slon
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Post by slon on May 15, 2022 17:23:03 GMT
Yes, but Monetarism is not the answer to all problems. Yes, there are other levers to influence the economy. I was pointing out one of them. I was hoping other people would point out others, as monetarism is the bit I know about. Yes there are, one way is to maintain an artificial currency exchange rate, another is to nationalise and subsidise key industries, another is a total command economy with everything owned by the state. Thing is reality interves, accelerated by war, plague, or other disaster, and some sort of market forces overwhelme the plans My inclination is to let market forces loose early on |
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Post by greenchristian on May 15, 2022 21:26:28 GMT
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? In a world with online shops that's only feasible if it means deflation in certain industries which make up around 25% of the economy, since there are very few products which you can't buy from some other area (petrol, utilities, and land/buildings being the only ones I can think of). Though obviously it's extremely likely that achieving this will shrink those industries' share of the economy to well below 25%.
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slon
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Post by slon on May 16, 2022 10:10:05 GMT
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? In a world with online shops that's only feasible if it means deflation in certain industries which make up around 25% of the economy, since there are very few products which you can't buy from some other area (petrol, utilities, and land/buildings being the only ones I can think of). Though obviously it's extremely likely that achieving this will shrink those industries' share of the economy to well below 25%.
All this does is change the supplier, not reduce the price .... so not really deflation. Unless of course you mean the property value of the bricks and mortar shop premises sinks by a huge amount. |
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Post by greenchristian on May 16, 2022 14:48:28 GMT
In a world with online shops that's only feasible if it means deflation in certain industries which make up around 25% of the economy, since there are very few products which you can't buy from some other area (petrol, utilities, and land/buildings being the only ones I can think of). Though obviously it's extremely likely that achieving this will shrink those industries' share of the economy to well below 25%.
All this does is change the supplier, not reduce the price .... so not really deflation. Unless of course you mean the property value of the bricks and mortar shop premises sinks by a huge amount. You misunderstand me. The things I listed are the only things I can think of where it's still feasible to change the price of a good or service in one part of the country without people just buying it online from whichever part of the country has it cheaper (obviously outside of the special case of things sold at big events/railway stations/motorway service stations/airports, or similar spaces where there's a captive consumer). |
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Post by observer on May 17, 2022 0:27:58 GMT
When the Bank of England started "quantitative easing" they said they would "retire" or withdraw the money when the crisis had passed. I don't think they've actually done this.
If QE/printing produces inflation - it does - then withdrawing that money will reduce inflation and, if on a large enough scale, will then produce deflation.
They would then have to bite the bullet and increase interest rates to where they would have been without QE.
That would mean interest rates approaching 10%. I can't see it happen as the government borrows so much money to keep voters happy
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slon
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Post by slon on May 18, 2022 9:32:05 GMT
When the Bank of England started "quantitative easing" they said they would "retire" or withdraw the money when the crisis had passed. I don't think they've actually done this. If QE/printing produces inflation - it does - then withdrawing that money will reduce inflation and, if on a large enough scale, will then produce deflation. They would then have to bite the bullet and increase interest rates to where they would have been without QE. That would mean interest rates approaching 10%. I can't see it happen as the government borrows so much money to keep voters happy What you have written is wrong .... this burst of inflation is caused by supply side pressures, not by cheap money fueling demand, as in earlier times. Withdrawing the QE money will not reduce inflation, it will just cause a giant recession |
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Post by observer on May 18, 2022 10:07:19 GMT
When the Bank of England started "quantitative easing" they said they would "retire" or withdraw the money when the crisis had passed. I don't think they've actually done this. If QE/printing produces inflation - it does - then withdrawing that money will reduce inflation and, if on a large enough scale, will then produce deflation. They would then have to bite the bullet and increase interest rates to where they would have been without QE. That would mean interest rates approaching 10%. I can't see it happen as the government borrows so much money to keep voters happy What you have written is wrong .... this burst of inflation is caused by supply side pressures, not by cheap money fueling demand, as in earlier times. Withdrawing the QE money will not reduce inflation, it will just cause a giant recession Inflation in the general level of prices was inevitable after so much printing of money. It's being exacerbated by supply-side factors, albeit the government, in the case of energy, then adds its own taxes. Net Zero? Bin it |
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slon
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Post by slon on May 18, 2022 10:46:46 GMT
What you have written is wrong .... this burst of inflation is caused by supply side pressures, not by cheap money fueling demand, as in earlier times. Withdrawing the QE money will not reduce inflation, it will just cause a giant recession Inflation in the general level of prices was inevitable after so much printing of money. It's being exacerbated by supply-side factors, albeit the government, in the case of energy, then adds its own taxes. Net Zero? Bin it No Look at fuel prices .... petrol and diesel are up 60% since mid 2021 That is not due to increased demand, or cheap money due to QE, it is down to shortage of supply. Food is a similar story. You can argue that property price rises are exacerbated by cheap money ... but for the rest of it blame supply side disruption. And as mentioned the situation will get worse if we have thatcher mk2 policy |
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Post by No Offence Alan on May 18, 2022 10:57:16 GMT
When the Bank of England started "quantitative easing" they said they would "retire" or withdraw the money when the crisis had passed. I don't think they've actually done this. If QE/printing produces inflation - it does - then withdrawing that money will reduce inflation and, if on a large enough scale, will then produce deflation. They would then have to bite the bullet and increase interest rates to where they would have been without QE. That would mean interest rates approaching 10%. I can't see it happen as the government borrows so much money to keep voters happy What you have written is wrong .... this burst of inflation is caused by supply side pressures, not by cheap money fueling demand, as in earlier times. Withdrawing the QE money will not reduce inflation, it will just cause a giant recession So when low inflation was caused by supply side (non-)issues e.g. peace, globalisation and free trade, the central banks were wrong to do QE and cut interest rates? |
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Post by observer on May 18, 2022 11:09:44 GMT
What you have written is wrong .... this burst of inflation is caused by supply side pressures, not by cheap money fueling demand, as in earlier times. Withdrawing the QE money will not reduce inflation, it will just cause a giant recession So when low inflation was caused by supply side (non-)issues e.g. peace, globalisation and free trade, the central banks were wrong to do QE and cut interest rates? You mean in the last 10 years or so? Yes they were wrong. Money is a store of value as well as a means of exchange. If you print money you devalue each unit of existing currency. At long-term 'normal' rates of inflation the value of people's savings halves every 23 years... stealing wealth from people who have deferred consumption to prepare for their future. So it is wrong. Printing money goes hand in hand with low interest rates...why pay interest at anything above a nominal level when money is in abundance? Banks/the government don't have to compete for your money when the printing presses simplo have to be turned on. So anyone saving for the future foregoes a fortune over the years. That wealth is transferred to debtors for no good reason that has ever been explained to me |
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Post by observer on May 18, 2022 11:21:06 GMT
When you combine a cradle to grave welfare state with inflation that makes saving pointless, people have no reason to save. I intend to be penniless by the time I am 70. But my daughters will be homeowners. Nail on head. Assets rise in value when you have inflation as there is more money chasing them. The assetless poor are the big losers. One reason young people are being priced out of the housing market. Ironic really that young people should vote for parties that always want more free money |
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slon
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Post by slon on May 18, 2022 11:43:46 GMT
What you have written is wrong .... this burst of inflation is caused by supply side pressures, not by cheap money fueling demand, as in earlier times. Withdrawing the QE money will not reduce inflation, it will just cause a giant recession So when low inflation was caused by supply side (non-)issues e.g. peace, globalisation and free trade, the central banks were wrong to do QE and cut interest rates? The problem in 2008 was not inflation |
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Post by John Chanin on May 18, 2022 11:59:38 GMT
It’s always interesting when you have someone way off the consensus opinions, like observer . But I find his arguments unpersuasive. |
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Post by observer on May 18, 2022 12:04:22 GMT
It’s always interesting when you have someone way off the consensus opinions, like observer . But I find his arguments unpersuasive. Thanks. But consider that only about a third of current inflation is due to current energy price rises. And consider that Switzerland and Sweden, both subject to the same international energy price rises, don't have the same inflation as the UK. They, of course, have kept better control of their money supply |
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neilm
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Post by neilm on May 20, 2022 0:24:26 GMT
The Bank is knocking quantitative easing on the head and pulling some of the money out of the economy. It dithered too long about doing it.
It isn't increasing rates fast enough, but as I've said on here, ad infinitum ad nauseam, they shouldn't have been allowed to go so low, for so long. Rates should have stayed at around 5%: had they done so we'd have been able drop 200bp and get some money moving around.
It is time (indeed, it never should have been created) to abolish the MPC but that is a whole other matter.
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