I had my man do it, now he’s finished the pool cleaning.
tell your man to plot gold against the dollar for a medium time period!
If only there was a way to compare sterling to other currencies, not just usd.
Just put GBP vs xxx into google and it'll show you
Paul Krugman has a skill which imo is vital to all economists, which is to not simply be able to understand their subject but to be also able to explain it to a non-economist so that they too can understand.
It is surprising how many economists lack this skill which frankly means that they are shite economists - ultimately it is the job of an economist to explain their theories to those who aren't experts and pay for their expertise.
In the article below Krugman explains how trussonomics won't work. The graphics are missing but the fuller article is behind a paywall, and they refer to the Reagan-Clinton era anyway which is less interesting than his comments concerning Liz Truss.
https://politpost.com/2022/09/23/wonking-out-the-tax-cut-zombie-attacks-britain/
From the 'Zombie' article, this is key:
As Martin Wolf of The Financial Times points out, since Margaret Thatcher, Britain has been relatively deregulated and low tax compared with its European neighbors. Its relative economic position hasn’t changed much at all.
I appreciate that it has now been retracted, but the basic premise for eliminating the 45% tax rate, in that it disincentives high earners from working in the UK, was never seriously challenged (or was it and I missed it, duh).
Looking at the EU zone, who was he attempting to undercut, the great financial powerhouses of Estonia?
Finland – 56.95%
Denmark – 55.90%
Austria – 55.00%
Sweden – 52.90%
Belgium – 50.00%
Slovenia – 50.00%
Netherlands – 49.50%
Ireland – 48.00%
Portugal – 48.00%
Spain – 47.00%
Luxembourg – 45.78%
France – 45.00%
Germany – 45.00%
Greece – 44.00%
Italy – 43.00%
Cyprus – 35.00%
Malta – 35.00%
Poland – 32.00%
Latvia – 31.00%
Croatia – 30.00%
Slovakia – 25.00%
Czech Republic – 23.00%
Estonia – 20.00%
Lithuania – 20.00%
Hungary – 15.00%
Romania – 10.00%
Bulgaria – 10.00%
this is an interesting read about the £
https://www.poundsterlinglive.com/gbp-live-today/17607-pound-sterling-record-lows-were-tables-turned-in-market-vs-pboc-punch-up/amp
Previous Governor of the BofE writes:
Oooft...
Can’t see the article, however in my opinion whacking up interest rates is the foolish thing. Inflation is mostly to do with external factors that will not be impacted by rates. People still need to eat, heat, travel and pay existing debt down. There is minimal choice. Whacking rates up is going to push more and more families to the wall.
So… I think I’m with the government on cutting taxes, but not for those who are all ready comfortably insulated. For those at the sharp end, and increasingly those in the middle too.
however in my opinion whacking up interest rates is the foolish thing
While I agree that increasing interest rates doesn't deal with consumer-driven inflationary pressures when people are shutting down discretionary spend already due to cost-of-living, if the £ continues to slide against other currencies, that almost immediately adds to supply-side inflation by making the stuff we have to buy from abroad - energy, food etc more expensive because we buy it in foreign currencies.
If there is too big a gap between our base rate and, say, the US federal reserve rate, then it makes the pound weaker and more vulnerable to the kind of shocks we saw last week, because sterling is already not an attractive option, and vulnerable to shorting.
Which is why our new Chancellor should have taken advice telling him to tread carefully in that environment. Instead of sacking the person who delivered it.
Did you read the article I linked above? It says the reason for the pound sliding is not necessarily directly related to the chancellors mini budget
Well, yes, there is long-term structural weakness in the £ and many other currencies, but no-one can claim that last week's sudden movements were not in direct response to his announcements, and it's hard to say what level the pound would have settled at relative to other currencies without the BofE emergency interventions.
Chancellor presumably was given advice about market conditions, and warned about existing volatility. Then went ahead and pulled the pin anyway.
Raising interest rates will curb inflation, due to reduced spending and more saving. What doesn't work is having the Chancellor do the opposite e.g. tax cuts. This is inflationary and has forced the BofE to print money (due to the effect on pensions) thus undermining the whole 'system' You need government policy and BofE action to be complimentary. Really, Kwasi and Andrew Bailey need to collude on this.
It's not as if the tax cuts are helping our energy or food security / availability, either. Ironically, the 45% tax rate may actually reduce the tax revenue generated (although we will never know). But I get that it was the wrong 'message'.
Like I said, i'm keen to see the supply-side reforms. Something like loosening of labour regulations for temporary workers would help on the food availability front.
'Not necessarily directly' could apply to anything, really.
And the 'income tax rate' is a total red herring, here and elsewhere - always has been.
I remember years ago working with a German and a Dane, the German was complaining that nursery fees had gone up because he'd moved from Dusseldorf to Hamburg - from 10DM per week to 50DM per week (basically £3.50 to £16).
The Dane was horrified that anyone paid nursery fees - and then I told them that we paid nearly £75 per week...
Thing is, the Dane's income tax rate was by far the highest, then the Germans and the mine - But, the overall tax take was lower for both of them. They also got considerable tax reductions for kids, mortgages etc.
And not just income tax, there's VAT, car tax, fuel duty, National Insurance and for the current generation student loans. Chatting with our middle lad the other week and he works with a guy who went to Uni - both earn the same but our lad is far better off as he's no Student Loan been deducted.
All tax IMO.
So it was the Queen dying that was behind this mini budget being quite so shit.
In fairness, if I’d had enough coke to have me giggling at a funeral, I’d probably not be doing my best work either.
The man was distraught. Give him a break FFS.
Quick question if anyone dares to attempt to answer it, during those car crash radio interviews that Truss gave she repeatedly claimed that their plan to cap the energy costs would by itself reduce inflation to 5%, now i'm not knowledgeable enough to know if that's true or not, and I certainly wouldn't take her word at face value, is that at all likely? As far as I can see no one has mentioned it on here and I haven't seen any mention of it in the press either.
Yes rising domestic energy prices is currently the main driver of inflation, so freezing prices will affect inflation.
Edit: Sorry I have just realised that you were specifically asking whether it will reduce inflation by 5%, I don't know, but the effect will be significant.
Thanks @ernielynch I suppose the bit that confused me is that the energy companies themselves aren't reducing the prices, the government is just paying (by borrowing) anything to them over the cap (I think that's right) so presumably that just moves the problem to a different pile.
presumably that just moves the problem to a different pile.
Yes but the definition of inflation which the Bank of England uses refers to the Consumer Price Index.
So it is the cost to the consumer that it is the issue here.
Edit: To be fair the energy price increases aren't really inflation, otherwise the Bank of England increasing interest rates would have an effect on domestic energy prices, they can't because with domestic energy prices inflation isn't the problem. They just add to increases in the CPI.
Does that make sense?
Could've made the energy bill help means-tested, or based on Council Tax band. So give more to poorer households and less to richer ones. Might even cost less!
IMO universal support is always much better than means testing. Firstly it makes it far simpler and cheaper to administrate. Secondly it removes the possibility of deserving people falling through the safety net and undeserving benefitting which always occurs with arbitrary cutoffs. Thirdly it doesn't require everyone to be fully aware of their latest up-to-date entitlement to help and support. Fourthly it removes any perceived social stigma with applying for help and support. And finally any anomalies caused by unequal incomes and needs can easily be resolved through personal taxation.
It is for all those reasons that I believe that in a social democracy all welfare support should always be universal.
Could’ve made the energy bill help means-tested, or based on Council Tax band. So give more to poorer households and less to richer ones. Might even cost less!
Or make it a flat rate per person, say £500 for everyone (so £2k for a family of four, making the anticipated £4.5k bills more like the £2.5k it will be).
It's a far more 'conservative' approach too, less intervention, doesn't affect the market, encourages people to spend their £500 on insulation where it will pay back more, etc.
Yes rising domestic energy prices is currently the main driver of inflation, so freezing prices will affect inflation.
Truss gave she repeatedly claimed that their plan to cap the energy costs would by itself reduce inflation to 5%
Which month's figure is normally used for any benefits/pension cost-of-living increases?
Hmm. I agree means-testing would take longer - that's why I suggested doing it by Council tax band. There must be a lot of households who don't need an extra £400 though? e.g. band E properties?
Also, plenty who could do with £500...e.g. family of 4 in Victorian Terrace, Band A.
Nobody has to 'apply' though, so that argument is irrelevant.
I haven't calculated anything but only giving it to Bands A,B+C may still keep people off the streets and save cash to use elsewhere.
I don't view it as welfare - it's mitigating the fallout from supporting Ukraine.
I do like the idea of free loft insulation, though. Especially for Universal Credit claimants.
I think 5% inflation cut is a bit optimistic, too. Energy prices have doubled (without the cap) and will go up again early next year. Then add in food inflation, petrol, transport, wage increases. I would say the energy cap alone will knock 2-3% off inflation at most.
I have just realised that one of my posts got reposted long after the original post. I have no idea how that happened but I suspect it is in some way connected to failed attempts to edit and post. Apologies anyway.
And...gilt prices hitting the heights again.
https://twitter.com/rbrharrison/status/1579479280459091974
Seems like 65bn doesn't buy back the confidence a Chancellor can squander in moments. Clearly no-one is impressed by the squirming at the Treasury, and the various pledges and rumours that are coming and going (sometimes on the same day).
The fact that the polls suggest that the government is fatally undermined with two years left in the electoral cycle cannot be helping either.
Is that just the normal reaction to whenever the Chancellor says he's going to do something (i.e. today he anonounced revealing plans on the 31st of October).
Constantly moving dates/OBR reports around doesn't inspire confidence. BofE also set to end the current round of gilt-buying.
Also, the rumours that Truss is planning not to cut benefits in real terms reignites the question over how all this is getting paid for.
The latest rise hasn't been seemingly in response to one thing or other, apparently started again around the time of the party conference, make of that what you will.
Are we now on two or three U-Turns for the same decision on when it will be published?
Everyone knows what the OBR report will say about Kamikwasi’s mini-budget anyway…
This is economically illiterate *-wittery of the highest order and the inexplicabley over-confident clown who wrote it hasn’t got the faintest *ing clue how he’s going to fund any of it
Mini budget
Big U-turn
Big fallout
Say Big Chief
this U is for turning 😀
45p reversed
corp tax reversed
Awesome, I assume I'll be getting my money back, now. No?
nearly everything reversed now 😀 what a farce!
Best close the thread then. Pretend it never happened 🙂
So basically we're all being screwed to appease the bond markets, international currency speculator and hedge funds, and bail out irresponsible pension funds who gambled trillions on financial derivatives.
Higher energy bills
Higher taxes
Higer interest rates on mortgages
Higher prices due to inflation
Cuts to public services and benefits
If the tories thought they were f**** before Hunt cancelled the MB, then they've seen nothing yet.
It's not to appease those people... they're the only ones that have been doing very nicely out the mini-budget announcement!
Hunt is just rolling back a poorly thought out package of measures to try and get us back to the less bad, but still pretty damn bad, position we were in over the summer. Once he's done that, it's time for the political parties to propose how we actually get out of the deeper hole we've been digging for ourselves for years. And put those plans to the public at a general election. I'll be voting for a party that understands that shifting at a faster speed to renewables and energy storage is a major part of that, not one that thinks that if we remove regulations and restrictions on the fossil fuel extractors, that they'll save us.
In fairness they got ripped a new one and crashed the markets based on their ridiculous mini budget so we can’t then also hammer them for reversing it
The fuel cap u turn is a concern however
Smacks of 'insider trading' to me...on a governmental scale
Hunt is just rolling back a poorly thought out package of measures to try and get us back to the less bad
No he's not, he's abandoning any pretence that the govt wanted to help working people survive the cost of living crisis, and has made it much worse by transferring the cost of volatile markets and irresponsible financial planning by pension funds onto the public. It's the complete abdication of responsibility of the government to protect voters in favour of protecting the city of London. We're being bled dry to protect the fortunes of the top 1% and the power of the city of London.
irresponsible pension funds who gambled trillions on financial derivatives.
I don't think thats a fair assessment. Government bonds are historically the opposite of "gambling" - they are, in normal circumstances, extremely slow-moving, low-revenue investments. Exactly what a prudent pension fund should invest in during the draw-down phase. What happened this month was the government s..wed up so badly they went to the wall causing issues for those funds.
the govt wanted to help working people survive the cost of living crisis
The mini-budget package didn't "help working people survive the cost of living crisis" ... if it had genuinely tried to do that, the reaction wouldn't have been what it was. It was a giveaway, to the rich, to fossil fuel producers, to bankers, to mates of mates, people buying up property in cash, when the government should have been investing in the country.
