How is inflation high when everyone is so poor?

[Orchidgal]

Please explain to me like I am three.

The explanation I have received is:

Everyone saved loads during the pandemic and the government printed and handed out loads of money.

So, there is too much money sloshing about in the economy, causing prices to rise (inflation) and so the government put interest up to stop people spending and borrowing more.

Except that bit about there being loads of money so needing to reign everyone in doesn't make sense to me. Everyone I know is financially stretched.

As far as I see it prices going up has nothing to do with people ‘having too much money’. So why is higher interest rates the answer?

I don’t geddit.

@socialmedia23

Cos your money is losing value in the bank account. The savings rate doesn't match inflation.

That depends entirely on the proportion between a person's spending and saving and also what they spend their money on, today and in the future.

If you have a couple of hundred thousand in the bank or a gold plated state pension, but spend very little on food and utilities, the increase in your interest/pension received is probably more than the increased costs of your food and utilities spending. Happy days!

Wow, 24%! Do you work for a supermarket?! (I jest… sort of!)

Picture is very different where I live (Wales). I’m in the public sector, 2% rise last year, probably 2-3% this year (currently in dispute).

I’m a professional earning £40k+ and my friends and colleagues something similar. We’re back to ‘pandemic’ socialising (walks and picnics) as meals and drinks out are getting rather pricey.

Orchidgal. No. Finance in south east on 6 figs. There's a huge shortage of good people.

The people who tend to vote Tory tend to be either one of two things

1. Older - paid off house, pension. Perhaps they don't have unlimited money but compared to their younger days when they were raising children, they probably have more disposable income. Also spending tends to fall as you grow older as the big ticket items tend to have been purchased. Also many benefited from house price inflation

1. Feel better off compared to others in their community or aspire to be better off. That would be a lot of red wall voters- earn £30k in an otherwise lower earning area and therefore own their house so feel relatively better off.

The poorer ones in the latter group is likely to be affected by inflation and mortgage rate rises so are switching. As a proportion, the richer ones are concentrated on the SE shires but even many of them are switching to lib Dems as their tax burden has gotten quite high in recent years and some are probably affected by mortgage rates.

We are an ageing population so it's not surprising that the vote doesn't reflect the interests of renters, mortgagors, people with young children etc who all tend to be younger. What is surprising is that the NHS has been allowed to get to such a state when the people who rely on them are the Tory's voter base (but is probably why it's still free at the point of access and is probably the last vestige of our welfare state). I guess it makes sense because it's staffed by younger people(mostly below 60) and immigrants and the Tories resent paying public sector workers well.

Inflation is high because this government borrowed and printed a trillion pounds to lockdown healthy people and trash the economy. When you magic money out of now here rather than people producing goods and services, this is what happens.

On top of that, there are 6 million people on universal credit, for which government is borrowing a further £20+ billion a month to pay for. Includes interest on borrowing.

And so the cycle of free money continues, making everyone poorer and prices increasing all the time.

Not everyone is poor. I appreciate that plenty of people are struggling, but plenty people are not and are continuing to spend. I was out for dinner last night and the restaurant was busy.. on a random Tuesday evening. A village pub, not a city centre location. All the malls are full. Our flight for our summer holiday is showing as almost completely full on the seat map. There’s definitely still money.

And don’t let this government fool you into thinking war in Ukraine caused this inflation. It didn’t. This corrupt government’s incompetence did. We are a net energy importer, because this government failed to make us energy secure. The US has not seen anything like the inflation on energy that we have.

If this government wasn’t so corrupt, fleecing the taxpayer, printing billions and borrowing even more to give away for PPE, test and trace, furlough, bad Covid loans, they might have more inclination to make good policy.

You know Truss is no longer the PM. And her policies lasted all of 5 minutes. The pound had recovered within 6 weeks of her leaving office.

This inflation is down to the corruption during Covid and the printed billions.

At last, some intelligence. It has nothing to do with Liz Truss because she never got to do any of the things she said she would. It has a lot to fo with Rishi Sunak debauching the currency during covid. A lot if people were paid to stay home for two years and Rishi printed the money to pay for this. Having basically reduced the value of the pound by 25%, you can expect two years of 10%+ inflation until prices catch up. I appreciate that not everyone got furlough payouts and stayed at home making soda bread but it was popular with the middle class and that seems to be who matters. Furlough—well off people being paid to do nothing and living off stuff delivered by poor people.

Well CEOs are getting 20+ % on average, which must skew the figures quite a bit

I’m pretty sure the Bank of England big boss is convinced everyone has lots and lots of savings. There’s basically no problem with everything doubling in price as we can all afford it.

Furlough—well off people being paid to do nothing and living off stuff delivered by poor people.

Weren't the well off more likely to have jobs that continued?

You know Truss is no longer the PM. And her policies lasted all of 5 minutes. The pound had recovered within 6 weeks of her leaving office.

The damage it did hasn't even begun seriously yet. You can't have the intervention on the scale the BoE engineered and expect it to disappear overnight. This isn't so much about "the pound" but the ever increasing interest rates needed to keep it viable as an international reserve currency, and by extension the UKs already tattered reputation for fiscal stability.

Mind you, I am quite happy to lean into "Truss is no longer PM, so it's not her fault" as a point of view, because it then leads onto "Rishi Sunak is PM so it is his fault".

Or have we stumbled across another "heads we win, tails you lose" argument ?

If you supported lockdown, this is your fault. Simple as. Anybody with any common sense could see in March 2020 that the measures put in place then would bring about exactly the current situation. But common sense was hard to find. Did you support lockdown? Did you think it should actually have started earlier and ended too soon? Like the Labour Party, the unions, the BBC and just about everyone else thought? If you did—and let’s face it, almost everyone did—then you are responsible for this.

Don’t be so silly.

We were already in a wretched state when Covid came along, and our PM at the time dithered, delayed, ignored, lied, blustered and avoided FIVE Cobra meetings. He finally, reluctantly put us into lockdown 2 weeks after he should have, and consequently the pandemic was much worse for the UK because of his too-late lockdown and then too-hasty coming out of lockdown, and all that “eat out to help out” nonsense of Sunak’s.

You Tory voters could not have put a worse person in charge of Brexit and Covid.

This

What we have is supply side inflation

Plus Covid reaction didn’t help

I think you really don’t understand how the economy works.

BofE intervened because they have been sat on their hands since 2008, yes 2008, printing hundreds of billions while productivity in this country tanked. And they did this because of how Labour turned this country into a low wage economy and inflated assets.

You don’t need to be a Liz supporter to know that. Liz Truss was PM for all of 5 mins. A generation of corrupt politicians since 1997 and an inept central bank led us here.

So this intelligent analysis claims that we have runaway inflation because we didn’t lock down early enough?

What a crazy, crazy world we live in. No wonder we get the leaders when this is the what the public thinks.

But they were too busy stood outside their front door on Thursdays, banging pots and pans like idiots. Or putting up pathetic solidarity posts on social media. Or coming on MN to ask if they were unreasonable for wanting to report their neighbour for taking the second walk of the day. Or moaning that their workplace was open and they weren’t furloughed. Or complaining that schools should closed.

All screaming for harder restrictions. Now these morons shrug their shoulders and say ‘well it wasn’t me’.

Many people aren’t struggling though. No one I know is, we’re in the Southeast, all have mortgages, decent jobs, in our thirties. Apart from the odd moan about the price of electricity and food life is carrying on as normal. We’re all still going on usual holidays, eating out, overpaying the mortgage. Our wages have been increasing alongside the cost of things.

And the idea we came out of lockdown too quickly. Madness

And they did this because of how Labour turned this country into a low wage economy and inflated assets

How sad that the Cuntservatives haven't been in power for long enough to change this.

And they did this because of how Labour turned this country into a low wage economy and inflated assets.

I thought that started in the 80s?

Sorry, isn't this Brexit plus pandemic plus Ukraine and truss tanking the economy?

Think this sums it up pretty much.

Pandemic, Ukraine or Truss could not be foretold in 2016 but....

Brexshit was the stupidest thing ever to be put to a popular vote.

It's an ISLAND.
Everything needs to be imported - foodstuffs, workers to work the fields and transport (so food is delivered to supermarkets and shops), NHS etc., spare parts for manufacturing, building materials....
Never mind people's ability to work and live where the work is in Europe, (EU) - which included UK! - scientific research grants, Erasmus, young people's future employment opportunities.... Just so sad.