I was pleased to note an article in the FT this morning by Paul Donovan that began:
I agree: it is profit increases driving inflation right now, if anything is. This is obvious from the energy sector.
As Donovan notes, a pretty big web of lies (he does not use the term) supports this. For example, as he observes bread price increases cannot be increased by wheat price increases when wheat forms only a small part of the cost of a UK loaf.
He concludes with:
I am glad that I am not alone in thinking there is a narrative conspiracy going on around inflation, because there undoubtedly is.
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Hi Richard,
On a related issue – how the BBC covers economics – things may be changing, according to this New Statesman piece today (H/T Politico London newsletter).
https://www.newstatesman.com/politics/media/2022/11/bbc-reckoning-uk-economy-coverage
Let’s hope….good to see Any Verity referred to
And thanks
https://www.telegraph.co.uk/business/2022/11/03/how-bbcs-economics-journalism-came-attack/?li_source=LI&li_medium=liftigniter-rhr
The Telegraph has taken a typically right-wing, any-chance-to-hammer-the-BBC approach to the same topic. You are mentioned.
I couldn’t get through the paywall
“Profits not wages” driving inflation. Finally, the penny has dropped with someone at the FT!
Few things riled me more than Bailey asking for wage restraint without a whisper about price restraint!
The way to achieve price restraint is to have a State player involved that can influence (or even dictate) what other players will do. Bulb could have done it for energy… but it has been quickly sold off (unseemly haste?) in order top head off calls for a State Provider of power.
Nationalisation of the energy companies has become an imperative decision; it isn’t as though it never happened before.
And its not as if they (the energy companies) haven’t had a decent go at it.
Crucial point very well made.
How to achieve the focus of the political debate on profits (and energy as a critical driver of ‘profits’). note it is not British SMEs that are, at least in the main producing the kind of profits being discussed in the FT.
If we are going to flush out the BofE policy flaws (and the politicians backing them), then I still think the windfall tax issue on oil and gas is the most effective ‘way in’ to both public and political consciousness of the underlying issues in a major sector that directly effects their everyday lives; because energy is so critical for most households.; both directly and indirectly
The defence of the oil and gas sector by Government is weak; and in both Government and the oil sector having to address the issue provides the best opportunity to expand the argument to focus on the total failure of the UK domestic energy market; and the need completely to rebuild domestic energy to ensure first the guaranteed security of supply, independent of world market prices; and recognising that if there is a single, exclusive method of supply; a single cable or pipe provided by the network provider to a house, then ‘de facto’ there is a monopoly; the householder cannot be offered a genuine, fully functioning, independent market in energy supply. To pretend there is a genuine ‘market’ is to misrepresent the economics and engineering of energy supply to households.
I agree: there is no genuine market. There is rent extraction instead
The rent is too damn high
Is pretty much the simplest and most accurate assessment of economics. Put that phrase into YouTube and you get a fantastic clip. A straightforward guy standing for election on a single issue platform. Perhaps it is the only issue that really matters.
Regarding rent extraction my “standing” energy charges have gone up (again) since Oct 1st – they seem anything but standing…
Has any BoE representative addressed your proposals or criticisms? I am not qualified enough to drawer conclusions but your analysis seems sound and I would like to undertsand the BoE and/or Treasury position. It could just be based on ideology and politics of course.
No, in a word
They do not face the criticism of others either e.g. Danny Blanchflower
Like the Tories they have heads in the sand
J K Galbraith said: ‘The process by which banks create money is so simple that the mind is repelled’.
You are saying that the banks create mortgage loans from nothing – though that does not seem to be widely understood. Either way, it is reasonable, for banks to charge interest on a loan to cover administration. There is a possibility that borrowers might default – but for what proportion of bank costs is that a significant legitimate charge?
Do admin costs rise when there is a hike in Bank of England interest rates? Are defaults significantly more likely?
Do mortgage interest rates usually rise by the proportion of the hike?
Conservative and Labour politicians are fond of saying ‘there is no magic money tree’ … and, despite protestations from you and increasing numbers of others, most people (also guided by the billionaire-owned press) seem to accept that in some circumstances austerity is essential.
But these one-sided mortgage deals seem to represent a bankers’ magic money scam whenever the BofE governor or the Fed chair fancy increasing their bonuses.
QT seems to be another strand of the same sort of thing.
This might be explained if the minds of ordinary, naturally-fair-dealing folk are repelled by the notion that such greed and indifference has been acceptable on such a scale for so long.
This short book is a good starting point for understanding commercial and BOE operations in the UK (and in general):
https://neweconomics.org/2012/12/where-does-money-come-from/
No it most definitely is not
Why is this book ‘Where does money come from?’ not a good guide?
What book would you recommend.
Regards, Chris
See another comment in response to this
https://www.theguardian.com/commentisfree/2022/nov/02/the-uk-economy-is-about-to-be-thrown-into-a-black-hole-by-its-own-government
Danny Blanchflower mentioned here. Hopefully more people will read this, and start thinking.
Even government lackeys might read it and pass the message on.
I am on Sky with the same message tomorrow morning 7.40
I was astonished to find that the UK stock market had been rising over the last month. Smaller UK companies and some sectors have lost value, but larger international companies are holding their own. I agree with Richard that the Fed and BoE are engineering a massive recession, but why do investment managers not see this coming? Are they delusional? Or do they see something we are missing? Surely even giant international companies need customers? Or is so little money in the hands of ordinary people that they are irrelevant to company profits?
And where is the rush to “greater fool” investments – gold, cryptocurrency etc.?
I can’t answer for the insanity of markets
It is even more disturbing if you think the markets are not insane. It suggests that the majority of people have so little money that their misery has no impact whatever on the wider financial markets
Richard, if you don’t think NEF’s “Where does money come from” is not a helpful introduction to how commercial and central banking works in the UK, what would you recommend (that’s short and in plain English) for people struggling to grasp how the system operates?
Stephanie Kelton’s “The Deficit Myth” perhaps? But that’s very US-focussed.
This (but maybe too technical)?
https://www.ucl.ac.uk/bartlett/public-purpose/publications/2022/may/self-financing-state-institutional-analysis
First my apologies: I confused that title with a recent one from the Bank of England
Second, that book is OK
Stephanie is better
See my ‘Money for nothing and my Tweets for free’
The last you note is up to date – but will be too technical for most
I actually think (seriously) mine is not bad – all based on Twotter threads
The chapter on inflation is out of date
[…] The inflation narrative is fabricated, as is the response Tax Research UK […]