The Bank of England meets this week to consider raising interest rates, yet again. The consensus of opinion is that they will do so by at least another quarter of a per cent. No doubt this will be accompanied by yet more calls for pay restraint because that is the only mantra that Andrew Bailey, the governor of the Bank of England, really knows.
There is no need for this increase in rates. This Guardian headline makes that clear:
Prices are falling, as was always expected to happen now, irrespective of interest rate rises.
What is more, pay continues to fall behind inflation, as this headline makes clear:
And what is the real cause of inflation? That is hiding in plain sight as these headlines from the FT and Guardian this morning make apparent:
It is profiteering that is driving inflation - with the government going all out to help by raising interest rates and maximising its support for big oil.
As I have already discussed this morning, climate policy is already creating one tipping point for politics in this country. A continuation of the current interest rate policy will create another. Things cannot continue as they are with politicians and big businesses laying waste to people's lives without any apparent concern for the consequences. Something is going to have to change I feel: the present is unsustainable.
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The London Economic reported that “Tory minister Nadhim Zahawi got £1.3m from second job at oil company” while working as an MP.
Are the Government’s decisions in the best interests of the country, or the best interests of MPs?
I would consider this arrangement to be totally unacceptable.
Maybe this is the explanation to Sunak’s dash for more oil/ anti green action. Actually these people do understand their actions are harming the planet but they know we are already set on the path of total destruction so aim to accumulate as much money as possible and spend spend spend and go out with a bang. I cannot come up with any other explanation for this insanity.
Working on Green Economy a few years back, a ‘penny dropping’ moment was recognising that sustainability applies to far more than just climate and environment. In particular that the finance sector has destroyed wealth in its various crashes just as certainly as the fossil fuel industry is destroying the climate. It too is unsustainable in its current form.
Agreed, for the second time this morning.
From the BBC and various other places:
‘Banking giant HSBC’s profits have more than doubled as it benefited from rising interest rates around the world.
The London-based lender posted pre-tax profit of $21.7bn (£16.9bn) for the first six months this year, compared to $9.2bn a year earlier.’
Free money for the banks?
There really is something perverse about this.
We just give it to them on their central bank reserve accounts and they pocket it
I see no calls for profit restraint
Heaven’s above – that would never do, old boy.
The way that I see it is that throughout history there have been winners and losers. This pattern of those who believe themselves to be entitled to be winners is so entrenched that they cannot begin to comprehend a situation in which we either all win or ultimately we all lose.
Waging wars for territory or ideology. Carbon offsetting, moving to a part of our world which seems temporarily less immediately challenged by climate change, exploring space for new planets to live on, having seven or eight children because you have the money to raise them and it is no-one’s business but your own are all ways that people who are powerful and feel themselves to be exceptional will delay and evade facing the truth that we are all in this mess together.
Never was the lie that – “ there is no such thing as society” so nakedly exposed for the utter selfishness that it is.
We only have one world and the living creatures who inhabit it.
Until we all see this we have no chance.
Agreed
Thanks
Profiteering is driving inflation.
Inflation always comes back down, just look at the graphs.
Those are only consistent claims if profiteering stops in a do nothing scenario.
Increased corporate profits for companies engaged in damaging activity at the expense of people creating a better future. Shocking!
Bringing together these three (apparently) unconnected stories gives clear evidence that the narrative you have been putting out there for a quite a while is now playing out. Furthermore, you offer solutions…. many of which are practical and straightforward to implement.
Thank you.
Thanks Clive
Sometimes an ‘I told you so’ story is required
Some folk are trying to spin the 6.5% as “generous” in the context of it being “only” 1.4% below inflation. Let’s be clear, this is nonsense.
Taking a middling pay scale from NASUWT (M3), the real change in pay between 1st September 2020 and 1st Sept 2023 (including the 6.5% rise just announced and assuming sensible estimates for inflation this month and next) is -6% (using CPI), -11% (using RPI).
Note that this is just in 3 years and ignores any erosion in pay prior to 2020.
Agreed
As part of a protest, buy a single green share in the oil companies. It’s a small gesture but if a million of us did it… game changer?
It’s easily done through:
https://shop.follow-this.org/
Just bought a BP share for £10.00 – thanks Stephen Perry
I have just done this and shared. What a good idea, thanks.
Chomsky says (I’ve been reading much by him recently):
“This is a business-run society. The political parties have reflected business interests for a long time.
One version of this view which I think has a lot of power behind it is what political scientist Thomas Ferguson calls “the investment theory of politics.” He believes that the state is controlled by coalitions of investors who join together around some common interest. To participate in the political arena, you must have enough resources and private power to become part of such a coalition.
Since the early nineteenth century, Ferguson argues, there’s been a struggle for power among such groups of investors. The long periods when nothing very major seemed to be going on are simply times when the major groups of investors have seen more or less eye to eye on what public policy should look like. Moments of conflict come along when groups of investors have differing points of view.” — Secrets, Lies and Democracy, Noam Chomsky, 1994. https://znetwork.org/secrets-lies-and-democracy/
So where are these coalitions?
I’m guessing he’s referring to Big Pharma, Big Food, Big Energy, Big Finance, etc.
Maybe fossil fuel corporations vs renewable industries in the competition for government subsidies of various kinds, though the biggest fossil fuel corporations have in-house renewable ventures too – all angles covered.
It fascinates me that, when people are asked what are their greatest concerns, they put “the economy” as top of their list, as if it’s a “thing” all by itself, but what do they think “the economy” actually means? If you’re a bank like HSBC, the economy is going great guns for you – champers all round! If you’re an energy wholesaler, things are looking very rosy indeed. But its convenient to the government to have the public worried about “the economy” when in fact, what actually concerns us, is the increasing cost of goods and the decreasing amount in our pay packets. Yes, these are a consequence of decisions made by wholesalers and banks and governments but they’re not the economy. In fact, most of the decisions made by wholesalers/banks/governments are explicitly designed to extract more money from us and are certainly not intended to improve our lot in life. And yet, through clever spin and marketing, the populace are in thrall to the mantra that “interest rate rises” and “pay restraint” are the things that will “save the economy” when in fact, they’re just another set of tools for enriching the already rich.
“Sunak’s family firm signed a billion-dollar deal with BP before PM opened new North Sea licences” — Jack Peat, The London Economic, 2023-08-01
https://www.thelondoneconomic.com/politics/sunaks-family-firm-signed-a-billion-dollar-deal-with-bp-before-pm-opened-new-north-sea-licences-353690/
Coincidence?
Will more people like this make any difference to the way Sunak thinks?
https://www.theguardian.com/environment/2023/aug/01/billionaire-investor-threatens-pull-out-uk-global-outcry-oil-rush-andrew-forrest
All the public sector workers who have settled for below inflation wage increases will be so much worse off next year at this time. Their living standards will have plummeted. On top of that unemployment is likely to have risen quite considerably. Every day it seems I am reading about firms going out of business or closing outlets. Most seem to be those who sell at the cheaper end . Some reports claim inflation is falling. All the filling stations in my area have increased petrol prices this week. Around 6 pence a litre. I exist in a looking glass world where the authorities are deliberately creating a recession and and making lives hard for good people who have done nothing to deserve it. How long before protest breaks out on a massive scale. ? Enduring worse suffering every day must create a pushback.
Accepting these pay rises was so naive
What was the alternative? Continuing to strike and lose money every time? Do nothing but refuse to accept – pointless.
Accepting those pay rises was not naive. Defeatist, probably, but the unions were, I am afraid, defeated. As they always will be if the employers/government are ruthless and don’t care about the destruction caused by industrial action.
But it will come back to bite people – and so far I think few realise the long term impact and its destructive nature.
With regard to a question I asked about flat tax…….
If it’s any use to you the quote
“it is possible to have a flat tax, or to have democracy, but not both” (Hettich and Winer)
Is from Walter Hettich; “Democratic choice and taxation : a theoretical and empirical analysis” Cambridge, 1999, p.92 which can be found here;
https://archive.org/details/democraticchoice0000hett/page/56/mode/2up
[Someone else might read it: but thanks]
Thanks
[…] title is The present is unsustainable. Oil and banking have made it so. Something is going to have to change. The City A.M. title is What Really Caused The Inflation Crisis?. To Murphy […]
When investment in renewables comes up the apologists for the windfall profit replete energy companies is that a) they are investing a great deal; b) the windfall profit tax is a disincentive. What has really astonished me is that none of the so-called journalists and interviewers (eg., BBC) have even once, raised the most striking insight into what the companies are really doing.
The oil companies are not investing all the profits in green energy; or anything at all. They are doing something else. something they deem more profitable than real investment. They are buying their own shares. Shell and BP are spending billions on it. Now the banks are joining in, having creaming it by profiting from central bank collateral reserves. What all that tells you is that they can find nothing better to do with their money (certainly not invest in anything useful or tangible) than just, literally eating themselves. This is corporate narcissism, turned into raw cannibalism.
Why do they buy their own shares? Because it reduces the equity of the business. Why would they do that? Because with windfall profits (profits far beyond the dreams of corporate avarice or anything you could earn by endeavour or investment) used to buy their own shares, the resulting smaller volume of extant shares decreases the availability of shares. The shares are thus expected to rise in price, turning the banked profits into a new capital profit for shareholders. Investment in anything real comes way, way down the pecking order against this kind of activity during a windfall bonanza; it will all be over before Government – studiously too late in applying the windfall tax – gleans any worthwhile return from its phoney attempt to benefit. The oil giant and bank will pick the carcase clean before the government arrives at the bottom of the food chain, with the worms.
It also tells you something about the people running oil. They haven’t a clue what to do with the incredible resource in technical, engineering know-how they have at their disposal, at the point of revolution. They are better placed than most to lead the energy revolution: but clearly they do not have the leadership or confidence to do it. Only government can give these seismic leads; typically by putting the first foot forward in taking the risk, and drawing in private enterprise. Unfortunately the Government doesn’t have the right people taking the big decisions either.
The origin of BP was not private capital. It was the Admiralty in 1908 that saw the writing on the wall for coal. It was essentially Government that looked for oil and found it in Persia (Iran); and formed the Anglo-Persian Oil company, in conjunction with risk capital and the engineering expertise of Burma Oil in, basically, a public-private partnership. There is nothing new under the sun. Capital on its own rarely ever takes the first steps in taking the big investment risks. We need the same approach from Government and Oil/energy companies today to achieve the Green Revolution, but truth to tell, the current politicians and oil businessmen are journeyman hacks; ciphers, without the vision, not up to the task.
Much to agree with