headline across the media. No explanation of how higher interest rates reduces inflation anywhere as far as I can see. It's just another tool of austerity. Take it you didn't do o-grade economics ??? To be fair (tbf), I don't agree with a lot of Detournement's takes but they've got a point here. And it's not exactly an uncommon take either. There's a number of people questioning how much of an impact it'll have. There's obvious forward guidance implications but - and this is my amateur opinion - I'm not convinced a rate rise will have much effect either way. Although I think there's more reasons to oppose rate hikes at the moment than there is to support them. 2 hours ago, coprolite said: Price rises are not inflation. Citation needed. Because almost every textbook or central bank website I've read defines inflation as a sustained increase in the general price level. Inflation causes a decrease in purchasing power, which is a reduction in the value of your money. Edited December 16, 2021 by yoda 0 Quote Link to comment Share on other sites More sharing options...
ICTJohnboy Posted December 16, 2021 Share Posted December 16, 2021 BBC just reported that N. Shropshire by election is too close to call right now. Also suggesting that if the Tories lose, it could be damaging for Boris! 0 Quote Link to comment Share on other sites More sharing options...
Tony Ferrino Posted December 16, 2021 Share Posted December 16, 2021 7 minutes ago, ICTJohnboy said: BBC just reported that N. Shropshire by election is too close to call right now. Also suggesting that if the Tories lose, it could be damaging for Boris! It'll just send him further right which will be damaging for all of us. 0 Quote Link to comment Share on other sites More sharing options...
Scott Steiner Posted December 16, 2021 Share Posted December 16, 2021 5 minutes ago, Tony Ferrino said: It'll just send him further right which will be damaging for all of us. The 'Conservatives' lurching right and actually becoming conservative would be great for us all. More likely for a by election defeat and the Tories ousting Johnson completely though. That wouldn't be such a bad thing. Gove would be far more competent.. at least he has an ideology and actually believes in things. Johnson's recent actions make him just as bad as Sturgeon. Never thought I'd hear myself ever say that. 1 Quote Link to comment Share on other sites More sharing options...
Tony Ferrino Posted December 16, 2021 Share Posted December 16, 2021 1 minute ago, Scott Steiner said: The 'Conservatives' lurching right and actually becoming conservative would be great for us all. More likely for a by election defeat and the Tories ousting Johnson completely though. That wouldn't be such a bad thing. Gove would be far more competent.. at least he has an ideology and actually believes in things. Johnson's recent actions make him just as bad as Sturgeon. Never thought I'd hear myself ever say that. Greenie for services to entertainment. 0 Quote Link to comment Share on other sites More sharing options...
coprolite Posted December 16, 2021 Share Posted December 16, 2021 3 hours ago, yoda said: To be fair (tbf), I don't agree with a lot of Detournement's takes but they've got a point here. And it's not exactly an uncommon take either. There's a number of people questioning how much of an impact it'll have. There's obvious forward guidance implications but - and this is my amateur opinion - I'm not convinced a rate rise will have much effect either way. Although I think there's more reasons to oppose rate hikes at the moment than there is to support them. Citation needed. Because almost every textbook or central bank website I've read defines inflation as a sustained increase in the general price level. Inflation causes a decrease in purchasing power, which is a reduction in the value of your money. Sure https://www.investopedia.com/terms/i/inflation.asp Clearly price rises are a feature of inflation (as are wage rises) but they're not the whole story. Neither is the money supply bit the whole story. Prices can rise because of shocks and fall back down again without being inflation. Or they can rise because of shocks and cause inflation. I'm not suggesting that the mechanism for interest rises combating inflation is rock solid or even plausible but that's one way of describing how it is supposed to work. 0 Quote Link to comment Share on other sites More sharing options...
ICTJohnboy Posted December 17, 2021 Share Posted December 17, 2021 Sky News suggesting a better showing for Labour than had been expected, might just let the Tories hold on. 0 Quote Link to comment Share on other sites More sharing options...
Scott Steiner Posted December 17, 2021 Share Posted December 17, 2021 (edited) I think the Tories will sneak Shropshire by something ridiculously small i.e. less than 1%. Either way, Boris is on borrowed time. Edited December 17, 2021 by Scott Steiner 0 Quote Link to comment Share on other sites More sharing options...
yoda Posted December 17, 2021 Share Posted December 17, 2021 38 minutes ago, coprolite said: Sure https://www.investopedia.com/terms/i/inflation.asp Clearly price rises are a feature of inflation (as are wage rises) but they're not the whole story. Neither is the money supply bit the whole story. Prices can rise because of shocks and fall back down again without being inflation. Or they can rise because of shocks and cause inflation. We're splitting hairs but that is a very awkward definition. The majority of people would define it as a sustained increase in price level. The Bank of England, for example, literally define it as that. The Federal Reserve too. What a way to spend part of my Thursday night. Discussing the semantics of inflation. 0 Quote Link to comment Share on other sites More sharing options...
welshbairn Posted December 17, 2021 Share Posted December 17, 2021 (edited) 1 hour ago, ICTJohnboy said: Sky News suggesting a better showing for Labour than had been expected, might just let the Tories hold on. I'm getting a bit fed up of them talking about Tory sleaze. It's a tabloid word that's become so vague it's meaningless. They should be talking about Tory corruption. I'm also a bit nervous after lumping on the Libdems in a bet, their spokeswoman seems to be downplaying expectations. If Labour have fucked it up because they want to keep Boris as PM for the next election I'll be seriously disgruntled. Thinking about it, the likely successors to Johnson are even more dislikeable if anything, so it would be a dumb strategy if true. Edited December 17, 2021 by welshbairn 1 Quote Link to comment Share on other sites More sharing options...
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