The Deflation Years

[boogieeck]

The year is 2028.

Boog, having completed his Honours Dissertation on Homelessness, his Masters on Social Housing and his PhD on Housing policy returned to politics as part of the Whig Movement headed by Dan Hannan and Doug Carswell. It has swallowed up Reform, Renew, Revolting, Reflux and the SDP, it is endorsed by Nigel Farage and Julia Hartley-Brewer, by Matt le Tissier and Geoff Norcott, Zuby and Darren Grimes.

Boog wins NE Fife as the Whigs translate their 44% vote into a 90 seat majority from a base of eighteen defectors led by Steve Baker. Scotland of course bucked some of the trend due to the SNP, disgraced but still capable of 28% and thirty seats.

Boog is mentioned in media as nailed on for Housing, Kristain Niemitz is nailed on for Chancellor, but in a minor shock to add to the mother of all shocks, Andrew Lilico gets Chancellor, and Niemitz gets Housing, a fact that does not displease him.

Lilico asks for Boog as Chief Secretary to the Treasury and tasks Boog with getting inflation, currently running at 17% under control. Boog, whose only actual attribute is thinking outside the box, decides that if he can make a quarter of the economy run at negative 15% inflation, it will create an overall figure for inflation of a manageable 4-6%

This then is the task. Deflation in about a quarter of the economy

First up we are going to cause housing prices to drop by 25%. Most of the policies have already been floated on this site, and Neimitz agrees with most of them, if you want I can rehash them but many of you have heard them already. The asset value of land and commercial property is in for a serious downward devaluation.

I am sure that just as government can create fiat money, it can also declare it to no longer exist, but I am fuzzy on how. Advice is sought. It must be more than simply not creating new government bonds

But new ideas to make inflation run in negative territory are sought even if you don't advise them. maybe others can iron out the glitches, so don't be shy.

[neilm]

May 11, 2022 20:33:01 GMT boogieeck said:

I am sure that just as government can create fiat money, it can also declare it to no longer exist, but I am fuzzy on how. Advice is sought. It must be more than simply not creating new government bonds

www.reuters.com/world/uk/giving-up-gilts-how-bank-england-plans-reverse-qe-2022-02-01/

[neilm]

Asset valuation of land: new rules to restrict buildings valued at x being used to support mortgages or loans valued at x+n.

Price controls, like the ones on Réunion.

Encourage savings through various tax breaks and reforms including forcing banks to pay higher interest on savings and current accounts.

Devaluation (this would probably have the reverse effect but its tempting for various reasons)

Order oil companies and petrol stations to cut fuel prices as soon as the price goes down in the same way they increase them without hesitation.

Close down large parts of the NHS.

All of this smacks a little bit of government heavy handedness (or, as I like to call it, 'the very existence of the state') but there isn't really another way to force change.

[slon]

Privatise public transport

[gwynthegriff]

May 12, 2022 16:13:41 GMT slon said:

Privatise public transport

You mean I get my own bus?

[myth11]

Move back to direct taxes on income instead of consumption.

[European Lefty]

Well, on certainty is that EL has fled the country for either Leiden or Toulouse

[stb12]

Who is Foreign Secretary?

[J.G.Harston]

Hong Kong tried legislating a ceiling on mortgages of 2.5*income# to damp down property prices. People just maxed out their credit cards instead.

#fuzzy recollection of exact number.

[J.G.Harston]

Hmmm.... Increasing the money supply feeds inflation. You can only increase the money supply with a fiat currency. So.... adopt a metallic currency standard. How about plutonium. Safe from being stolen. Run out of plutonium? Can't print any more banknotes.

[boogieeck]

May 12, 2022 10:20:54 GMT neilm said:

Price controls, like the ones on Réunion.

do tell, I am instinctively suspicious

[finsobruce]

May 12, 2022 21:54:26 GMT J.G.Harston said:

Hmmm.... Increasing the money supply feeds inflation. You can only increase the money supply with a fiat currency. So.... adopt a metallic currency standard. How about plutonium. Safe from being stolen. Run out of plutonium? Can't print any more banknotes.

Well it's an idea.

[neilm]

May 13, 2022 8:24:22 GMT boogieeck said:

May 12, 2022 10:20:54 GMT neilm said:

Price controls, like the ones on Réunion.

do tell, I am instinctively suspicious

There are price issues in the French TOMs (or whatever whatever they're called at the moment), to the extent that even locally produced stuff is a fair bit more expensive than in the Hexagon. A friend of my dad's (who lives in France) went to Martinique on holiday and commented on this: I pointed out that he was at a resort aimed at well heeled older people so you couldn't blame the locals for knowing their market, to which he responded by saying that it was the prices in actual supermarkets that surprised him right down to things that you'd think would be abundant like bananas.

I'm not endorsing it as a strategy, but: www.lemonde.fr/en/2022-presidential-election/article/2022/04/19/on-reunion-island-a-price-shield-to-fight-the-high-cost-of-living-inspires-french-presidential-candidates_5980924_16.html

[boogieeck]

Its.....interesting.

Ok, the bit about a 0% rate of VAT for essential products I can maybe get behind. But we already have a 0% rate for food, so it adds nothing in the UK.

If it's a "voluntary" agreement with the big four supermarkets that 150 agreed products will have a combined cost not exceeding £350, I can sort of get it, although the laws of unintended consequences are going to be a bugger.

You can just about press supermarkets to run them at break-even cost, although I suspect they do already. 22p for Tesco beans is not making a profit. You cant make them sell at a loss.

It sounds very much like their version of our Foodbank Mania, "look, we have identified a problem, instead of solving it we will design a way around it." When quite possibly the problem they have identified is not even real.

[neilm]

I think in this case the problem is real: because lots of stuff has to be imported, prices are higher than Metropolitan France. But public sector salaries (which are the bulk of the economy in these places), which are paid by the mainland taxpayer, are at the same level.

I'll rephrase, it's a real problem but only because they've not worked out how to not be reliant on the French taxpayer.

[boogieeck]

They ought to have a lower standard of living. Or relocate to metro France

[aargauer]

May 11, 2022 20:33:01 GMT boogieeck said:

I am sure that just as government can create fiat money, it can also declare it to no longer exist, but I am fuzzy on how. Advice is sought. It must be more than simply not creating new government bonds

But new ideas to make inflation run in negative territory are sought even if you don't advise them. maybe others can iron out the glitches, so don't be shy.

I don't think you want to run prolonged deflation. If you want the return of real money, just link back to the gold standard. The problem is, we don't have enough gold...

In the meantime, get the central bank to sell government bonds and raise interest rates - but you would basically just create a crushing recession.

[slon]

Hang on .... what do you think you mean by deflation here?

Deflation is a reduction in consumer and asset prices, doesn't matter what the money supply is doing, doesn't matter if money is paper, crypto, or gold.
Money supply has more impact on GDP than prices.

The idea that you can have deflation in 25% of the economy is confusing. Does it mean only certain sort of things will see a reduction in price, or that price reductions will only happen in certain places?

[aargauer]

May 14, 2022 15:14:55 GMT slon said:

Hang on .... what do you think you mean by deflation here?

Deflation is a reduction in consumer and asset prices, doesn't matter what the money supply is doing, doesn't matter if money is paper, crypto, or gold.
Money supply has more impact on GDP than prices.

The idea that you can have deflation in 25% of the economy is confusing. Does it mean only certain sort of things will see a reduction in price, or that price reductions will only happen in certain places?

Money supply isn't the only cause of inflation / deflation but its a certainly a big factor.

[J.G.Harston]

May 14, 2022 15:14:55 GMT slon said:

Hang on .... what do you think you mean by deflation here?

Deflation is a reduction in consumer and asset prices, doesn't matter what the money supply is doing, doesn't matter if money is paper, crypto, or gold.
Money supply has more impact on GDP than prices.

But a reduction in money supply produces deflation because there is less money chasing more goods - the opposite of an inflationary scenario where you have more money chasing fewer goods.

Yes, it's doesn't matter what that money is, it's the quantity of it that matters, not its form.

One of the features of a metallic* money standard is that you *can't* create more money that the commodity it is based on. If you can't create money at the speed of the economy then the money supply declines relative to the economy - which is another way of saying that the money supply reduces. This is held up in economics theory as "a bad thing" because it creates deflation - but Boogs is actually trying to create deflation.

*or any other non-fiat currency.