As the Guardian has noted this morning:
Fears of a long recession and the likelihood of higher public spending to cope with the cost of living crisis have sent the interest rate on Britain's debts soaring towards its biggest monthly rise in almost 40 years.
Ten-year UK government bond yields, which are a proxy for the effective interest rate on public borrowing, hit 2.78% to register the biggest monthly rise since September 1986.
Heaping pressure on the incoming prime minister to address the Treasury's worsening financial outlook, some analysts predicted the yield would increase before the end of the year to at least 3%.
I think there is a massive lack of perspective in this report.
Inflation is over 10%. It may not stay that way. It probably won't. With luck interest rates will fall as well. But, right now these interest rates are massively negative. In reality the interest cost is not in any way making up for the fall in the value of the capital saved in government bonds. The rate is, actually, therefore, at a real massive low point.
Now turn that on its head. This means that this year something like £200 billion of government (valued as it was before this inflation hit) might be taken off the real value of government debt. It is falling massively in real terms as a consequence.
The debt botherers should, of course, be very happy abut that. I am not. Firstly, this means that opportunities for people to save with the government are, in real terms being reduced.
Second, it means that the money supply is being reduced when it needs to increases.
Third, it means that a massive opportunity to do QE at a time when bond values are low (they move inversely to interest rates) is being missed.
And fourth, if interest rates are in real terms negative this is still the moment to borrow.
But instead the fuss is about the cost, wholly missing the issues that really need to be discussed and fuelling the austerity agenda instead.
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I agree the interest is not but its all part of increasing the money supply..and regardless what you say there is definitely a relationship between increasing the money supply and debasing the currency..and we debase the currency we import inflation..so there are consequences, disingenuous of you to suggest otherwise
Show me how that relationship has created inflation?
Taking V into account, show me where and increase in M has resulted in infaltion
https://www.stlouisfed.org/education/feducation-video-series/episode-1-money-and-inflation
The data says anything but what you claim
If there is a direct link between increased money supply and inflation, why didn’t your assertion manifest itself after the QE intervention following the GFC? Or, for that matter immediately following furlough payments?
Current inflationary pressures can be laid firmly at the feet of the fuel crisis; Brexit and supply chain issues. With a dishonourable mention for the BoE’s response. If I’ve been paying attention to Richard correctly.
There was a link, posted some months ago, in response to one of Richard’s articles that indicates there is no direct link between money supply and inflation, which I’ll try to track down.
IIRC, several economies, over many decades had increased inflation following money supply increases fewer on than half of the occasions that the money supply was increased. That would suggest, to me, that other factors are in play, and those factors are more important than the money supply itself.
You are right
Tim Congdon is spot on..he will provide all the data you need
https://www.ft.com/content/091c288f-6d17-4f1a-a86e-5c35e1161b62
Tim Congdon has never been spot on about anything
But you give yourself away by saying so
I saw this today too and immediately ended up putting my head in my hands.
The Guardian. Another failed institution misinforming those who trust it.
Disgusting.
The lack of economic know-how amongst journalists, even at the FT, is quite worrying. I really think you should push to write more columns in the papers to help educate people. The fact is that the Daily Mail is the most read English news publication online only demonstrates that. But I’ve found the best way is to write for them, educate them, rather than sitting on the back pages of the Guardian where the masses don’t bother to look. Just my two cents Richard, I think you need to up your media presence even more. Instead we are getting economic lessons from the likes of Alex Brummer and Owen Jones, not exactly best in class
I’ll try
But in essence, you have to be asked and even getting on podcasts is hard
The leading ones avoid discussion of these issues as much as the BBC and Mail
They are also frightened of non neoliberal ideas, it seems