This is from an FT email this morning, suggesting the top five news stories of the day:
In effect, the Fed has said that even though inflation already appears to be under control in the US and many think rates have already risen far enough and just need time to work now, they will keep increasing rates until the inflation has gone. This is madness: the result will be continuing downward pressure on the economy long after the risk of inflation has totally dissipated. Of course a worldwide recession will follow.
This just proves that we are not alone in having idiots in charge of the economy.
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In Germany, a recent auction of wind capacity resulted in only 50% of capacity being bid for (750MW vs 1300MW on offer).
Reasons given: a rise in finance costs (weighted average cost of capital – which covers equity and debt) and a rise in equipment costs. Pushing up interest rates will make a bad situation worse – by increasing energy costs. It is note worthy that in 2020, bids in German auctions for on-shore wind were circa Euro50/MWH – the bids today are around Euro58/MWh – a 16% rise. Thus does Fed action make a not good situation worse – and endanger decarbonisation efforts (lets not forget this will also have an impact on energy efficiency measures).
Is the same madness prevelent in the B.O.E Richard?
Essentially, yes, in my opinion
The evidence is that the BoE bankers are more aware than their counterparts at the Fed of the dangers of raising interest rates and plunging the economy into recession or even crashing it. They have been criticised for failing to be more aggressive and not tightening monetary policy quickly enough. They are caught between a rock and hard place especially as the Govt’s Trussonomics is causing the pound to fall dangerously which is increasing the pressure on them.
It is always going to be difficult for everyone else to not follow the American lead. There are also similar hawkish comments coming out of Europe on the need to tighten monetary policy; so, we can expect sharp interest rates there too. The crash, when it inevitably comes, will be international in nature and just as it was in 2008.
American capitalism is pure opportunism and always has been because the ‘land of the free’ is all about being free to exploit people.
This policy is surely aimed at the rentier capitalists and enabling them to get a cut of the inflation through their lending.
Yes – it is stupid for all sorts of economic reasons, but that never stopped a true American patriot capitalist from shitting in their own backyard: the interest rate hike is also planned, deliberate and callous and will further create an environment where people like Donald Trump will prosper in America.
What is the old saying? ‘What goes around comes around’.
Enjoy, America.
It’s funny how you disagree with the exerts in every country / jurisdiction. Perhaps its’ not them that is the idiot?!
It’s funny how you just posted here under another name entirely suggesting you worked for a prestigious financial institution when doing so
Could it be that you’re the one who9 is bullshitting?
The “experts in every country” have failed most of the population over the last 30 years, having had some success for a very limited sector of the population: the wealthy.
The US has created unaffordable healthcare for many, that is free in the UK and elsewhere. Wealth inequality grew (in the US income growth was most rapid for the top 5% of families). Energy and fuel has gotten more expensive, and the overall UK poverty rate is at around 20% (one in five!). It can cost me more to travel by train than taking the same journey by taxi, and only 60% of people own their own homes.
Technology and modern practices should have made nearly everything more affordable. It hasn’t. The experts aren’t.
Too true.
I’m going to Ireland in November to see my brother. I eschewed going by a subsidised, polluting Ryan Air cattle shed with wings and will be going on the train. A return ticket bought in advance in September from Derby to Holyhead?
£130.00!!
That’s rentier capitalism folks, and the railways are even more subsidised than they were in the 1980s. Luckily seeing my Broheim is worth it, but I mean £130 is supposed to encourage me out of my car and use public transport? Really?
The railways are nothing but an income stream now to investors and doesn’t it show?
I love everything you write…but idiots is utterly the wrong way of framing this. completely ignores the murderous impact of these policies on the poor in emerging market economies around the world. AND…the way in which the international financial system operates around the greenback-and the power of central banks. Sociopaths? Knowingly destroying economies around the world. Pyschopaths? Deluded ideologues? Help me please!
Ok
And I agree with that international aspect of this – which I’ve mentioned before
Raising interest rates is a fine way to slow an economy into stagflation. The USA will not hit 2% without entering a recession. Growth is practically at 0 in the US, Core CPI just printed 6.66%.
Why don’t we use fiscal policy to thump the higher earners to slow the economy instead of rate rises to drive those struggling with mortgages into poverty
Yep, Truss’s aim is “Growth, growth, growth”*. Apparently nothing else matters. So does she achieve that by improving consumer spending power and business investment(I.e. by cutting interest rates, which is entirely within her power if she so chooses)? Nope, on the contrary she allows the opposite to happen.
* I expect others watched Truss’s awful Conference speech and had similar thoughts to me when she explained her economic philosophy. With all the passion of a dead sloth she leans into the pulpit and says: “I’ve 3 ambitions for the economy….. growth….” . And at this point we’re all going “yadayada…. Growthgrowthgrowth…. Get it, now move on”. But no, she’s still there, now goggle-eyed and, undramatic pause, “…. growth…..”. After another near-interminable pause we get the 3rd “growth”, she smirks with the power of her oration and conference erupts in rapture. Fuck me. At the time I said to myself that if she had as much charisma as Hitler’s little finger she’d be truly dangerous.
I’ve become more aware recently of countries playing tit for tat with one another, for example Biden tries to implement his New Green deal, the Saudi’s decide to push up oil prices to create political discomfort for him. Is this a way of America flexing back? They can push the world into a recession knowing it will hurt them a little but could hurt a lot of other people far more. And the added bonus being a richer country they can bounce back quicker, there corporations can buy up failed or failing overseas businesses??? Bit like a discount model that pushes other businesses under and then scoops up market share.