Cost of living crisis

[chelmsfordhammer91]

How does a country increase its citizens wealth and standard of living without causing inflation?

Controlled inflation, so the BoE have a target of 2% inflation per year.

Inflation isn't a bad thing, it just needs to increase in line with everything else.

[SammyLeeWasOffside]

No, it's like they are doing it because it is the least worst option. What are the better solutions?

There probably arent any, that doesn't mean doing this will work. Inflation driven by higher energy prices isn't going away unless energy prices come down. Sticking fingers in traditional ecomonic dams won't solve this imo its too fundamental a cost that is rising, it needs a broader fix for our energy requirements.

Its an attempt to grow an economy that is stagnating because everything is impacted by energy. Food prices are rising because it costs more to run farms, processesing plants and supermarkets. Limiting prices of energy at a point that is double or treble what is affordable won't reduce the cost of producing food. So with energy up, food up, petrol up etc etc how does making peoples mortgages more expensive put more money in the economy?

[SammyLeeWasOffside]

How does a country increase its citizens wealth and standard of living without causing inflation?

Time?

[sendô]

How does a country increase its citizens wealth and standard of living without causing inflation?

Using the money that is currently being funnelled into the hands of wealthy foreign investors to improve public services would be a start.

[EvilC]

There probably arent any, that doesn't mean doing this will work. Inflation driven by higher energy prices isn't going away unless energy prices come down. Sticking fingers in traditional ecomonic dams won't solve this imo its too fundamental a cost that is rising, it needs a broader fix for our energy requirements.

Its an attempt to grow an economy that is stagnating because everything is impacted by energy. Food prices are rising because it costs more to run farms, processesing plants and supermarkets. Limiting prices of energy at a point that is double or treble what is affordable won't reduce the cost of producing food. So with energy up, food up, petrol up etc etc how does making peoples mortgages more expensive put more money in the economy?

No, ignoring other factors, inflation will go away unless energy prices spiral ever higher. However it does create other issues - people demanding wage increases (in an already tight labour market) can create structural inflationary pressures that are harder to get rid of. It also tanks your currency, which is in itself inflationary.

Increasing interest rates and therefore the cost of mortgages doesn't put more money into the economy, it takes money out, thereby reducing demand and inflationary pressures, which is why they do it.

[SammyLeeWasOffside]

No, ignoring other factors, inflation will go away unless energy prices spiral ever higher. However it does create other issues - people demanding wage increases (in an already tight labour market) can create structural inflationary pressures that are harder to get rid of. It also tanks your currency, which is in itself inflationary.

Increasing interest rates and therefore the cost of mortgages doesn't put more money into the economy, it takes money out, thereby reducing demand and inflationary pressures, which is why they do it.

The effects of it won't. Something costs say £100 to produce, inflation rises to 10%, product now costs £110 to produce, inflation drops to 0, product still costs £110 to produce. If people can't afford it at 10% inflation then without the other inflationary pressures they also can't afford it at 0. If energy prices stop spiraling up today then the average bill is still £60 a month over a level where the govt had to step in because people couldn't afford it.

The problem is people don't have the money for stuff today, by 1st of October they will have less. If inflation drops next week to 0 they still can't afford stuff. Reducing demand for a pub lunch further while costs remain higher than people can pay only brings in more people that can't use the pub, so the pub goes. Does increasing interest rates help the pub or hinder it?

[EvilC]

The effects of it won't. Something costs say £100 to produce, inflation rises to 10%, product now costs £110 to produce, inflation drops to 0, product still costs £110 to produce. If people can't afford it at 10% inflation then without the other inflationary pressures they also can't afford it at 0. If energy prices stop spiraling up today then the average bill is still £60 a month over a level where the govt had to step in because people couldn't afford it.

The problem is people don't have the money for stuff today, by 1st of October they will have less. If inflation drops next week to 0 they still can't afford stuff. Reducing demand for a pub lunch further while costs remain higher than people can pay only brings in more people that can't use the pub, so the pub goes. Does increasing interest rates help the pub or hinder it?

No, but that isn't inflation any more. That's prices being higher than they were a year ago or whatever.

I understand all of this.

It hinders it, that's the point.

[chelmsfordhammer91]

The effects of it won't. Something costs say £100 to produce, inflation rises to 10%, product now costs £110 to produce, inflation drops to 0, product still costs £110 to produce. If people can't afford it at 10% inflation then without the other inflationary pressures they also can't afford it at 0. If energy prices stop spiraling up today then the average bill is still £60 a month over a level where the govt had to step in because people couldn't afford it.

The problem is people don't have the money for stuff today, by 1st of October they will have less. If inflation drops next week to 0 they still can't afford stuff. Reducing demand for a pub lunch further while costs remain higher than people can pay only brings in more people that can't use the pub, so the pub goes. Does increasing interest rates help the pub or hinder it?

It can go lower than 0. You can have deflation, where prices for goods and services reduce to lower demand than supply.

[jastons]

Please excuse my ignorance but what did the new chancellor say last week to cause (or accelerate?) the current sterling cluster f***? The only headline I saw was 'tax cuts for the rich'

[EvilC]

Please excuse my ignorance but what did the new chancellor say last week to cause (or accelerate?) the current sterling cluster ****? The only headline I saw was 'tax cuts for the rich'

Tax cuts and spending increases.

[jastons]

Tax cuts and spending increases.

Which means increasing the national debt? Thus increasing the risk of the UK defaulting on its repayments?

[EvilC]

Which means increasing the national debt? Thus increasing the risk of the UK defaulting on its repayments?

Yes, and also throwing fuel on in inflation.

Your government is economically illiterate. This shouldn't really come as a surprise to anyone, they were basically elected for being just that.

[SammyLeeWasOffside]

No, but that isn't inflation any more. That's prices being higher than they were a year ago or whatever.

Prices increasing over time isn't inflation?

[EvilC]

Prices increasing over time isn't inflation?

Not when they stop going up.

[SammyLeeWasOffside]

Not when they stop going up.

Inflated is ok inflation isnt?

[EvilC]

Inflated is ok inflation isnt?

No. Obviously we'd all rather energy prices were lower, but there isn't much you can do about that - you are trying to prevent cost-push inflation, which in this case is basically unavoidable, translating into built-in inflation and wage-price spirals.

I'm not really sure where you are trying to go here.

[SammyLeeWasOffside]

No. Obviously we'd all rather energy prices were lower, but there isn't much you can do about that - you are trying to prevent cost-push inflation, which in this case is basically unavoidable, translating into built-in inflation and wage-price spirals.

I'm not really sure where you are trying to go here.

That it isn't a traditional situation. That trying to fix it the same way they would have fixed other situations won't help. Its not a crisis of an industry failing its an overheating (no pun lol) of a market that is fundamental to the way the entire world works. Energy rises push up the cost of everything so if the point is to stimulate the economy then taking even more money out of households doesn't seem to me like its going to work.

Once you can't afford to eat or heat your home does it matter to you if the inflation rate is still 10% or now 0%?

[EvilC]

That it isn't a traditional situation. That trying to fix it the same way they would have fixed other situations won't help. Its not a crisis of an industry failing its an overheating (no pun lol) of a market that is fundamental to the way the entire world works. Energy rises push up the cost of everything so if the point is to stimulate the economy then taking even more money out of households doesn't seem to me like its going to work.

Once you can't afford to eat or heat your home does it matter to you if the inflation rate is still 10% or now 0%?

All situations are unique. The point isn't to stimulate the economy. If you stimulate the economy you will get (more) wage-price spirals. Doing this is likely to have significant negative impacts on your economy, hence the currency ****ting the bed etc.

Yes, because having inflation of 0% or close to it will make it a lot easier to find a job than having inflation of 10%.

[Denzil]

Was planning on looking to sell and buy a new place in the next six months (current mortgage ends five year fixed next November). I think we're going to hold fire for a bit. High interest rates and forecasts of possible house price slump next year, just feels like too much uncertainty at the moment. Feels like the sensible move is to stay put unless a move is essential.

[SammyLeeWasOffside]

All situations are unique. The point isn't to stimulate the economy. If you stimulate the economy you will get (more) wage-price spirals. Doing this is likely to have significant negative impacts on your economy, hence the currency ****ting the bed etc.

Yes, because having inflation of 0% or close to it will make it a lot easier to find a job than having inflation of 10%.

The whole point of the mini budget was to stimulate growth in the economy

There have to be jobs for that to be meaningful.