Inflation to hit 15%

[onthefencesitter]

www.independent.co.uk/news/business/inflation-bank-england-cost-living-b2137311.html

www.theguardian.com/business/2022/aug/03/uk-inflation-could-reach-15-by-start-of-2023-experts-say

What do you all think?

@sst1234 the problem with saying ah no nationliasation (or in the case of the EU member states - state as a major shareholder) - is that only the state can do things like energy security i.e. support less profitable industries/solutions in the short term because it's better for the country in the long run. e.g fracking wasnt profitable before - it needed state support. The UK has little gaz storage because private companies sold it off because in the short term it made sense. It didnt from a national energy security point of view but companies dont care about that.

What you are describing is NOT the same as nationalization.

It’s important to not confuse nationalization with subsidies and legislation. What you are describing is achieved very effectively through legislation and liberation. Award licenses for exploration and infrastructure projects, legislate for minimum output and storage.

the inflation was baked in long before that. Very loose monetary policy and inept fiscal policy has been the game for 25 years.

Don’t let the BOE or the Gov off the hook.

@sst1234 I wasnt talking about nationalisation - I was talking about the way in which EU countries have kept the state as the main shareholder/state holder within their key utilities/infrastructure - in order to be able to steer and focus them on what the country needs.

The type of projects you are talking about - they are also mainly done by the state. When it isnt it usually ends up costing the state more e.g. Elizabeth line and Hs2

@cuddlybear21 Our inflation and energy costs are higher than in France for a few reasons. A) energy companies - historically when EU made its member states privatize their utilities, all EU countries privatized but ensured the state remained the largest shareholders, except for the UK

Can you link to this piece of EU or EEC legislation please?

I remember nothing about any EU directive that ordered all EU countries to privatise Utilities, either in part or full.

Or is this a belief?

Energy prices will remain v high for many years, so part nationalising the energy industry and controlling prices, outside of the global market, is the only thing that can be done, as we did with the banks.

On LD expense causing inflation, i must be getting old as i'm sure i remember posters saying we would head into another "Roaring Twenties" Boom post Covid.

If Truss tries to crack down on strikes and restrict pay rises, we are in for months of strikes, possibly even a General Strike, people are fucked off being told what to do by the very wealthy.

@SwanBuster that just silly - and absolutely misunderstand global econ dynamics. The BOE has little to do with that. The UK follows the US at every step - one can debate as to whether that's a good policy or not - low interest rates were led by the Fed not BOE. So blame the Fed if you like. However, the US usually takes care of itself (within its understanding of what that means - they seem happy to destroy their mc but not their econ). Despite their inflationary issues - they are better energy self-sufficient than the UK - they are an energy exporter. Following the US policy doesnt always benefit the UK just because it benefits the Americans. However, the reality is that the UK economy is just too small to do it's own thing. It decided not to go with the euro - again debate the pros and cons of that. Therefore, the UK follows the US - it was the Americans who set the pattern for the interest rates and indeed by the BOE doesnt have a choice right now but to raise them whether it's the best thing for the UK or not. But you know......the UK is small, not particularly productive island of the coast of Europe - remember the saying - the sick man of Europe

State run industries are Nationalized. And you were talking about nationalization in your comments.

I guess the difference between what we both saying is that I believe energy security is the questions and nationalization is not the answer. After all state ownership has not made France more self sufficient than the UK. And Germany just bailed out a state owned energy company Uniper (albeit its owned by a different state - Finland). The state’s role is to liberalize to get private companies to invest, and legislate to guarantee standards and output.

Whereas your position is that this problem can be only be solved by the state running these industries. We will have to agree to disagree.

If we were at war, we'd not allow a privatised energy industry, with UK produced Gas sold and bought on the global markets.

Russia has effectively declared an economic war on Europe.

Prices cannot be controlled if energy stays privatised and we cannot afford paying billions to consumers which ultimately ends up in the pockets of the energy companies.

These prices may exist for many more years.

@Alexandra2001 it was part of the wider process of the common market, anti monopoly and competition regulation put in place by the EU since the 80s ec.europa.eu/competition/general/liberalisation_en.html

not being allowed for the state to subsidise national companies at the expense of other european companies - utilities having to be moved toward private market. There is far far too much out there on the subject - but google is your friend here.

The short story is that it's only the Brits that did it for real - while everyone else just paid lip service to it. Thats why you have a crazy situation whereby EDF (the French state) now does so much energy provision in the UK.

Actually, no misunderstanding because I do agree with everything you’ve said.

But it doesn’t alter my perspective or opinion - that loose monetary policy and inept fiscal has been the problem.

But you’re right. It’s largely a global issue, and not UK centric. And the Fed’s ‘ drop the rates and pump the printers’ pat has been the lead. I do think Bailey et al should have followed their lead on raising rates faster, albeit though even that doesn’t solve the problem of the legacy of their previous actions. .

@sst1234 my concern is that usually it is only the state which has the incentive to guarantee/ensure energy security. However, am happy to agree to disagree. I've spend the last twenty years researching and writing on the subject so yes am not about to change my mind.

@SwanBuster I actually dont think BOE even thinks rising interest rates is the answer in this case - yes they are avoiding inflation becoming endemic - but they know it wont solve the issue right now. So they wouldnt have raised rates before the Fed - thats not what they do. Yes, Truss wants to throw BOE under the bus so the Tories arent responsible for the mismanagement of the economy. But dont buy into it. They just need a scapegoat so they dont get the blame at the next general election. It has nothing to do with reality

@cuddlybear21

Your link clearly states state ownership is no problem, EU law ensured that when privatised, public good must be maintained.

UK was selling off utilities long before EU came along.

Privatisation was a member state choice, either fully or in part.

@AndreaC74 Agreed - well privatisation in name was more or less forced. However, in practice - member states had a choice. The Brits went one way.......everyone else went the other

jeez - if you think I believe truss’ words where she is throwing the BOE under the bus you completely misjudge me.

I did mention fiscal as well as monetary policy ineptness after all.

I don’t think either central banks or governments have any credibility given the last 25 years. And it doesn’t matter whether it’s democrat/republican or labour/Tory. They are short termist, and too influenced by lobbyists and the promise of pay days after their time ‘serving the public good’ is done.

But in answer to the question yes the UK is fucked. Brexit means there arent the workers, economy/trade messed up. Austerity/covid means public services/vast number of people have been made so much poorer since 2011 that there's not enough meat on the bone to comfortably go through this shock. The war and rising gaz prices are not the fault of the Tories but Brexit, austerity, Covid mismanagement all are......and sadly......2/3 of the British population/service simply dont have enough capacity to go through this crisis

And weirdly, the privatisation of energy was supposed to increase competition for customers. They could have a choice who in they used for their energy.
Hasnt worked out that well though has it

@SwanBuster I am not sure that the last couple of decades of global i.e. American fiscal policy has been wrong for the Americans. Well at least not for American companies and ultimately it's up to the American voters to decide whether it's been good for them or not. However, the problem is that it certainly hasnt been good for the UK if you look at it from the point of view of general prosperity, stability, equality of opportunity etc. And in a way thats my big issue with the idea of the market will deliver - it's not the best but fine can be a solution within a nation state but within a global economy largely dominated by one market......the market will not self correct itself for the UK ( even if say it will do for the US aka US companies do on occasionally listen to the US policy makers). Therefore, the market in the UK led by the US companies will not deliver

But has the government not realised that many pensioners won’t be able to pay their energy bills? Those on a state pension earn £600 per month. They won’t be able to pay £300 plus a month will they ?
Or does the government want pension age people to freeze to death ?

The USA is richer than the UK, even with a bigger population. I think their debts are smaller too, in comparison to the population.

The gap between rich and poor is still large though.

I always work on the theory that governments always know.

Glad there is some sense on here now.

Some threads are just not worth reading.

Is that right re debt?

Japan is high, Greece is too, US, Italy, France, Spain, Canada, Portugal, Belgium higher - many others but taking time to list. Couldn’t screen grab whole thing

worldpopulationreview.com/country-rankings/debt-to-gdp-ratio-by-country

Don't know about various countries debt ratios but the other consideration would be the cost of debt.

It was recently reported that a large chunk of UK debt was variable, not fixed, so likely to get far more expensive as interest rates rise. Other countries could have a lot more debt, but it might not cost them as much to service, which is the important part, if the interest rate was fixed when rates were low.

@Sporty2022in terms of the pensioners - honestly i just think they havent got around to it. The recent administration has often been fairly slow at sorting out governance/admin issues plus the Tories have been very busy with themselves. The civil servants are aware - Gordon Brown has told the Tories to get themselves together by September i.e. before the Tory election. But the reality is - both Boris and the chancellor were on holidays and Truss/Sunak are too busy tearing bits out of each other.

Am assuming that once one of them wins - they will quickly change the timeline of benefit rates being adjusted from April to October/November. The pensioners will actually get their inflationary pay increase but only in April i.e. at this point the winter is a problem. Seeing as pensioners vote and even more importantly vote Tory - am assuming that someone in the tory headquarters will remind sunak or truss by 15 sept that if they dont bring the change in inflationary adjustments earlier they will piss off their core electorate and they will change it.

But right now - even the pensioners aka the one group of voters the Tories actually care abound dont get a look in amidst this election campaign and Boris finally being relieved of doing what he always hated doing i.e. governance - plus he isnt actually allowed (in theory) to change policy