I just posted this on Twitter:
In very many ways there is little that I can add to that: the simple fact is that UK household budgets are going to be crushed beyond imagination over the coming year by real cost of living increases, meaning that nothing that the Bank of England can achieve by pushing up interest rates now is going to do anything but force yet more people into debt and poverty, which is going to be the fate of millions in the UK unless Rishi Sunak does something really radical next week.
In other words, this increase is utterly pointless in delivering any inflation objective, but is callous in creating yet further unnecessary impositions on household budgets that millions will be unable to meet.
I do hope that those on the Bank of England Monetary Policy Committee who voted for this can live with their consciences: I could not have done if I had done so.
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I’m struggling to understand how increasing interest rates will reduce the price of oil and gas, which is fuelling the present inflation. Can the Bank of England explain?
I suppose, if people are demanding something must be done, and the MPC only have one lever, all they can do is pull it and hope it is connected to something that produces a desired effect.
That’s about it
Exactly…. and a reason to challenge the orthodoxy that CBs should be “independent”. What is clearly needed is coordination between fiscal (government) authorities and monetary (BoE) authorities.
BoE was given operational independence in 1997 and it was a great political stroke at the time as it “took party politics out of rate setting” and made the City fall in love with Gordon Brown… which did smooth the way for increased spending on health and education.
However, what has it really done for us? Nothing. Benign inflation meant that the BoE never had to administer tough monetary medicine but at each and every crisis it did need government involvement.
What we know from 2008 onwards is that cooperation is more important than independence.
It did not even mean inflation was addressed – it had faded away by 1993 or thereabouts
The solution, of course, is to implement the plan for Co-operative Socialism, since this abolishes Rent, Interest and Profits to Shareholders.
Along with a Socially-determined range of incomes and an internationalist acceptance of the opportunity of a global Co-operative Commonweal.
Perhaps TJN might co-host meetings to this effect?
Starting with the First Thursday in April, 4pm at Friends House, London.
John
This is nowhere near my agenda
Richard
Thanks Friend,
Perhaps you might like to host a Question and Discussion event to critique the plan, at which Mary and I could attend.
You might find our tax proposals, therein, closer to your own proposals.
Love to and for all,
John
Sorry John, but I do not think that a good use of my time
Some numpty on R4 this morning from the IoD said that interest rate rises would be welcomed by business leaders to ‘calm demand’ and stabilise prices.
‘Calm demand’? I mean – it just does not work like that does it? And all the other stuff she spoke of was right out of the neo-liberal orthodox playbook. It sounded reasonable I admit but after studying this stuff for so long we know who the real beneficiaries are – the rentiers who bringing forward their profit margins and sod everyone else.
Increasing interest rates now is just an act of faith in intangible theory which is just a Trojan horse to hide profit gouging – as well as being cruel and unnecessary.
This the rentier state at work again methinks.
Inflation is going to kill demand almost entirely as this year progresses
If they think this helps, they really do not understand the real world
I am now aware of this:
https://www.taxresearch.org.uk/Blog/2021/12/21/the-tax-justice-network-is-an-unreliable-source-of-data/
At times like this you are reminded of how the neoclassical economics of the last 30-40 years is still so dominant in thinking, be it central bankers, government or business. Still trying to manage the economy with the interest rate – what Edward Heath described as ‘one club golfing’ I think.
The world of economics really has not changed, despite its claims to have moved on.
You are right
Just reading Diane Coyle’s Cogs and Monsters – a defence of economics, arguing that it has moved on. Not convinced at all. The economics equivalent of ‘greenwash’.
Given many will need to borrow to get by in the hope this massive rise in the cost of living is transcient, raising interest rates gifts a respectabile veneer to the idea of banks accordingly raising their loan rates. It facilitates predation, then, reminding us (like we needed it) whose side Bailey et al are on. If any one institution is to survive the coming chaos, it will be banking. None of this would be stood for, I remind all, in any genuinely educated country.