9 ms·

UK inflation hits 9.1% as prices rise at fastest rate for 40 years

40 points by sarreph 4y ago

tim333 4y ago
Money is really just tokens to help distribute the real stuff made like cars and houses. During covid people slacked off making real stuff and the government handed out more tokens hence the price rises now people are trying to spend them. More tokens per real thing. The interesting question is now covid is over if this is a blip or will keep going.
throwaway4good 4y ago
And the central bank interest rate is at 1.25%. I think it is fair to say that the powers that be just don't care about inflation.
- patrulek 4y ago
  They care. They want it high.
- mytailorisrich 4y ago
  Actually, all the economists interviewed in the media warn against raising interest rates too aggressively. 1. They say that the bulk of inflation is imported (energy, food, etc) so raising interest rates makes no difference to inflation (and in fact can push cost of living further) 2. Demand is already crashing. 3. Economy is already contracting. 4. Effects of raisin rates can take 2 years to trickle down So their estimate is that raising rates too aggressively would make things worse, not better.
  - throwaway4good 4y ago
    Most economists are employed in banking and real estate ... seems to cause them to forget what they once read in their textbooks ...
- dazc 4y ago
  Inflation has risen to 9.1%.... from 9% in April.
  - mmarq 4y ago
    It’s supposed to go down and reset expectations. Instead the central banker goes on TV asking people to not request pay rises, which is equivalent to saying “the situation is totally out of control, the CB can’t and won’t do anything”. Which prompts everybody to ask for a pay rise because the central banker just told them to revise their inflation expectations upwards (hence strikes). Then he pretends to raise interest rates (he can’t really because it would upset Johnson’s main constituency) and nothing happens, apart from inflation going up. That was a majestic show of incompetence. Not the first one from the current breed of the British Conservative party, that appointed him. It’s not by chance that countries like Italy and Germany, that are way more reliant on gas than the UK, have a much lower inflation and still an almost normal core inflation. They have a central bank that, Lagarde aside, is not a clownish shitshow. It should be said that much of current inflation is due to the disruption of the British supply chains that was caused by Brexit. Short of re-joining the EU, that I’d vote against because we must stop putting up with the antics of the Englishman, the only way out I see, as a rando with some interest in economics, is a 1980-style recession.
    - mytailorisrich 4y ago
      > It should be said that much of current inflation is due to the disruption of the British supply chains that was caused by Brexit. Not really: "Euro area annual inflation was 8.1 % in May 2022, up from 7.4 % in April 2022" [1], and of course it is, I believe, also 8.5-9% in the US. [1] https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Inflation_in_the_euro_area https://ec.europa.eu/eurostat/statistics-explained/index.php...
      - mmarq 4y ago
        Eurozone inflation: 8.1 UK inflation: 9.1 Eurozone core inflation: 3.8 UK core inflation: 5.9 Where would the price level increase caused by a labour shortage end up: core or non-core inflation? Besides the UK started having a significant inflation differential with the eurozone since mid 2016. https://www.newstatesman.com/business/2022/06/uk-inflation-brexit-blame-cost-economy https://www.newstatesman.com/business/2022/06/uk-inflation-b... You are welcome
- mvc 4y ago
  If all you have is a screw and a hammer, it doesn't really matter how hard you hit it.
- imtringued 4y ago
  I too advocate for greater inequality by raising interest rates. The income share of capital must rise at the expense of the income share of labor. Actually, I don't. I would rather see the abolishment of quantitative easing and central bank controlled short term interest rates by eliminating the zero lower bound by introducing a demurrage fee on excessive amounts of liquidity. Nobody wants that. The latter is indispensable to allow interest rates to fall below zero to allow the economy to unwind when it doesn't want to grow. Secretly every single human on this planet prefers inflation over negative interest rates due to loss aversion. Everyone thinks they can save money by making negative interest rates illegal. The losses don't disappear, they hust leak into thr economy in the form of inflation. All hail the money illusion, in the money illusion we trust. Imagine if you were painfully aware of inflation every single year, that your bank account would literally tell you, you lost X dollars from inflation but your salary is automatically adjusted upwards to match inflation. That is what a negative interest rate does and nobody wants that, they want to stick their head into the sand, they want to use inflation as a political tool for their own cause. Instead, you get this nebulous, creeping feeling that something is going wrong but you don't know by how much. So you just assume the worst and think the government is conspiring against you.
  - throwaway4good 4y ago
    Rising interest rates will bring down debt levels and asset prices in general ... I betcha that will lower inequality, not raise it.
  - idlehand 4y ago
    Low interest rates benefit the wealthy, that's why they have been allowed to remain in place for a decade. Inequality accelerated during the 10s.
  - cloutchaser 4y ago
    > Secretly every single human on this planet prefers inflation over negative interest rates due to loss aversion. Everyone thinks they can save money by making negative interest rates illegal. The losses don't disappear, they hust leak into thr economy in the form of inflation. All hail the money illusion, in the money illusion we trust. I think you are right. Yet pulling off the band aid would be much better. And it would be better for inequality, as asset prices would collapse if you raised interest rates (check the US stock market, real estate, and bitcoin), which is where most wealth is stored.
cloutchaser 4y ago
Central banks have a choice to make. After the insane bubbles they've blown for the last 20 years, and the government debt created along with that, they can either raise interest rates aggressively and basically bankrupt their countries for a while (this isn't necessarily a catastrophe), or they can inflate away the debt by refusing to raise interest rates. I strongly suspect the only reason the US has been aggressive in rate hikes is because they can do it with the US dollar's reserve status. For the UK, EU, and others, it's not so clear. It might be much easier on governments just to inflate the debt away, it will take longer and won't mean massive crashes. It will mean completely destroying most middle class and upper middle class savings. I think many governments won't mind doing that.
richliss 4y ago
The working and middle classes in the UK have had a lost decade really. 2008 crash followed by austerity going on for way too long when it wasn't needed at all, followed by Brexit, Covid and now this.
- mytailorisrich 4y ago
  The middle class enjoyed a decade of extremely low interest rates on their mortgages. Covid has been a mixed bag and it has really depended on what sort of job you had. Many in the middle class have office jobs that 'just' moved to WFH and all those people actually benefited financially from the situation (cost of commute disappeared overnight). I don't think many people have felt any change following Brexit so far... NOW is the rude awakening: Prices up, interest rates up, back to office. Perfect storm on personal finances. Whilst unemployment is at record low it is predicted to go up as well.
  - KptMarchewa 4y ago
    Low interest rates on mortgages means the principal is higher due to astronomical prices. Expanded access to credit just makes prices rise.
    - mytailorisrich 4y ago
      It's audacious to try claim that historically low interest rates have been bad for people with mortgages (which is most of the UK's middle class).
      - patrickthebold 4y ago
        Not gp, but it seems clear to me that that low interest rates are bad for new home buyers, and only good for people holding mortgages as they drop. That might be what you and gp both mean.
        mytailorisrich 4y ago
belter 4y ago
If you want to spoil the rest of your day... :-) This Deflation/Inflation calculator, courtesy of the German Bundesbank, will allow you to see, how much purchasing power you lost in the last 12 months for example... https://www.bundesbank.de/en/service/school-service/interactive-features/inflation-and-deflation-calculator-619038 https://www.bundesbank.de/en/service/school-service/interact...
wdb 4y ago
And the train prices will go up. I think they are already silly expensive compared to the continent
T3RMINATED 4y ago

40 points by sarreph 4y ago

Money is really just tokens to help distribute the real stuff made like cars and houses. During covid people slacked off making real stuff and the government handed out more tokens hence the price rises now people are trying to spend them. More tokens per real thing. The interesting question is now covid is over if this is a blip or will keep going.

throwaway4good 4y ago

And the central bank interest rate is at 1.25%. I think it is fair to say that the powers that be just don't care about inflation.

patrulek 4y ago
They care. They want it high.
mytailorisrich 4y ago
Actually, all the economists interviewed in the media warn against raising interest rates too aggressively. 1. They say that the bulk of inflation is imported (energy, food, etc) so raising interest rates makes no difference to inflation (and in fact can push cost of living further) 2. Demand is already crashing. 3. Economy is already contracting. 4. Effects of raisin rates can take 2 years to trickle down So their estimate is that raising rates too aggressively would make things worse, not better.
- throwaway4good 4y ago
  Most economists are employed in banking and real estate ... seems to cause them to forget what they once read in their textbooks ...
dazc 4y ago
Inflation has risen to 9.1%.... from 9% in April.
- mmarq 4y ago
  It’s supposed to go down and reset expectations. Instead the central banker goes on TV asking people to not request pay rises, which is equivalent to saying “the situation is totally out of control, the CB can’t and won’t do anything”. Which prompts everybody to ask for a pay rise because the central banker just told them to revise their inflation expectations upwards (hence strikes). Then he pretends to raise interest rates (he can’t really because it would upset Johnson’s main constituency) and nothing happens, apart from inflation going up. That was a majestic show of incompetence. Not the first one from the current breed of the British Conservative party, that appointed him. It’s not by chance that countries like Italy and Germany, that are way more reliant on gas than the UK, have a much lower inflation and still an almost normal core inflation. They have a central bank that, Lagarde aside, is not a clownish shitshow. It should be said that much of current inflation is due to the disruption of the British supply chains that was caused by Brexit. Short of re-joining the EU, that I’d vote against because we must stop putting up with the antics of the Englishman, the only way out I see, as a rando with some interest in economics, is a 1980-style recession.
  - mytailorisrich 4y ago
    > It should be said that much of current inflation is due to the disruption of the British supply chains that was caused by Brexit. Not really: "Euro area annual inflation was 8.1 % in May 2022, up from 7.4 % in April 2022" [1], and of course it is, I believe, also 8.5-9% in the US. [1] https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Inflation_in_the_euro_area https://ec.europa.eu/eurostat/statistics-explained/index.php...
    - mmarq 4y ago
      Eurozone inflation: 8.1 UK inflation: 9.1 Eurozone core inflation: 3.8 UK core inflation: 5.9 Where would the price level increase caused by a labour shortage end up: core or non-core inflation? Besides the UK started having a significant inflation differential with the eurozone since mid 2016. https://www.newstatesman.com/business/2022/06/uk-inflation-brexit-blame-cost-economy https://www.newstatesman.com/business/2022/06/uk-inflation-b... You are welcome
mvc 4y ago
If all you have is a screw and a hammer, it doesn't really matter how hard you hit it.
imtringued 4y ago
I too advocate for greater inequality by raising interest rates. The income share of capital must rise at the expense of the income share of labor. Actually, I don't. I would rather see the abolishment of quantitative easing and central bank controlled short term interest rates by eliminating the zero lower bound by introducing a demurrage fee on excessive amounts of liquidity. Nobody wants that. The latter is indispensable to allow interest rates to fall below zero to allow the economy to unwind when it doesn't want to grow. Secretly every single human on this planet prefers inflation over negative interest rates due to loss aversion. Everyone thinks they can save money by making negative interest rates illegal. The losses don't disappear, they hust leak into thr economy in the form of inflation. All hail the money illusion, in the money illusion we trust. Imagine if you were painfully aware of inflation every single year, that your bank account would literally tell you, you lost X dollars from inflation but your salary is automatically adjusted upwards to match inflation. That is what a negative interest rate does and nobody wants that, they want to stick their head into the sand, they want to use inflation as a political tool for their own cause. Instead, you get this nebulous, creeping feeling that something is going wrong but you don't know by how much. So you just assume the worst and think the government is conspiring against you.
- throwaway4good 4y ago
  Rising interest rates will bring down debt levels and asset prices in general ... I betcha that will lower inequality, not raise it.
- idlehand 4y ago
  Low interest rates benefit the wealthy, that's why they have been allowed to remain in place for a decade. Inequality accelerated during the 10s.
- cloutchaser 4y ago
  > Secretly every single human on this planet prefers inflation over negative interest rates due to loss aversion. Everyone thinks they can save money by making negative interest rates illegal. The losses don't disappear, they hust leak into thr economy in the form of inflation. All hail the money illusion, in the money illusion we trust. I think you are right. Yet pulling off the band aid would be much better. And it would be better for inequality, as asset prices would collapse if you raised interest rates (check the US stock market, real estate, and bitcoin), which is where most wealth is stored.

cloutchaser 4y ago

Central banks have a choice to make. After the insane bubbles they've blown for the last 20 years, and the government debt created along with that, they can either raise interest rates aggressively and basically bankrupt their countries for a while (this isn't necessarily a catastrophe), or they can inflate away the debt by refusing to raise interest rates. I strongly suspect the only reason the US has been aggressive in rate hikes is because they can do it with the US dollar's reserve status. For the UK, EU, and others, it's not so clear. It might be much easier on governments just to inflate the debt away, it will take longer and won't mean massive crashes. It will mean completely destroying most middle class and upper middle class savings. I think many governments won't mind doing that.

richliss 4y ago

The working and middle classes in the UK have had a lost decade really. 2008 crash followed by austerity going on for way too long when it wasn't needed at all, followed by Brexit, Covid and now this.

mytailorisrich 4y ago
The middle class enjoyed a decade of extremely low interest rates on their mortgages. Covid has been a mixed bag and it has really depended on what sort of job you had. Many in the middle class have office jobs that 'just' moved to WFH and all those people actually benefited financially from the situation (cost of commute disappeared overnight). I don't think many people have felt any change following Brexit so far... NOW is the rude awakening: Prices up, interest rates up, back to office. Perfect storm on personal finances. Whilst unemployment is at record low it is predicted to go up as well.
- KptMarchewa 4y ago
  Low interest rates on mortgages means the principal is higher due to astronomical prices. Expanded access to credit just makes prices rise.
  - mytailorisrich 4y ago
    It's audacious to try claim that historically low interest rates have been bad for people with mortgages (which is most of the UK's middle class).
    - patrickthebold 4y ago
      Not gp, but it seems clear to me that that low interest rates are bad for new home buyers, and only good for people holding mortgages as they drop. That might be what you and gp both mean.
      - mytailorisrich 4y ago

belter 4y ago

If you want to spoil the rest of your day... :-) This Deflation/Inflation calculator, courtesy of the German Bundesbank, will allow you to see, how much purchasing power you lost in the last 12 months for example... https://www.bundesbank.de/en/service/school-service/interactive-features/inflation-and-deflation-calculator-619038 https://www.bundesbank.de/en/service/school-service/interact...

wdb 4y ago

And the train prices will go up. I think they are already silly expensive compared to the continent

T3RMINATED 4y ago