UK House prices are falling.
In the EU inflation came in at lower than expected rate last month.
In the US there is just a hint that the Fed might be easing its position on interest rate rises.
Here, Huw Pill, chief economist of the Bank of England says otherwise, even though both the Bank and the Office for Budget Responsibility say that inflation will largely be gone by the end of 2023 or early 2024. Given that there is a two year lag between rate rises and inflation reacting that fall cannot have anything to do with the Bank's ruinous policy of rate rises.
So what is happening? First, as I have long said, inflation is falling simply because of a) the passage of time, where the evidence is that this always happens and b) because this is the inevitable consequence of the way it is calculated and, maybe (in the case of house prices) c) the result of inept policy by Kwarteng and Truss.
Looking at the second option, as I have explained before, since inflation simply compares prices one year with those a year beforehand, and there was a massive one-off shock from Putin's war which we hope will not repeat and which might even reverse, a decline in inflation has always been inevitable. The Bank had to do nothing to achieve that result.
Everything it has done has made matters worse: it is impossible to say otherwise. Interest rate rises, quantitative tightening and the massive support it is providing for austerity as a result (when that is not in its mandate) are deeply harmful. The results are already becoming obvious.
But, as ever, where is the Opposition? Why didn't know Labour know this if I did?
Why too can't it say that the problem now is not inflation, but is instead dealing with the fact that pay rises are lagging inflation, leaving millions more in poverty, which can only be corrected by pay rises?
And where is its plan to cut interest rates down again, with alternative plans (lending caps for mortgages, for example) to constrain the consequences?
These are absent. All we hear is that they will scrap the non-dom rule and spend the proceeds many times over.
The way out of the mess we are in is to offer a better story of what is possible. After all, we live by narrative, and the stories we tell ourselves are critical to how we view the world. There is a better story to tell right now, and Labour is refusing to tell it, leaving the Tories effectively unopposed.
It is annoying to have to keep saying this, but I feel I have no choice. Th alternative is to watch the rapid spread of economic despair without suggesting an alternative is possible. And I cannot do that.
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Whilst all Central Banks should have been able to “see through” the current spike in prices (as you have) at the least the Fed appears to be responding to the evidence. Will the BoE?…. and will it be in time to prevent a car crash?
No, and no
Am I right in thinking that inflation represents the slope of a graph of average prices over the last 12 months. So if there was no average price rises a year ago, then inflation will obviously come down?
No, it is about the change in average prices between now and a year ago
There could have been big rises a year ago compared to the year before but that does not matter
It is only the 12 month comparison that matters
So if prices in 2020 were 100 and in 2021 110 and in 2022 110 the inflation rate in 2021 is 10% but in 2022 0% – bit prices are still unaffordable unless wages catch up
Is there a measure of how far below wages are from having a living wage (37½ hour week, holidays), and anything below 100% would represent exploitation? Anything above 100% would represent a fair day’s pay for a fair day’s work.
Nat that I know of
@Ian Tresman: I believe you are looking for the
Annual Survey of Hours and Earnings: 2021 (based on SOC 2020)
https://www.gov.uk/government/statistics/annual-survey-of-hours-and-earnings-2021-based-on-soc-2020
It isn’t very opaque though, the last survey report of any clear meaningful use I can find was in 2015:
Almost six million employee jobs in the UK are estimated to be paid less than the Living Wage.
Figures from the Annual Survey of Hours and Earnings (ASHE) show that in 2014 an estimated 5.9 million jobs were paid below the Living Wage.
https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/articles/howmanyjobsarepaidlessthanthelivingwageinyourarea/2015-10-12
Starmer is paranoid about saying or doing anything that will be jumped all over by the lamestream media so is going for the ‘we’re not as bad as them’ Tory-lite plan. He’s not brave enough to go ‘we can do better, we must do better, we will do better and we will spend more’ and is keeping his fingers crossed that the poll leads turn into votes whenever there is a General Election. But, that could be 18 months away, maybe more if it is the Autumn of 2024. What will the country be like then?
Sadly, in order to help remove our local MP (a Tory), my only option is to vote Labour 🙁
Craig
To not keep having to repeat yourself is giving in to ‘inevitability politics’ Richard so don’t be too hard on yourself.
This is the age of tautology I’m afraid, and if you aren’t repeating you are not competing! It’s as simple as that. Alternatives have to be advertised too as much as the false aspirations of SUV ownership.
How many times did I hear R4 saying that the Government hadn’t got any money and was looking at savings to generate cash!!
Granted, it is bloody annoying. But I’d rather hear the truth over and over again than the bullshit I keep hearing.
True
And I will be saying fit time and again
I am looking forward to having more energy to do so
Still running on empty and on the next batch of antibiotics now, the last lot having not done the trick
My apologies – I had picked up that you are still under the weather – all I can say is eat well – plenty of fresh fruit and vegetables etc., and water.
I think we all appreciate the effort you put in.
Thanks
“If you tell a lie big enough and keep repeating it, people will eventually come to believe it.” ― Joseph Goebbels
“Repetition does not transform a lie into a truth.” ― Franklin D. Roosevelt
There is clearly no hope the BBC news is going to improve or help to educate the public.
The former editorial director and director of news and programmes at GB News, John McAndrew, has been hired as the BBC’s director of News Programmes.
McAndrew, who was a launch director of GB News, worked closely with Andrew Neil, where he proposed an “anti-woke” alternative to established broadcasters.
Press Gazette reports: “Since leaving GB News, McAndrew has been the launch editor of The Andrew Neil Show for Channel 4.
“The pair worked closely together at GB News and shared a vision for it to reach people who felt disconnected from the existing TV news offerings. McAndrew told Press Gazette just before the channel’s launch in June 2021 that it would be a “very warm, inclusive channel where disagreements will be had, tough subjects will absolutely be taken on, but they’ll be taken on in a classy and courteous fashion”.
Deeply worrying
At least Andy Verity did say that the govts ‘cant afford it’ narrative is a political choice and there is enough money. But that is never responded to or actually discussed. You could imagine a five or ten minte in depth discussion with appropriate economists and politicians – but the last thing BBC would do. Maybe someone should ask them – and Labour?
I wish they would
@Andrew
Your post bears repeating.
The economic explanation offered by Andy Verity on the R4 six o’clock news (it may also have appeared elsewhere on the BBC?) yesterday is, in my view, the most accurate yet.
I suggest it marks some significant progress in the BBC narrative.
The actual links and details are here:
http://www.progressivepulse.org/economics/bbc-begins-to-master-proper-workings-of-the-economy
Excellent
Thanks Peter
Tweeted
Is it time for a maximum wage? Nobody is worth more than £250,000 a year, what ever they do. Wish we could rely on government to spend our tax money wisely though.
Hope you get better soon.
Almost impossible to enforce
But tax relief for companies on payments above the maximum wage could be denied
This was TUC policy in about 2010. I wrote it
“This was TUC policy in about 2010. I wrote it”
So footballers, pop stars, actors etc etc before you get to anyone successful in industry.. you wanted to enforce a salary. Complete nonsense..
I was simply saying no tax relief on it
Why should the highest paid be tax subsidised?
Please tell me
I accept that a maximum wage would be almost impossible to enforce.
Would it work to have a maximum wage for all nationalised industries and any other body that receives government grants or funds of any kind – perhaps aided by some naming and shaming?
Royal Mail CEO, Simon Thompson, has described workers wanting below-inflation pay rises as ‘greedy’. Worse, he plans to bully his staff by cruel deductions from their holiday entitlements. A big stick, then for his workers, but plenty of carrots for himself – £753,000 including a bonus of £142,000 (Twitter report) – in spite of missing delivery targets and losing £450M pa. Is he really claiming to be an exceptionally skilled manager?
If his behaviour is typical, it is not surprising that so many strikes are threatened.
George Osborne asserted that we were all in this together. Mr Johnson led the clapping for our nurses during an early stage of the pandemic. Neither of them will be queuing at food banks – and it’s not a joke that many thousands of people are.
If Liz Truss and her four Tory MP co-authors admire the likes of Thompson, it is not surprising that they could come to believe that British workers are among ‘the worst idlers in the world’.
It cannot be healthy for delivery drivers and refuse collectors, for instance, to be forever working against the clock, to be penalised for traffic congestion and other factors over which they have no control.
It is time to take care of all workers and it is obvious that differentials should be reduced. Rather than the obsession with percentage increases, a start could be made by offering the SAME CASH INCREASE to all employees up to a certain threshold.
A number of companies have recently paid a £1,000 bonus in this way.
In the Guardian , a report on the debts of water companies. This must be another cause of inflation.
https://www.theguardian.com/environment/2022/dec/01/water-companies-debts-since-privatisation-ofwat-refuses-impose-limits
Water company debts hit £54 billion. That is £10 billion more than the defence budget.
It confirms yet again what you have said about firms borrowing to pay dividends.
To quote Professor David Hall of Greenwich
“With the water companies, since day one there has been hardly any shareholder capital put into the companies. Customers pay for everything, and the companies are borrowing to pay the dividends often to themselves, because their shareholders are parent companies.”
If we wanted to nationalise, I suppose we would be saddled with their debts?
This is borrowing to pay interest – and I wonder how much of this is intra-group?
I know I have posted here before about inflation and how it is calculated, but it is relevant to what is happening now. While official inflation may well fall over the next year or so, the cost of everything that we need and often have little choice but to pay for is seeing horrendous inflation. Energy price increases are the most obvious. No sign of our gas and electricity prices falling as yet – or even staying the same. Will they ever fall back to where they were a year or so ago (average of £1300 a year, now £3000, with £4000 still expected in due course ?) I doubt it.
I note that house prices have fallen a little today, no doubt causing panic in the Tory shires, but most things we need inflation is still rampant. Without pay keeping up with it there is less to spend on the non-need side of the economy.
The Tories, I suspect for political reasons (i.e.) blame the leftie unions, are fighting the battles of the 1980’s on inflation. Current inflation is clearly not due to excessive pay rises, accept perhaps for the super rich. Pay claims are a response to the current inflation surge, especially in things we need, not the cause. Dark days ahead for the economy if wages are kept depressed. Do the Tories want deflation? I doubt it.
‘MarP
There is less to spend on the non-need side of the economy”. That spending is also the income of business. They also get income from govt spending but that is to be cut -and exports but Brexit has hit those.
We have strong deflationary forces at work. Therefore we need an input. A QE type injection to keep up demand. What is the alternative? Businesses closing, higher unemployment, falling revenue and investment, both private and public.
Pay the people who are being forced into voting for strikes and others in the public sector which have fallen behind. They will go out and spend. And much of that money comes back as tax as the money circulates.
It seems so obvious. The question is-why do the government resist the obvious? My answer is that they are chained to an obsolete economic ideology -and they would have to admit they were wrong.
As for Labour, depressingly the same.
You get it