Cost of living crisis

[mumbles87]

Maybe they should replace the pound with some magic beans? Or perhaps people could pay their mortgages with pixie dust? Replace their cars with Unicorn drawn carriages?

But at Lloyds Grossman used to say, let's look at the evidence.

Andrew Bailey
A Bank of England lifer who use to sign bank notes. The BofE is not considered a bank and certainly not one of the club

Junco's Claim of being as city banker: False

Dr Ben Broadbent
Previously Ben was Senior European Economist at Goldman Sachs (2000-2011)
Junco's Claim of being a city banker: True

Sir Jon Cunliffe
Was UK Permanent Representative to the European Union,
Junco's Claim of being a city banker: False

Dr. Swati Dhingra
She is Associate Professor of Economics at the London School of Economics, and an Associate of the Centre for Economic Performance at LSE. She is a Director of The Royal Mint Museum and a member of the Steering Group for the UK’s Economy 2030 Inquiry.
Junco's Claim of being a city banker: False

Jonathan Haskel
He was previously Professor and Head of Department at the Department of Economics, Queen Mary, University of London.
Junco's Claim of being a city banker: False

Dr Catherine L Mann
She was the Global Chief Economist at Citibank (2018 to 2021) and the Chief Economist, Head of Economics Department, and G20 Finance Deputy at the OECD (2014 to 2017).
Junco's Claim of being a city banker: True

Huw Pill
Was Chief European Economist at Goldman Sachs (2011-18). Before that, he worked at the European Central Bank in Frankfurt.
Junco's Claim of being a city banker: True

Dave Ramsden
Was Chief Economic Adviser to the Treasury and Head of the Government Economic Service from 2007 – 2017.
Junco's Claim of being a city banker: False

Silvana Tenreyro
Worked at the Federal Reserve Bank of Boston and served as external Monetary Policy Committee member for the Central Bank of Mauritius.
Junco's Claim of being a city banker: False

So making the assumption that an economist is a banker and that even a short tenure at a commercial bank classes them as a banker, 1/3 of the MPC falls into the category of a banker. On the basis of the MPC being a democratic vote each month, we can conclude that Junco's accusation of being some form of banking conspiracy is unfounded.

It's understandable that one can be intimated by those whose academic qualifications are in excess of our own and rather than put our faith in their ability and experience, however, to denigrate them in order to make ourselves feel superior? That PPD.

How many of these have dealt with or studied the affects of interest rate rises on inflation when based on a basic need like energy bills rather than just your usual recession where this is tried and tested policy?

Why aren't other measures being explored by those in power to control inflation.. IE vat rises and income tax increases? I guess they are trying to suppress wages which is one kind of control .. doing a cracking job there

[bubbles1966]

Wholesale commodity prices on the global market are often quoted in US Dollars.

Therefore the strength of the our currency relative to the USD directly impacts the cost of buying things such as oil.

In simple terms, lower interest rates = weaker GBP = higher prices.

I think we can reasonably assume that the average BoE economist probably has a more advanced understanding of macro-economic relationships than most.

[The Old Man of Storr]

Just thought I'd chip in -

Before setting off for a mini break in Dornoch yesterday we picked up a bit of shopping from a Tesco delivery van in Broadford - the delivery driver noticed we'd bought some McVities Digestive Biscuits as part of our order and said ' i never buy those any more ' - after enquiring why he answered that not only have Tesco reduced the size of the packet they've also increased the price to what amounts to a 90% increase , a packet of McVities Digestive Biscuits have gone up 90% at Tesco , one item is now almost double the previous asking price . Everyone is taking the piss .

[DublinDave]

Just thought I'd chip in -

Before setting off for a mini break in Dornoch yesterday we picked up a bit of shopping from a Tesco delivery van in Broadford - the delivery driver noticed we'd bought some McVities Digestive Biscuits as part of our order and said ' i never buy those any more ' - after enquiring why he answered that not only have Tesco reduced the size of the packet they've also increased the price to what amounts to a 90% increase , a packet of McVities Digestive Biscuits have gone up 90% at Tesco , one item is now almost double the previous asking price . Everyone is taking the piss .

Welcome back TOMoS.
I agree, a lot of very wealthy people are making even bigger fortunes in a time of intense difficulty for the vast majority.
Will a packet of Digestive Biscuits get bigger once the war in Ukraine ends & inflation has stabilised..?
Will it heck,.
Mr Kipling shrinking the size of cherry bakewells was the final straw for me.
We should get French on their asses & start burning stuff

[RichieRiv]

Well seeing that you two seem to know more than the 9 people on the MPC what with PHDs and their experiences of working at Fwderal Reserve Banks, the European Central Bank, the Treasury and various other EC agencies, what would you suggest they do to combat inflation?

In fact as you two are experts, what are the mechanisms that central banks and governments can use to drive down inflation?

[RichieRiv]

How many of these have dealt with or studied the affects of interest rate rises on inflation when based on a basic need like energy bills rather than just your usual recession where this is tried and tested policy?

Why aren't other measures being explored by those in power to control inflation.. IE vat rises and income tax increases? I guess they are trying to suppress wages which is one kind of control .. doing a cracking job there

You cannot study something that hasn't happened.
There is no such thing as a normal recession, every recession is unique with unique cause and effect as you will remember from the 1991 recession.

The Bank of England and the MPCs jurisdiction is interest rates not taxation. My post was in response to them specifically. We the British people are facing the highest tax burden since the Second World War maybe that's why they don't wish to raise them any further.

Raising rates is designed to suppress wages, The point of doing it. Circular flow of income, the laws of infinite wants and finite resources and demand/supply.

[SammyLeeWasOffside]

Just thought I'd chip in -

Before setting off for a mini break in Dornoch yesterday we picked up a bit of shopping from a Tesco delivery van in Broadford - the delivery driver noticed we'd bought some McVities Digestive Biscuits as part of our order and said ' i never buy those any more ' - after enquiring why he answered that not only have Tesco reduced the size of the packet they've also increased the price to what amounts to a 90% increase , a packet of McVities Digestive Biscuits have gone up 90% at Tesco , one item is now almost double the previous asking price . Everyone is taking the piss .

Won't it be mcvities that decide packet sizes (along with govt guidance in obesity)?

[The Old Man of Storr]

Won't it be mcvities that decide packet sizes (along with govt guidance in obesity)?

Possibly - I'm not privy to Tesco or McVities' internal politics - if so maybe they should be lauded for agreeing to an extra tax on sugar ?

What I do know is that the bigger packets of McVities Digestive Biscuits are available at the Coop for the same price as the smaller packets from Tesco [ possibly old stock ? ] and McVities closed their Glasgow Tollcross factory which employed 500 people back in 2022 so possibly trying to claw some money back ?

If McVities are abiding by some Government guideline on obesity I'm guessing the only overweight folk we'll see in future are the wealthy while the poor get leaner and fitter ? Funny how it never works that way though .

[Tenbury]

It seems increasingly obvious that provision of compulsory, quality, free school meals at all state schools over an extended lunch period (as part of an extended school day) should be a cornerstone of a healthier and fairer society.
Sandwiches are for gamblers only.

[mumbles87]

You cannot study something that hasn't happened.
There is no such thing as a normal recession, every recession is unique with unique cause and effect as you will remember from the 1991 recession.

The Bank of England and the MPCs jurisdiction is interest rates not taxation. My post was in response to them specifically. We the British people are facing the highest tax burden since the Second World War maybe that's why they don't wish to raise them any further.

Raising rates is designed to suppress wages, The point of doing it. Circular flow of income, the laws of infinite wants and finite resources and demand/supply.

Exactly the point it hasn't happened before so the usual ways of dealing with it aren't guaranteed to work. It seems they are trying it in the hope that it will work and get lucky with coming down naturally when the wholesale price of gas drops as it's not actually working.

I understand when wholesale falls back the measures in place should bring inflation back down to a controlled % but right now it just seems they are hoping it will work with trail and error rather than looking into other ways.

[bonzosbeard]

Bt and o2 prices up 14% or 17% .

But it's low interest rates causing inflation.

I bet their CEOs are getting a bonus and dint expect either interest rates or inflation to do anything but go up.

[hammers92]

Richie you’re clearly more clued up on this than me for sure. May I ask, what would you do?

[SammyLeeWasOffside]

But it's low interest rates causing inflation.

I don't think anyone has said that have they

[RichieRiv]

Exactly the point it hasn't happened before so the usual ways of dealing with it aren't guaranteed to work. It seems they are trying it in the hope that it will work and get lucky with coming down naturally when the wholesale price of gas drops as it's not actually working.

I understand when wholesale falls back the measures in place should bring inflation back down to a controlled % but right now it just seems they are hoping it will work with trail and error rather than looking into other ways.

But that was the case in 2008/9. And against in 1990/1 and again 1980/1 etc. In the simplest media explanation of a recession and on face value yeah, a recession, that's the effect. But the causes were all very different, with different people and industries affected.

As my learned friend EvilC had pointed out, rate rises do not have an immediate affect of removing cash from the circular flow of income, so to say it's not working is premature. The usual way will work, eventually, because it always has done.

We should also remember that to solely blame the war in Ukraine, which I would agree is a major part, is not 100% accurate, because energy prices were on the rise before a single Russian boot hit Ukrainian soil. To blame solely blame Russia is a politician's answer.

But it's not just energy. Building materials were on the rise, especially timber, even during Covid and even before as people borrow cheap money for home improvements.

I have said this on numerous occasions - printing money is at the root cause of this. It has given the country's (and on the whole the entire Western World) economy a cardiac arrest.

What surprises me is how people are so shocked that this as coming.

[bubbles1966]

Bt and o2 prices up 14% or 17% .

But it's low interest rates causing inflation.

I bet their CEOs are getting a bonus and dint expect either interest rates or inflation to do anything but go up.

So, if people's mortgage bills are climbing and reducing their post-housing costs income, and then their telephone/mobile phone provider tries to do them for an extra 14%/17%, what is the consumer likely to do?

[Alan Pardew's Dad]

We should get French on their asses & start burning stuff

Because adding the price of rebuilding the town hall into the mix really helps with inflation

It is the two year anniversary since a bunch of thugs masquerading as kill the bill protesters smashed up and burned down the main police station in Bristol. Many of these dickheads and their friends are the same ones protesting about the cost of living and council cuts to core services. Perhaps if we didn’t have to keep finding millions of pounds to clean up and repair the damage done by these morons, there would be more in the pot for core services.

Thankfully, over thirty of them got custodial sentences, which I’m personally delighted about.

[RichieRiv]

Richie you’re clearly more clued up on this than me for sure. May I ask, what would you do?

Well if some were to be believed I am a banker......

The economics knowledge comes from studying it at A-Level, although I didn't do very well because I wasn't very good at writing 3 essays in 4 hours. But for some reason, some 30 years on I can still recall Keysian/Friedman economics which is applied in western capitalist societies.

In terms of what I actually do, I have all but 3 years of technology. Firstly in banking systems - mainly settlements and then core banking. I then did a year on a building site when I got laid off and then spent 3 years at The London Clearing House which is one huge insurance policy for the financial markets. Here I learned about everything from equities to power derivatives as well as government debt.

For the last 12 years I have worked in the Risk and Compliance tech sector. Obviously, that involves banks and insurance companies, but not exclusively. I have dealt with defence, pharmaceuticals, retail, manufacturing, car makers and even the makers of dental implants. I had the European Commission as a customer for 4 years, which is what my Brexit vote was based on. The one thing about risk and compliance is it overarching and covers the entire business, so you get to understand pretty much all aspects of what they do, which for some reason I seem to retain.

I'm on my 4th vendor in this space, but one of them was Reuters, so although I was only a small piece of the pie, I got exposed to a whole host of other areas and industries like Law and Tax and of course, the news agency which was fascinating. I even tried to get a job there, but I wasn't a Reuters kind of person.

[bonzosbeard]

So, if people's mortgage bills are climbing and reducing their post-housing costs income, and then their telephone/mobile phone provider tries to do them for an extra 14%/17%, what is the consumer likely to do?

Get into more debt because they have to buy things to live, food, clothes etc. Heat their homes.

I'm happy for the experts to be right and continuing to increase rates will bring inflation down. But hasn't happened so far.

Do we increase to 20% until it works. Hundreds of thousands homeless? But they can at least afford tomatoes now they've stopped going up.

I dont have the answers, of course I don't, but something isn't working.

[hammers92]

In terms of what I actually do

I actually meant what would you do to solve the cost of living crisis!

But that’s all really interesting nonetheless. My mate worked at Reuters for a few years working on the “environment” and the IT systems everyone uses there.

[EvilC]

Get into more debt because they have to buy things to live, food, clothes etc. Heat their homes.

I'm happy for the experts to be right and continuing to increase rates will bring inflation down. But hasn't happened so far.

Do we increase to 20% until it works. Hundreds of thousands homeless? But they can at least afford tomatoes now they've stopped going up.

I dont have the answers, of course I don't, but something isn't working.

This isn't the right way to frame this. The right question is (IMO) where would inflation now and in the future be if the BoE hadn't bothered increasing interest rates. And you can never know the answer to that, but everything points to the answer "quite a bit higher".

Much of the inflation we have had has been unavoidable. What we can try and do is prevent this from becoming baked in and causing further inflationary expectations and price/wage spirals.