More helicopter money...
Discussion
Is it just me or are we going the wrong way about the current cost of living crisis?
Rolls Royce have offered all employees £2000 one off "cost of living payment".
Lloyds Bank are offering a similar scheme.
RMT want a 7% rise. I heard yesterday teachers are starting to bang the drum again.
Looks like the State Pension is going to go up by a considerable sum.
£650 cost of living payment to people on low income. (some 8M people)
Fuel payments of £400 to every house
£150 for people in the bottom 4 council tax bands
£300 for pensioners
£150 for disabled
etc, etc, etc....
I understand why people need these rises - most people are feeling the pinch at the moment. But, are we now in a chicken and egg situation? If we increase wages / income via what ever means i.e lump sums, increase in benefits etc then surely this is just going to increase inflation further?
It seems as a country we are unable to take some short term pain to bring the economy back in line? Instead we are just throwing fuel on the fire??
If we helicopter in a load of cash this year what about next year if inflation hits 25%?
More cash?
Then, once its all over and the dust settles who is going to pay the bill for all this?
Rolls Royce have offered all employees £2000 one off "cost of living payment".
Lloyds Bank are offering a similar scheme.
RMT want a 7% rise. I heard yesterday teachers are starting to bang the drum again.
Looks like the State Pension is going to go up by a considerable sum.
£650 cost of living payment to people on low income. (some 8M people)
Fuel payments of £400 to every house
£150 for people in the bottom 4 council tax bands
£300 for pensioners
£150 for disabled
etc, etc, etc....
I understand why people need these rises - most people are feeling the pinch at the moment. But, are we now in a chicken and egg situation? If we increase wages / income via what ever means i.e lump sums, increase in benefits etc then surely this is just going to increase inflation further?
It seems as a country we are unable to take some short term pain to bring the economy back in line? Instead we are just throwing fuel on the fire??
If we helicopter in a load of cash this year what about next year if inflation hits 25%?
More cash?
Then, once its all over and the dust settles who is going to pay the bill for all this?
What you've described is the basis of economic debate in every university and economic institution since the notion of capitalism and economics first emerged as something to debate.
One theory states that whilst wage rises may to a certain extent trigger higher prices, the cyclical nature of economics suggests that when prices fall, wages stay where they were so more people are able to spend more of their money generated on higher taxed stuff creating additional tax which pays off the debt previously incurred to facilitate the wage increase earlier.
The counter theory to this as you've described, an ever upward spiral.
There is a chain of thought that suggests the current increase in inflation has some benefit. This is because the interest rate and economic growth has been so low and flat for so long. It's difficult to argue for a pay rise when there's not been any significant hike in the cost of living so the system needed an intervention - a jolt to reinvigorate things. Jolts can be painful but once the pain goes, there is some reinvigoration to be enjoyed. That's the theory, anyway.
Truth is, nobody knows. Everything's a theory until it happens.
My theory is that the current rise in prices is predominantly because of what's happening Ukraine. On the basis (hope) that at some point this will be resolved, then we should start to see a fall in key commodity prices and the first of the two theories here would apply. The only question is the timeline that applies.
One theory states that whilst wage rises may to a certain extent trigger higher prices, the cyclical nature of economics suggests that when prices fall, wages stay where they were so more people are able to spend more of their money generated on higher taxed stuff creating additional tax which pays off the debt previously incurred to facilitate the wage increase earlier.
The counter theory to this as you've described, an ever upward spiral.
There is a chain of thought that suggests the current increase in inflation has some benefit. This is because the interest rate and economic growth has been so low and flat for so long. It's difficult to argue for a pay rise when there's not been any significant hike in the cost of living so the system needed an intervention - a jolt to reinvigorate things. Jolts can be painful but once the pain goes, there is some reinvigoration to be enjoyed. That's the theory, anyway.
Truth is, nobody knows. Everything's a theory until it happens.
My theory is that the current rise in prices is predominantly because of what's happening Ukraine. On the basis (hope) that at some point this will be resolved, then we should start to see a fall in key commodity prices and the first of the two theories here would apply. The only question is the timeline that applies.
I’m not an economist or business expert, not that they seem to have a clue either, but below is my take.
Much of the inflation we are seeing is due to central banks keeping interest rates too low for too long, printing too much money, covid related supply issues and now Putin’s “special operation”.
Sure, if the money supply keeps increasing we will see some inflation but the alternative is probably worse. Public sector pay and conditions have been suppressed for years, it is all coming to a head now as the unions have finally organised themselves.
The amount of money being spent on pensioners is ridiculous IMO. Clearly they are on a fixed income and need to be supported but 10% increase in state pension on top of all the other handouts is a slap in the face to workers getting far less and paying for the state through their taxes.
If there was a bit less group think between central banks then they would go quicker with raising rates, crash the economy and get inflation over with. Short term pain for long term gain and all that. Instead they are dragging this out to suit their political chums as inflation hits the rich less and government debt erodes in real terms (plus lower repayments with low interest rates).
Much of the inflation we are seeing is due to central banks keeping interest rates too low for too long, printing too much money, covid related supply issues and now Putin’s “special operation”.
Sure, if the money supply keeps increasing we will see some inflation but the alternative is probably worse. Public sector pay and conditions have been suppressed for years, it is all coming to a head now as the unions have finally organised themselves.
The amount of money being spent on pensioners is ridiculous IMO. Clearly they are on a fixed income and need to be supported but 10% increase in state pension on top of all the other handouts is a slap in the face to workers getting far less and paying for the state through their taxes.
If there was a bit less group think between central banks then they would go quicker with raising rates, crash the economy and get inflation over with. Short term pain for long term gain and all that. Instead they are dragging this out to suit their political chums as inflation hits the rich less and government debt erodes in real terms (plus lower repayments with low interest rates).
Carbon Sasquatch said:
Well (hopefully) we're all going to be pensioners sooner or later - so how far behind inflation do you want the state pension to get by the time you get there ?
I am not suggesting that they don't get or deserve anything, but I am questioning the fact surely it will make things worse?Pumping more money into the economy when inflation is already high will just make inflation higher?
Are we not making this whole issue last longer and be an even bigger hill to climb to get out of this problem if we keep essentially handing out free money?
The SP is a whole other topic tbh, but when you have employers handing out thousands of pounds "because cost of living" I start to get a bit worried we could really be making things, much, much worse.
speedy_thrills said:
The UK is just entering a price/wage spiral because there is a long running imbalance in supply and demand. Employers are kind of hostage at the moment to demands because unemployment is so low. There is little option but to pay to play.
Employers have for years been happy to pay little an see salaries stagnate while stocks markets rose seeeing owbwra reap huge rewards. So this is a rebalance and to ask employees to suck it up is disgustingCarbon Sasquatch said:
Well (hopefully) we're all going to be pensioners sooner or later - so how far behind inflation do you want the state pension to get by the time you get there ?
I want the economy trashed and the population locked under house arrest and their children excluded from school if it buys me an additional 6 months of life. The biggest cost ever imposed by one generation on another.
Gecko1978 said:
speedy_thrills said:
The UK is just entering a price/wage spiral because there is a long running imbalance in supply and demand. Employers are kind of hostage at the moment to demands because unemployment is so low. There is little option but to pay to play.
Employers have for years been happy to pay little an see salaries stagnate while stocks markets rose seeeing owbwra reap huge rewards. So this is a rebalance and to ask employees to suck it up is disgustingChocolateFrog said:
It may be true but it all comes across as rich people telling poor people that they can't have any more money, it's for your own good.
The governor of the Bank of England on what? £350k a year telling the rest of us not to ask for a big payrise.
f
k right off.
I get what you mean, I suspect the people who pay very little tax are the only ones who will come off ok out of all this. Those that work a normal job earning fairly normal money, or even fairly high earners tbh, are going to be paying this off for the next 10 years if not longer if things get really bad. The governor of the Bank of England on what? £350k a year telling the rest of us not to ask for a big payrise.
f
k right off. I mean we already spent, what, £900Bn on Covid?
The economy needs to be protected or we are going to end up in a really, really deep hole where the only solution is to keep digging deeper in the hope to come out the other side!!
The interesting stat that came out of yesterday was that services have only risen by circa 4%.... goods on the other hand have risen by something like 13%.
Trying to control inflation in this country by raising interest rates isn't going to work as it used too.
The much wider world economy that supplies and prices goods isn't impacted by our national interest rate decisions.
Trying to control inflation in this country by raising interest rates isn't going to work as it used too.
The much wider world economy that supplies and prices goods isn't impacted by our national interest rate decisions.
Dan_1981 said:
The interesting stat that came out of yesterday was that services have only risen by circa 4%.... goods on the other hand have risen by something like 13%.
Trying to control inflation in this country by raising interest rates isn't going to work as it used too.
The much wider world economy that supplies and prices goods isn't impacted by our national interest rate decisions.
An increase in UK interest rates may cause sterling to rise in value, effectively making those imported goods cheaper for UK consumersTrying to control inflation in this country by raising interest rates isn't going to work as it used too.
The much wider world economy that supplies and prices goods isn't impacted by our national interest rate decisions.
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