And your summer hols abroad would have cost more…..
They did.
Fuel, insurance, food, clothes.
And for people who flew. They did on top.
And my £ is worth give or take double digits less than last year due to inflation.
Any credit card usage will cost more etc.
I can't see the benefits you're talking about.
Pound has been dropping against the dollar almost at the same time as the interests rate cuts.
Imagine how much more it would have dropped if they hadn't raised rates
I can’t see the benefits you’re talking about.
Not benefits in the absolute sense,but not as bad as it could have been.
Glad I have a bunch of US-based shares. The weak pound slightly offset the stockmarket plunges when I needed to sell a few to buy a new hob.
High interest rates? It's nowhere near the 1990s yet. Credit-card-like rates on mortgages seriously dent your disposable income.
Raising interest rates is an interesting plan to combat inflation that is not spending related.
'I have a hammer, let me whack whatever it is'
Of course I could also suggest that this is the risk that so many people take – borrow more, ‘upgrade’ the house, play the house price rise game and hope for low interest rates to fuel that…
Whilst for many others, a mortgage was a "cheap" way out of rented housing and the ridiculous rates you're expected to pay (but for some reason a lower mortgage is considered unaffordable by underwriters).
As others have said, we're not at early 90s levels yet, not even close.
Imagine how much more it would have dropped if they hadn’t raised rates
Imagine how a recession might have been adverted if interest rates were at zero?
Only the asset class benefit from high interest rates.
Hopefully good news for us savers. Rates on savings have been abysmal for 10 years or so.
majority of folk with a private pension will have bp and shell shares indirectly, increased divs and share price is good for us.
Sorry, I know this part of the thread is old now, but Manchester Guardian quoted yesterday that only 0.2% of Shell and BP shares are owned by pensions investors, so you can't really claim that's a benefit of high fuel inflation.
IANA Economist but something I can't quite follow.
Is this really 'inflation' though as we normally perceive it? The major changes are driven by the oil and gas price which has been some would say artificially low for several years. Now it's been reset* and it as well as everything affected by it has spiked, making prices 10 or 15% or whatever the headline number (and/or this mythical basket of goods is) higher than this time last year, which was also pretty much the same as the year before and the year before that. So what is measured by inflation is actually what would have been spread over the last say 3 years.
Next year - we're post spike. Inflation won't continue to run at this rate unless O&G etc. is that much higher again?
So is inflation really 15%, or is it really 3 years of 3.5% that has compounded to look like 15%?
* not saying it's all due to the reset, Ukraine and its impact on raw prices of foodstiuffs is also a contributor but the energy cap etc. was a problem before Putin went crackers, etc.
If only some-one had said something at the time
https://twitter.com/BestForBritain/status/1555204172798107649
Although Brexit is in there somewhere plenty of economies have got inflationary problems that don't have a real connection.
I think that Germany are about to have big problem related to Russian gas too.
The fact of the matter is we have several black-swan events all grabbing at once.
And the only way out it appears globally is to de-grow economies.
Sorry, I know this part of the thread is old now, but Manchester Guardian quoted yesterday that only 0.2% of Shell and BP shares are owned by pensions investors, so you can’t really claim that’s a benefit of high fuel inflation.
Yes it's bollocks. 'They' use this also to make it seem like we're killing all these share-holding grannies if we nationalised varies industries.
Pensions shouldn't be structured like this anyway.
The only people defending the asset-class are the asset-class.
The fact of the matter is we have several black-swan events all grabbing at once.
We do. But we also have a series of poor political decisions that have been made in the knowledge that they will be inflationary. It’s no good putting holes in your ship’s hull, asking everyone to get bailing out as fast as they can (or to drink faster if they’re on the lowest decks) and then acting all surprised when the storms come. Our government has put us in a very poor position to deal with events, and they’re doing next to nothing to try improve our position now, leaving it to the BofE to use a hammer to knock in nails.
Interest rates need to be lowered, not raised. The government needs to be fixing the hull. Using other means to prevent devaluation and reducing costs for businesses and working people alike. If inflation is high partly because of demand (I have serious doubts that it is), why are we not increasing taxes on those individuals with higher disposable income? If fund holders don’t want to invest their money in the UK, why is that? How do we reverse that trend? Regaining free access to the market that surrounds us is part of that, even if it is a hard political message for politicians to deliver.
Hopefully good news for us savers. Rates on savings have been abysmal for 10 years or so.
Well unless they're double-digits then you're still on a massive downer unfortunately.
We really have got a messed up situation.
Construction industry has seen around a. 50% increase in costs over the last few years. Input prices have increased but my impression is that there has been massive profiteering from suppliers , merchants and contractors.
The industry has changed over the last 20 years from a myriad of small suppliers and merchants to bigger and bigger companies, verging on monopolies in some cases.
Only the asset class benefit from high interest rates.
"And inflation paid for my house"
A quote from my Dad. They bought in the very late 60's (paid £3k) and by the early 80's were paying their annual mortgage in a lump sum.
Inflation hits those on a fixed income the hardest, and for those of us who's wages/income will rise it'll just cause cashflow issues now & again. Depreciating assets work out cheaper though 🙂
Interest rates (and inflation TBH) will be an issue until folk get a handle on them - I talk from experience as someone who had a mortgage from 1985. Rates had risen from 7% to 10% in late 80's/early 90's and then we fell out of the ERM... Often got double digit pay rises too, mainly due to inflation.
Hopefully good news for us savers. Rates on savings have been abysmal for 10 years or so.
There'll be big winners and big losers - pretty much what happens IME when you elect Tories. The pain is not shared.
BofE predictions are for double digit inflation next quarter. I think we are there already. Think about what you spend every week. The essential items, not discretionary spending, like a new lazeee bike. Petrol, gas, elec, water, foodstuffs etc. 50% on all of the above this year. This is a guess and a nice round number but, if you look at pump prices, all your bills, your weekly food shop. Tesco seem to add a penny here and there, but its every week
All the millenials who don't remember double digit mtg rates, who i believe think house prices only go up, are in debt with a £250k mtg, 2 fancy rented cars, 2 kids etc are royally screwed.
The mtg they could afford at 1.9% will be an anchor at 10%.
We do. But we also have a series of poor political decisions that have been made in the knowledge that they will be inflationary
Well the pandemic leads the way, and I don't think any economy understood exactly what would happen next.
And you could go further back and say any country/administration that operates short term capitalism was also massively part of the problem.
So the last 40 years then.
We only have tools to deal with stuff whilst its working.
(Micro arguments about wall-paper as I've always said are blown out of proportion compared to world-events.)
BofE predictions are for double digit inflation next quarter. I think we are there already
Someone said it earlier - inflation is different for everyone affecting as usual the less well off the most.
We also had that MIRAS back in the day too but I wasn't financially independent then so I can't really put that in perspective.
I don't think interest rates will get that high personally. Once we start to lack growth, unemployment etc - pressure will be on to swing the other way.
But you never know what's coming next really.
Raising interest rates is an interesting plan to combat inflation that is not spending related.
‘I have a hammer, let me whack whatever it is’
That's my concern. Seems flawed, and hits the poor hardest.
I see the French are spending (borrowing?) billions to ease inflationary pressures.
Is it just me or is the Woodstock 99 documentary on Netflix a perfect metaphor for the UK right now? I reckon we’re at the Saturday morning stage. We’ve woken up with a monumental hangover, dehydrated and surrounded by rubbish. The infrastructure is falling apart and we’re being ripped off by rapacious market traders, and the organisers are still claiming everything’s fine. Pretty soon we’ll be abusing the bands and tearing the place apart. Tomorrow maybe we’ll be burning it all down?
I see the French are spending (borrowing?) billions to ease inflationary pressures
Yeah the ECB have delivered similar packages to us.
We put the blocks on right near the 'end' of the pandemic.
Government's will need to spend, it's impossible to grow without it under current circumstances.
How big the package or where it's targeted I'm not sure.
Is it just me or is the Woodstock 99 documentary on Netflix a perfect metaphor for the UK right now?
I was going to watch that last night - any good?
Someone said it earlier – inflation is different for everyone affecting as usual the less well off the most.
Agreed. For example, energy prices up, so the white collar types WFH avoiding travel costs and fit a sack load of solar avoiding electricity costs.
it probably is the right thing to do anyway, but it’s a lot easier if you have the space at home and cash respectively.
any good?
Yes very good. Especially when you start comparing the organisers to the headless chickens running for the Tory leadership. 😂
Free-market economics makes a mistaken vital assumption - that lots of people have built up good savings to tide them through the downturns.
Yes very good. Especially when you start comparing the organisers to the headless chickens running for the Tory leadership. 😂
I will give it a click.
I enjoyed the one about the Fyre festival.
on the shareholder front, I actually have a small holding in shell. whatever gains I have made are vastly outweighed by the increases in energy and the prospect of a huge mortgage increase in a few years time
oh and we are in the middle of a building project so being stung daily with price increases. budgeting sensibly is impossible. quotes from 2 months ago are now 10-20% more when you come to pay.
Seems flawed, and hits the poor hardest.
Disagree. If you're living in social housing and/or with protected rent/benefits why would it really impact you?
Reading some of the more recent comments it seems to be
- be more like the Europeans (longer term investment etc)
- leaving the EU didn’t help
- the pandemic was a gig for all
- we could do without the Brexy-Trump-friend Mr Putin and is wars of conquest
- the affluent will be less affected than the less affluent
- lots of views on savings, pensions, shareholding and capitalism, not all of which agree
That about right?
If you’re living in social housing and/or with protected rent/benefits why would it really impact you?
Could you be more out of touch? Do you seriously think all the poor live in social housing? This isn’t the 1980s, there is no social housing left. Even if they do, they still have to pay bills, put food on the table etc.
Reading some of the more recent comments it seems to be
– be more like the Europeans (longer term investment etc)
– leaving the EU didn’t help
– the pandemic was a gig for all
– we could do without the Brexy-Trump-friend Mr Putin and is wars of conquest
– the affluent will be less affected than the less affluent
– lots of views on savings, pensions, shareholding and capitalism, not all of which agree
That about right?
There are many with mortgage loans based on low interest rates and rising house prices.
I will be the first to say - just issuing more money into broken economies as per MMT's prescriptive side is unlikely to fix things - without applying the correct resources to spend the money on.
Just a warning.
Spend the money - but spend it on the things that fix the holes in public services and infrastructure. The private sector will follow.
Nice little blog spot from Phil Burton-Cartledge
http://averypublicsociologist.blogspot.com/2022/08/inflation-and-political-paralysis.html
Raising interest rates is an interesting plan to combat inflation that is not spending related.
It's not the perfect tool, but as the BoE / UK Government can neither conjure up workers in the Far East, stop China's Covid lockdowns, nor suddenly produce billions of barrels of oil, they don't have any ability to affect the supply side of the equation.
Raising interest rates will reduce demand, which is one way of balancing the current supply / demand miss match.
As mentioned above, if they didn't raise interest rates the pound would fall further relative to the Euro / $ and given we're all chasing the same barrels of oil from the Middle East - that would just make things even more expensive as our £ would buy less oil.
There is no magic bullet out of this situation until demand and supply balance out. It's a global problem, made worse by Brexit, but fundamentally out of the UK's hands.
It’s not the perfect tool, but as the BoE / UK Government can neither conjure up workers in the Far East, stop China’s Covid lockdowns, nor suddenly produce billions of barrels of oil, they don’t have any ability to affect the supply side of the equation.
Raising interest rates will reduce demand, which is one way of balancing the current supply / demand miss match.
Then the system is broken - the government should recognise this - and offer solutions. It's not a suprise that lack of investment in our own shores was going to produce massive problems for the economy, environment and society.
Punishing spending power of the least well off with a COLC is not good policy.
As mentioned above, if they didn’t raise interest rates the pound would fall further relative to the Euro / $ and given we’re all chasing the same barrels of oil from the Middle East – that would just make things even more expensive as our £ would buy less oil.
The government can partly fix what consumers pay for energy.
Why is the free-market solution always more free-market?
There is no magic bullet out of this situation until demand and supply balance out. It’s a global problem, made worse by Brexit, but fundamentally out of the UK’s hands.
I've just outlined a direction - you find the deficits in the UKs infrastructure and services and the government spends the money putting that to work. In the meantime you take the utilities into government ownership - I mean Octopus wants 1 Billion (they won't repay it) from the government to run Bulb!!
Spend the money – but spend it on the things that fix the holes in public services and infrastructure.
This. This. This.
The government can partly fix what consumers pay for energy.
While I agree with the sentiment, can it?
e.g. in the cases of BP and Shell a significant amount of those profits are made in Algeria and Nigeria. Is it then morally right to apply a windfall tax on those profits? Shouldn't that be upto those countries to apply a windfall tax on their own natural resources before the companies bring the money back to the UK?
Could you be more out of touch? Do you seriously think all the poor live in social housing? This isn’t the 1980s, there is no social housing left. Even if they do, they still have to pay bills, put food on the table etc.
Try reading the point I was responding to.
Then the system is broken – the government should recognise this – and offer solutions.
Well the only solution, in this scenario, is to be self sufficient in gas (or energy). If you're not and have to buy gas on an open market, then you are dependent on that market.
It's not something a single government can fix - becoming 100% energy self sufficient is going to take decades and cost 10s of billions.
NB France, who has a massive nuclear power station network, is currently dependent on the UK as they have about 50% offline rectifying problems. So even after that huge investment, they end up having to buy leccy from their neighbours at the worst possible time....
I mean Octopus wants 1 Billion (they won’t repay it) from the government to run Bulb!!
And if HMG doesn't agree to that, HMG will spend billions honoring contracts to supply energy below market cost. It costs HMG the same either way. They've already spent over £1bn doing exactly that up to date.
Why is the free-market solution always more free-market?
Because we're not energy self sufficient so you either buy energy on the market or stop using energy - there isn't another choice!
Well we could invade the ME and try and steal oil - that would be a 3rd option....
Because we’re not energy self sufficient so you either buy energy on the market or stop using energy – there isn’t another choice!
Interesting that all the discussion defaults to where to find energy.
Very little discussion about reducing our need for energy - and even less policy and investment aimed at reduction of energy....
Yes, but that's precisely what the UK hasn't been doing. Investment in the UK is low, and has been for a long, long time, and investment is a big deal as the UK has rubbish productivity, and this isl inked to investment and matters. This hasn't been helped after the crash of 2008, after which the UK economy seemed tp start to enter a zombie state (more poor performance). You've then been 'blessed' with austerity, so more poor investment, further lagging in productivity. All these things add up to make the UK a bad place to invest for the long term, more stagnation, then you get a weakening pound, and stuff from abroad costs more and inflation is harder to manage.
All in all you've had a decade plus of bad financial planning by the government.
I don't think fiddling around with a few tax cuts will help stimulate the economy either. It's beyond that sort of minor fiddling around