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?

National debt doesnt matter - private debt does. National debt is a mythical concept - and no one pays it off. The problem in the UK is that private debt is really high and that will be harder to service for the individuals

"National debt doesnt matter"

Doesn't high national debt mean huge % of taxation & GDP goes on servicing the debt and can't be spent on public services (or even tax cuts). Seems like a bad thing to me.

UK Debt to GDP ratio is already > 77% the threshold thought to be linked to lower economic growth.

@lljkk No it doesnt - it's both more complicated and simpler than that. What it is not like is like personal debt. Governments create debt but also create money, rising rates are bad but inflation also means that tax revenues actually go up. The point was that when the Tories talked about binging the debt down as the reason for austerity it was rubbish because that's not how national debt works. as set out Japan's debt is massive so is the us'. No government worries about national debt in a crisis of this proportion - it would be akin to deciding to polish your silver while the house is burning down.

👍 broadly agree. It has worked out at least on the surface pretty well, for now, for a lot of the US population and definitely their corporations, although the inequality issues are even worse than here.

the intrinsic ties with the rest of the world economy make it very, very difficult though.

There are no easy solutions though, which is why I have such a problem with politicians/central bank officials not telling it like it is.

I’d be much happier to vote for someone who was honest and said ‘You are going to have to accept a drop in living standards in the short/medium term, if you want at least the chance of a systemic solution to inequality and a more equitable world for your children ‘

But I accept no politician will say that, and most of the population are too selfish to want to hear it 🤷🏻‍♀️

Oh and better still if they allow a haircut on asset prices. Jerome Powell has already indicated as much, at least on housing that the Fed’s policy doesn’t care and more importantly signalled he would welcome a drop in prices in that sector.

“I would say if you’re a homebuyer, or a young person looking to buy a home, you need a bit of a reset.”

— Jerome Powell
Federal Reserve Chairman

Thats a person who has to choose their words very carefully, so if he’s even saying ‘a bit of a reset’, that is a pretty strong statement.

So you reckon 13% inflation is a good thing?

@lljkk i think 13% is very bad for the economy in general, i just wouldn't bring the issue of national debt into this

Agree a crisis situation is more likely to accrue debt, but continuously increasing debt in non crisis times and servicing costs doesn’t sound great.

Although right now approach to debt can be different and although Sunak resonated with me more over not handing it down, that table - which is better for U.K. than I thought - and that we are still in crisis mode has made me think maybe we can wait a bit longer.

Or maybe "crisis" is the new normal.

I could easily imagine that as soon as the inflation-Ukraine-war crisis is over, something else will be the next crisis. I mean, run-away-inflation is about to get baked in hard under Truss's economic plans, while Brexit-love means baked in labour shortages. Meanwhile, climate change is saying "Hold my beer"...

Well Sterling has been severely weakened by Brexit which is inflationary. However, neither PM candidate will ever admit to this so inflation will continue to increase.

House prices will continue to rise as wealthy foreigners can be U.K. homes more cheaply.

To prevent brain drain in internationally sought after sectors such as tech and finance, firms will continue to give workers inflation busting pay rises. As a result London, South East will accelerate away from the rest of the country in regards to pay and house prices.

I genuinely don’t understand how working class Brexit voters thought it would benefit them?

15% is back to the late 80s/90s under the Conservatives. So is sleeping on the streets, NHS waiting times, patients in corridors.
Next will be negative equity, where your house value plummets, your mortgage payments go up, and you can afford neither to move or pay your mortgage.
That is, if Truss doesn’t trigger WW3 first.

www.theguardian.com/business/2022/aug/08/city-workers-get-double-digit-wage-rises-while-lowest-paid-see-1-increase

tale of two cities - half of london is doing great, the other are left scrambling

Surely though, this is just market forces and those getting the 3 or 4% pay rises, aren't worth as much to their employers or society in general (thinking of NHS healthcare staff in particular) and if they don't like it, they can retrain and get a job in a sector that is more in demand and hence paying higher wages?

Seems the obvious Conservative solution.

I hope Truss offers this up as her next new policy announcement.

This. High.mortgahe rates and negative equity was a a big thing in the 80s. Several of my friends lost their houses and ended up owing the banks the difference in the house price between what it was bought for and what the bank valued it at so were in massive debt with nowhere to live

National debt is a mythical concept - and no one pays it off.

Really? How strange that the WW2 debt was being paid off into this century. I paid towards it and I wasn’t even born in 1945.

And some countries dont even have a national debt at all!

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

As in understand it, the average age of UK bonds has shortened, meaning it is more vulnerable to interest increases. I don’t know whether this is replicated in other countries we like to benchmark ourselves against though

I think Greece would probably disagree on this one.

@Blossomtoes - and please tell me of any time in this or last century that the UK has paid it off
www.visualcapitalist.com/global-debt-to-gdp-ratio/

The trouble with the general public's understanding of national debt is they equate it to a household debt i.e. it's like owing a debt on a credit card and they then come and take your house away or something. When did that ever happen in a country? National debt is complicated because the state both owes money but can also literally create money by printing it (or what we call quantitative easing). etc etc etc. And in practice - even austerity failed to bring it down but did become a massive exercise in cutting down on public services while subsidizing private enterprise. www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicspending/bulletins/ukgovernmentdebtanddeficitforeurostatmaast/december2021

In a crisis cutting national debt is the wrong approach and is counter productive.

www.forbes.com/sites/francescoppola/2018/04/30/governments-are-nothing-like-households/?sh=70580b7054f8

But it will be a problem for the British public - poor people will lose even more money. The only hope is we dont end up with higher unemployment.

@Icanstillrecallourlastsummer the problem with Greece was not national debt but a) German banks controlling capital in the country; b) the mismatch of euro v Greece - i.e. debt is national but currency is regional. 2008 showed that without redistribution within the EU - Euro is pegged to German rather than Greek needs and fails. But thats not about the national debt per se but the Euro, German banks, etc etc etc

Here you go @cuddlybear21.

news.bbc.co.uk/1/hi/6215847.stm

Thats not about national debt

What is it about then?

We can’t keep re running the Brexit debate forever. It’s done. It is not going to be reversed. We ok have to hold our politicians to account on economic growth.

We need a more productive economy. Higher wages at the bottom to incentivise automation, subsidies for skills training, tax breaks for true investment like infrastructure or tech projects. Government funded infrastructure projects. Low tariffs on primary/secondary sector imports to be reciprocated through low tariffs on services/finance exports. Freer flows of capital to boost our biggest asset - finance sector.

We cannot tax our way out of this. Nor can we spend our way out of it. The only way is to open the shop for business. Properly open it up for private investment.

We've been opening up to private investment for decades, it doesn't work... Europe/EU has far more state/private partnerships and have much higher productivity and hence higher wages.

Rising wages at the bottom? How does that work? and remember many low paid are in the state sector, then there is the lower paid striking.. and the Govt telling to FO.

We see wages rising at Amazon or Lidl and they then attract staff from Social Care, so lets rise the wages of Carers? then AHPs won't train and go into debt to get a degree because they won't earn anymore than a carer... and so it goes on.

No single action will get us out of these issues but we could nationalise energy, join SM, have a better relationship with EU.

China is the emerging threat too, we need to address that, as is the UK's water infrastructure, we wont be doing much at all unless we renationalise that too, private water doesn't work, they simply will not invest.