Why does the UK not have a nationalised bank, that could provide the services of high street banks but with more favourable terms for everyone?
Plus the SNP jonv
Gauss - no money in it for tories friends,. We do have credit unions
Why does the UK not have a nationalised bank
You mean like the US? Seems amazing that the US, the supposed pinnacle of free market cutthroat capitalism, has a more progressive and stable mortgage market than we do.
From Observer:
"Pay rises for the top 10% of UK earners, including City bosses, have clearly outstripped those for the rest of the workforce and been prime drivers of recent inflation and soaring interest rates, according to new analysis of official figures."
Ah. Right then.
The wealthy have been driving inflation then. (But not news to me) These ****s are responsible for all manner of shit.
Too many years of accepting trickle-down means they can get away with anything these days.
They've worked on the principle (successfully) you can con the working class to believe orthodox economics is best everyone, and even ribbed them into believing we should still support the rich currently.
Wonder what is coming next?
The replacement for Neoliberalism might be much worse.
These AI chat bots still agreeing with each other?
In one corner we have Alphabet’s Distributed Articulate Zealot Heuristic
In the other corner we have Meta’s Repetitious Opinion Neural Engine
LOLz
Just out of interest. What does ‘holding my nerve’ look like when it comes to interest rate rises.
Asking for a friend…
Quite. What utter shit
0% pay rise here across both wage earners. Coming out of a fixed deal in December. Luckily we can cope with the expected increase.
more worryingly, our eldest is looking to buy his first house, we've had two vague friends who were aware get in touch to offer their houses. They are both paying SVR on interest only mortgages and have been for many years and don't have the funds to manage a normal sale process. One is badly in arrears. Why these poor sods didn't throw the keys at the bank years ago I'll never know
And more importantly what items are increasing due to high demand and which of those items demand will be lowered due to interest rate rises? It is none isn’t it….
As I understand it, it takes money out of peoples pockets which would otherwise be spent chasing a limited supply of goods.
I personally know different people who have recently postponed or cancelled plans to: move to a bigger house, get a new kitchen, buy a new car (bought used instead), buy an eMTB, take the kids to Disney.
Just out of interest. What does ‘holding my nerve’ look like when it comes to interest rate rises.
Asking for a friend…
The worst thing I've heard someone say this year in politics.
Total and utter contempt for their electorate.
All this whilst the top earners are doing just swell, and to factor in the government can stop interest rate rises.
This BoE independence - is another truly pointless, anti-democratic charade.
You see, Liz Truss's screaming ideas were shot down before they began because of ... oooh markets - whereas Sunak's approach is to make you suffer in real terms, and has not been met with the same scorn.
As I understand it, it takes money out of peoples pockets which would otherwise be spent chasing a limited supply of goods.
I personally know different people who have recently postponed or cancelled plans to: move to a bigger house, get a new kitchen, buy a new car (bought used instead), buy an eMTB, take the kids to Disney.
Ignoring house purchase as that doesn't count but is there a limited supply of new kitchens, Disney tickets etc,. That is my point, how does not getting a new kitchen or not going to Disney help inflation?
What specific goods are in limited supply and directly causing inflation? Is it actually none because it is not a demand issue inflation?
(These are rhetorical questions...)
I've been waiting for a "we're all in this together" equivalent from Rishi. I wouldn't put it passed him to say something similar after "hold your nerve". WTF does he think is actually happening to people? He has no ****ing idea what it's like to live payday to payday. I'm not struggling (yet) but this could get lumpy for a lot of people.
I'd rather Labour were calling this out for what it is than trying not to look financially illiterate in front of the traditional Tory voters but I can sympathise with their dilemma.
WTF does he think is actually happening to people?
They assume that everyone has a savings pot to dip into during tough times. If they don't, then it's their fault for not planning ahead and they can go f*** themselves. Labour aren't much better, the main difference is they say 'we're really sorry and understand your problems, but there's nothing we can do because we can't afford it'. Outright cutthroat callousness, or barely disguised patronising mendacity, that is the choice before voters these days.
What specific goods are in limited supply and directly causing inflation?
Well for a trip to Disney, there's flights, accommodation. Which will be sold at a premium when demand is high, and prices knocked down at slack times.
"I want people to be reassured that we've got to hold our nerve, stick to the plan and we will get through this."
I can't help thinking Rishi's just stolen a line from the kids movie 'Storks'...
His hold your nerve comments aren't directed at the mortgage holders, they are aimed at everyone else, what he's saying is don't get spooked by the people with mortgages and rate rises they can't afford being in dire financial difficulty. I'm sure in Richi's head he's already written them off as a lost cause, a price worth paying to allow him to fulfil his promise to halve inflation. Meanwhile back in the real world people need sustained deflation to see their incomes return to previous levels of prosperity.
I imagine that the 0.1% are looking at this as an opportunity to buy up a load of bargain basement repositions and capitalise on the misery of those looking for a house to rent after they've been forced out of their home. Will make the 5% base rate look like chicken feed.
We do have credit unions
And building societies
His hold your nerve comments aren’t directed at the mortgage holders
ah, i get it. it was aimed at the bankers...
thanks for clearing that up.
ah, i get it. it was aimed at the bankers…
And retired Tory voters, what he's saying is don't abandon me now just because of some bad headlines, it won't affect you so keep the faith. He couldn't give a stuff about those in danger of going under.
Also an interesting point made on Radio 4's more or less program. People keep saying interest rates were much worse in the 90s, they were, but the current impact on household income now is comparable as people have been forced to borrow such large multiples of salary to afford a house.
Outright cutthroat callousness, or barely disguised patronising mendacity, that is the choice before voters these days.
So what is your solution? Bring down interest rates which stokes inflation (making people poorer), or raise interest rates to bring down inflation (which makes people poorer) or an as yet undiscovered magic third way?
No one seems to have a pain free fix for the current situation.
Average house price in the UK in 92 was £53k, average household income was ~£20k - 2.5:1 borrowing rate. Assume 10% deposit , £48k loan over 25y at 7% (this is actually above what it was) is 339 a month, so around 20-25% of after tax household income.
Average house price in 2022 was £293k, average household income was £43k - 6.8:1 borrowing rate. Assume 10% deposit , £264k loan over 25y at 7% is £1864 a month, so around 40-45% of after tax household income. Even with two people working full time, this is still 4.5:1, so almost double.
but the current impact on household income now is comparable as people have been forced to borrow such large multiples of salary to afford a house.
It's not even remotely comparable. Rates need to be below 3% for it to be comparable and that's what people don't seem to understand. Wages, house prices and rates are all interrelated. Either wages and interest rates go up or house prices come down. You can't just ram rates up or you'll create a crash which will kill the economy.
Even equating wages, rates, etc isn't enough - living these days is just simply more expensive - food, fuel, transport, services are all more expensive.
So what is your solution? Bring down interest rates which stokes inflation..
Raising or lowering interest rates isn't the only option available to control inflation. It's a massive blunt instrument which disproportionately benefits those with assets. When you combine energy bills and extra mortgage repayments I'm going to be approx 10k a year worse off than a couple of years ago. That's 10k I'm not spending in the economy going direct to banks and energy companies. It's pretty obvious where the money is going, and the govt has the power to get it back. It needs a combination of redistributive fiscal policy, price caps and controls, and regulation to punish profiteers. The market isn't working and needs radical intervention from govt.
No one seems to have a pain free fix for the current situation.
As long as the pain is being felt by everyone then I could accept that. It's not though is it?
So what is your solution? Bring down interest rates which stokes inflation (making people poorer), or raise interest rates to bring down inflation (which makes people poorer) or an as yet undiscovered magic third way?
Increase the higher rates of tax
This would have an immediate impact on spending vs the 18 months it takes for interest rate rises to have in impact. Plus it would target those people who have higher levels of disposable incomes vs those families struggling to make ends meet on lower incomes.
Its just not going to be implemented as its a vote loosing policy, especially for traditional Tory voters.
(i'm saying this as a higher rate tax payer, as being lucky enough to fix my mortgage 18 months ago into a 5 year deal. Interest rate rises are having zero negative effect on my spending habits)
Interest rates did need to go up to correct many things in the economy, but very few people would have planned for them in increase by so much in a short period of time.
As long as the pain is being felt by everyone then I could accept that. It’s not though is it?
It never is and never will be as people have different circumstances...
Increase the higher rates of tax
Tricky when we're supposed to have the BoE manage inflation and tax rates are set by the Chancellor...
So what is your solution? Bring down interest rates which stokes inflation
How about not treating everyone like children who need to have their allowance docked until they learn to spend it in a way defined appropriate by the banks?
How about forcing a little more rigour into the modelling which underpins CPI and a communication to the markets and the people requesting wage rises that this is a lingering effect and will dampen over time?
How about a suspension of VAT for 6 months to reduce inflationary rises in goods pricing and then a law which levies taxes on egregious profits which're driving inflation, but won't be known until financial results are disclosed next year? A discouragement of prices rises, just because everyone is doing it.
There are MANY things which could be done with political will. This current response is just a lazy, historic response deemed acceptable to/by the markets and in the interest of the banks at the expense of the people. AGAIN!
How about a suspension of VAT for 6 months to reduce inflationary rises in goods pricing
Would that actually work?
Companies could just up prices to increase profits and if there are supply side limits, the price would rise regardless...
Tricky when we’re supposed to have the BoE manage inflation and tax rates are set by the Chancellor…
So get rid of the charade of BoE 'independence' and start joining up policy. It's been an unmitigated failure and was only ever enacted to show the markets that Gordon Brown was a safe pair of hands.
Increase the higher rates of tax
Needs both a hike in highest rate taxes, adjustment of thresholds and a tax cut for low earners. Also reform of VAT to have differential rates on different types of goods. Target the action on the areas of the economy which are driving inflation rather than using the nuclear bomb of interest rates to treat the economy as a single entity.
So what is your solution? Bring down interest rates which stokes inflation
Evidence is currently showing the opposite to be true.
Companies could just up prices to increase profits and if there are supply side limits, the price would rise regardless…
So legislate to prevent companies doing that. Force them to pass on tax cuts and other forms of stimulus.
Tricky when we’re supposed to have the BoE manage inflation and tax rates are set by the Chancellor…
Economics 101: Monetary & Fiscal policy should be aligned
Would that actually work?Companies could just up prices to increase profits and if there are supply side limits, the price would rise regardless…
Not if you made a law which essentially enshrined increased corporate taxation or fines based on economic profiteering in times of crisis. Laws against war profiteering are commonplace, why not against disruption based economic profiteering and fraud?
Economics 101: Monetary & Fiscal policy should be aligned
Not least for total transparency and democracy.
Government makes policy for the market to operate in.
They can always change the policy.
They can always change the policy
Indeed.
And sadly, a lot of policy at present is to the enrichment of a few at the cost of the many.
Indeed.
And sadly, a lot of policy at present is to the enrichment of a few at the cost of the many.
Boils my piss.
They are currently spelling it out too - we need a recession.
Markets are tools - there is zero reason other than ideology we couldn't have state back mortgages at a super low rate of 1-2% - if they wanted it to be the case. The consumer should not have to hunt around based on government shenanigans of interest rate policy filtering through greedy commercial banks.
It doesn't need to be a competitive market along with energy, train tickets etc.
They made it that way - unmake it.
Finance sector - digging a hole in and being paid to fill it in whilst sucking up useful resources and labour - and charging you for the privilege.
there is zero reason other than ideology we couldn’t have state back mortgages at a super low rate of 1-2% – if they wanted it to be the case. The consumer should not have to hunt around based on government shenanigans of interest rate policy filtering through greedy commercial banks.
But we kinda do... All of the banks & building society's pricing their mortgages at Base Rate + risk margin. If you're a low risk customer you can easily get a mortgage at Base Rate +0.5% (thats a low margin for the banks to operate in)
The BoE/Goverment "could" hold interest rates at 1-2%
What you're not factoring in is international money markets. If the ECB/Fed have their rates at 4-5% then all the liquidity would leave the UK seeing higher risk free returns overseas.
Then the value of the £ vs EUR/USD would also plummet, which would push inflation higher given we're a net importer of goods.
So legislate to prevent companies doing that. Force them to pass on tax cuts and other forms of stimulus.
how the hell would that work? For every business caught fiddling, hundreds more would get away with it. Just look at what happened during Covid - companies popping up, getting money through support then disappearing. There isn’t the manpower to ‘legislate’ effectively.
how the hell would that work?
The same way most laws work. You make the penalties serious enough to deter people/companies from breaking the law in case they get caught. Funny isn't it how when simple stuff like this is proposed people shout 'it'll never work, it's impossible, there isn't the manpower!', yet only a couple of years ago we managed to prop up the entire economy whilst people had to stay at home for months, saving millions of jobs and businesses from disappearing, and we did that in a couple of weeks. Try harder FFS, this isn't difficult!
Seriously? I can’t be bothered to look for the numbers right now but there’s been millions written off by HMRC due to fraud during Covid.
Here you go
https://amp.theguardian.com/world/2022/feb/23/uk-lost-up-to-16bn-due-to-and-error-in-covid-loans-schemes
Ignoring house purchase as that doesn’t count but is there a limited supply of new kitchens, Disney tickets etc,. That is my point, how does not getting a new kitchen or not going to Disney help inflation?
What specific goods are in limited supply and directly causing inflation? Is it actually none because it is not a demand issue inflation?
(These are rhetorical questions…)
Well for a trip to Disney, there’s flights, accommodation. Which will be sold at a premium when demand is high, and prices knocked down at slack times.
Exactly.
Kitchens need wood, factory time and machinery to manufacture, transport, tradespeople to fit. Cars need metal, chips, factory time and machinery, transport, tyres. There is only so much of those that is available, and making more available creates further demand on secondary things e.g. production of factory machinery and lorries.
Houses do count. There's a limited number available, and there are limits on the rate of production (e.g. materials, land, planning permission, capacity to do construction and planning work). Demand can be reduced by stopping families upgrading to bigger houses, stopping people moving out from their parents or from a house shares etc. It's not nice but it works.
Someone I follow on YouTube runs a business using a lot of financed equipment and buildings, he's regularly complaining that interest costs are hitting him. Yet he is continuously replacing equipment and vehicles that are just two years old, with new ones. That's an an example of unnecessary demand he is causing.
I'm not sure about the demand-pull vs. cost-push inflation stuff. It does seem to me however that giving people less money to spend (going on mortgage instead), encouraging them to save, and scaring them a bit about their job security (so they have a harder time getting payrises) will help cool things down a bit.
I’m not sure about the demand-pull vs. cost-push inflation stuff. It does seem to me however that giving people less money to spend (going on mortgage instead), encouraging them to save, and scaring them a bit about their job security (so they have a harder time getting payrises) will help cool things down a bit.
Again, it all depends on what they are buying and what supply shortages are causing issues. Without even trying to understand that and just using interest rates it is not really doing much and stopping someone going for a holiday in Disney is really not going to help (i.e book online, get on a plane that already has seats and then spend a lot of money in another country)
I’m not sure about the demand-pull vs. cost-push inflation stuff. It does seem to me however that giving people less money to spend (going on mortgage instead), encouraging them to save, and scaring them a bit about their job security (so they have a harder time getting payrises) will help cool things down a bit.
Maybe eventually, but in the medium terms as demonstrated - paying interest income to people with assets adds money to the economy for people with the ability to spend.
So there's a tipping point where things will break but it has to defeat the inflationary effects of adding more money to the economy at the new price level set by interest rates.
(This is reckoned to be 6%.)
Lifting interest rates has the same effect as deficit spending but you're basically giving people money (who have money) without the directed investment on the government's behalf.
Here is a US chart showing how the Fed is funnelling money into the economy via rate rises. (300-400Bn+ per year.)
https://twitter.com/wbmosler/status/1673440379176099841?t=BYEshx95d_zyFIiy5Rc_9A&s=19
Things aren't exactly the same for us but the Fed's policy is almost the same as the BoE.
It's as simple as the interest payments go somewhere.
Currently the US by its own metrics is doing very well. Because the more the government spends (whether through deficit spending or interest payments) puts money in the economy. Obviously things are exacerbated with supply shortages but things are catching up.
The UK is a bit more of a mess.
