Is the Bank of England to blame for inflation?
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- Опубликовано: 30 июн 2023
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Despite interest rate hikes, inflation in the UK continues to rise, and the Bank of England is undoubtedly facing tough challenges. In this video, we explore the history of central bank independence, public dissatisfaction, and the possibility of bringing it back under government control.
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1 - www.ft.com/content/dde04841-1...
2 - Schultz, K. (1995). The Politics of the Political Business Cycle. British Journal of Political Science.
3 - www.ecb.europa.eu/press/key/d...
4 - news.bbc.co.uk/onthisday/hi/da...
5 - www.theguardian.com/politics/...
6 - www.nytimes.com/2023/06/24/bu...
7 - www.newstatesman.com/politics...
8 - www.theguardian.com/business/...
9 - www.bbc.co.uk/news/business-6...
10 - www.theguardian.com/business/...
11 - www.newstatesman.com/business...
12 - www.theguardian.com/business/...
13 - Cecchetti, Stephen. (2008). Monetary Policy and the Financial Crisis of 2007-2008.
14 - www.caixabankresearch.com/en/...
15 - www.niesr.ac.uk/blogshould-ba...
16 - committees.parliament.uk/oral...
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@6:55 the fact that Liz Truss considered reviewing the Bank's mandate and giving the government more control is symbolic for just how much of a terrible idea that would be
After these populistic politician, it would be disaster for UK. We’ve seen it with brexit
She used Japan as an example and they literally have a deflation issue lol. Idk how she could be so stupid and still get voted in.
Was going to leave this comment thank you.
Can you imagin the uproar if labour suggested that
I mean, is it? It would be a terrible idea if the """technical""" staff was:
1) made up of actual experts, and not the politicians that also exist in science, where they spend a lifetime hiding the fact that they really don't know shit-all by passing work on to people who do and signing the final product;
2) the "expertise" field had a bit more humility in admitting that no amount of statistics can solve their internal biases, low quality data, and unrealistic theoretical assumptions.
Bringing the bank under gov control is a terrible idea. HELL TO THE NO
Turkey is a good example of what can happen when the government has control over the CB.
but it will allow the gov to use interest rates coordinate actions more easily
thats only because your government is not democratic because you use the dumb FPTP system.
@@ecnalms851The BOE coordinates with the government without it being under government control, this is a dumb argument
@@Pyxleanappointments and targets are set by the government.
What it means is inflation can only be tackled with interest rates and not tax or limiting profiteering.
New Labour was Neo Liberal at heart.
- "The Bank of England is not dealing with this disaster properly."
- "Yeah! We should put it under the control of the people who caused the disaster in the first place."
The people who caused this disaster sit in Moscow and Peking.
Without Russia attacking Ukraine and China's labs releasing COVID, we'd not see such an economic disaster.
Andrew bailey? He's more concerned about gay rights, and women having a cock.
Maybe giving billions away to already rich companies wasn't a great idea
What? Noooo. It's literally never worked before, why wouldn't it work now?
That doesn't cause inflation, coving relief payments are a major culprit.
@@yourstruly5706why?
@iqbalindaryono8984 rich people invest it in companies and businesses, which makes them richer. Them receiving billions is wrong because of other reasons. Covid relief payments required the UK government to turn on the money printer. The money supply increased massively, and people were saving the bulk of it. When you have more supply of money and fewer goods, inflation rises massively. The average person then spends the money, and inflation shoots up. Add to that the Covid shutdown affecting the supply chain, which added supply side problems. So the effects are very bad inflation. It would slowdown and potentially reverse, but the government sanctioned Russia. The commodities shock made the price of gas and other commodities shoot through the roof. That added more supply side problems. It is a culmination of these three factors.
@@yourstruly5706 why would it? Money given to poor and middle class people usually go back into the economy right away, since it's used for more basic things such as food, rent, electricity, etc. You know, things people actually need
Everything has failed, but the UK has been in a state of decline for a long time!
Celebrating 13 years of Tory rule!
@@seanpatrick1243 The decline started long before then
I would argue that the UK was in decline from the times when it started becoming the sick man of Europe, and the EU is the only thing that slowed and postponed the failure of the UK…and since brexit, its back in full swing.
@@fubar12345
Sure. The coalition did its but too and then the Tories came in to put the mail in the coffin.
Because beinig populist politician is making easy to get voters. Instead doing real reforming steps, which are sometimes painfull but necessary for long term future.
The inflation we have is caused by supply shortages rather than high demand. Obviously we don’t want increased demand whilst we have limited supply, however the government should be focused on boosting supply (producing more energy, regulation change to help farmers increase food production, building more houses, getting more people off welfare and in to work, speed up new trade deals, seek solutions to the post Brexit trade issues). The result of increasing interest rates is just slowing the economy by cutting demand, however demand was not the problem in the first place. This is clearly the most economically harmful way of reducing inflation.
Absolutely right - but Bailey was chosen in (large) part for his pro Brexit credentials. His ability to make sound economic decisions is therefore questionable
You are absolutely correct. Interest rates are to regulate the demand side inflation of an overheating economy (which we certainly do not have). We are suffering from supply side inflation. It is almost as if they are raising interest rates to look as if they are attacking inflation and not to actually be doing it.
Absolutely correct but those things take time.
Brexit policy is to run down farming buy sub standard cheap from abroad pretty much in line with how Thatcher ran down heavy industry.
next stage to lower UK standards and go along the factory farming large scale model
I agree there using a DEMAND side tool to deal with SUPPLY Side inflation when they should be changing tac
Sunak put 6 billion into Fossil subsidies in the last budget
Quote
The point estimates of the multipliers are 1.1-1.5 for renewable energy investment and 0.5-0.6 for fossil fuel energy investment, depending on horizon and specification.
So it costs the Treasury to invest in Fossil but increases GDP and therefore taxation > 1 if its focused on renewables
@@You-mr3lo
Ignoring the effects of Brexit doesn’t magically, make them go away.
Ignorance is a wonderful opportunity to learn something new.
Willful ignorance is just plain stupid.
Gordon brown has proved yet again that he’s an absolute legend
The same man who sold off most of the UKs gold reserves just before the market shot up?
The only politician in recent UK history to think about long term sustainability.
@@ricardosmythe2548 Everyone loved the GFC
@@ricardosmythe2548How silly of him not to have been able to predict the future
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Stocks, yes. Digital currencies, hell to the motherfuck no.
Is price gouging and profiteering not a contributing factor to inflation?
perfectly valid points which i totally agree with, consider also:
government mismanagement of markets and political grandstanding
'inflation' is not prices going up. It's an increase in the supply. Rising prices is a consequence. What we are seeing atm is mostly the result of covid policies. How much money was printed, world wide, in those years?
No thats a price increase, the inflation was the money printing. Suppressing prices gives you shortages... It dries up supply when what you need is more supply to balance the demand.
@@poppyrider5541 increase in supply should lower prices, not raise them
@@struanpeat5116he means money supply I'd guess.
The government isn't busting industry cartels/collusion and taxing corporations robustly. I'm no fan of the BoE but government is the root of the problem.
Celebrating 13 years of Tory rule!!
Corporate taxation isn't exactly know as being great inflation reduction tools. Cartels are likely to have contributed to continued inflation, but this is a subject of the cause, not the aftermath. As was noted in research by Levenstein & Suslow in their 2012 paper Cartels and Collusion - Empirical Evidence, these type of practices only happen as a result of rapidly declining prices, as a means of hindering short-term profit loss, they're therefor unlikely to be the cause of growing inflation
@@nils191
The study doesn't consider windfall taxation.
@@seanpatrick1243 Don't know what you're talking about. The study simply address how declining prices causes cartelization and anti-competitive practices. Corporate taxation being a terrible tool for inflation reduction is a different empirical question entirely, which lies in how firms react by readjusting costs. It's also worth considering that profits lead investment, so to tax windfall is probably just going to prolong the issue or have a neglible impact
@@nils191
Increased profits go first and foremost go to increases in executive pay and stock buybacks.
Especially temporary profits made from taking advantage to raise prices. Increased investments only come when it is established that those investments will lead to more profits. In this case there profits are a direct result of diminished supply so their is no incentive to invest more.
England is on fire… They waited too long to raise rates, then also had the Truss Fiasco which essentially forced foreign investors to flee.
With their relatively high control over monetary conditions, central banks are much better equipped to tackle "inflation" that results from high-demand situations (due to governments' fiscal profligacy or the banks' own past sins of easy money).
They're NOT at all well equipped to handle "inflation" in the form of relative price rises due to downward SUPPLY shocks.
For Britain, the key shocks to note are NOT those associated with the war in Ukraine (which affect pretry much everybody in the outside world to comparable degrees) but those associated with Brexit, namely barriers to trade and labour supply that limit Britons' access to goods and services they were used to getting in the past.
So... As politically stupid as it was for the BoE's people to be talking about people having to reconcile themselves to being poorer, there is more than a germ of truth to this. In their truthfulness, they could have stepped on an even more powerful political landmine had they just gone on to point out that Britons actually VOTED to make themselves poorer as well...
You are correct as far as your argument goes. In the US monopolies and oligarchs control most areas of the economy. There is no “free” market as prices are set without any concern over competition. Price controls and windfall profit taxes are needed not higher interest rates. Monetary policy is not the only way to control inflation.🐝🐝
Bollocks.
@@paulwood6729 You're bollocks.
@@davidpayant8684yup inflation is direct ratio to a few companies record profits in parts of the economy that have become basically monopolies who control supply and demand to the point they are able to squeeze the consumer for every penny they can get. And then the average person gets penalized for it with higher interest rates, fun times for all 😵💫
Interesting how they absolutely ignore and forget to mention the record profits from all supermarket chains, airlines, oil companies, banks etc…. There is no inflation, it’s caused by the greed of all these corporations
We need more people like gordon brown. He wasnt a politician, he was an administrator.
The reason for inflation,well I'll give you two of the most important factors,spending money like a drunken sailor with furlough payments ,bounce back loans over a so called pandemic ,also installing boomerang sanctions on Russia
Inflation is not something Governors and ex Governors of the Bank of England have to worry about. Lord King retired on a pension of over £200,000 in 2012 and that was linked to the RPI index not the CPI index which is normally lower. Carney got over £150,000 in 2019.His total pay package was £883,911 in 2018. Of course there is a tradition amongst bankers that the normal rules don't apply to them.
Love this video, I found it super informative. I Would appreciate it if you could make a deeper dive of this video on your TLDR business channel as well. Cheers!
Bank of Englad isn't to blame here . This has been caused by supply shocks and the BoE can only affect the demand.
If the government would have capped energy prices at 3% per year increases and provided a government loan to the energy companies to keep them afloat. They could have also used the opportunity to renationalise energy if they wanted to. This would have significantly lowered inflationary pressure and we would be in a different position than we are now.
Could have also increased labour supply by staying in the EU but that's a different problem.
While supply shocks have been a factor, blaming that entirely is a gross over-simplification.
The inflation across the world is partly supply issues resulting from Covid, but also largely in part due to rampant profiteering by big businesses. That so many global companies are posting not just record profits, but record increasing profits to the point of it being upwards of 3-5x greater than their previous postings, should be headline news were we not living in a Neo-Liberal vulture capitalist economy that sees this thing as a huge success.
But for UK inflation specifically, the issue is exacerbated by greater import costs from Brexit, something many experts warned during the referendum, yet were mocked and ignored because why the hell would you listen to experts on anything in the information age where any goober knows everything thanks to the internet personality who tells him exactly what to believe on any given day?
Where the Bank of England is at fault is for going along with the long-con that wages are the primary cause for inflation, and any worker daring to demand a sliver more of the every increasing pie their corporate owners are devouring is who is really at fault, proving that they're basically just lackeys for the corrupt system we're all forced to live under in this day and age.
😂 When you still think price controls work. You can't control the price of goods by sheer will.
They were slow to respond but the government was responsible for the fiscal spending that resulted in inflation.
Easy now. In this comment section only brexit can be blamed for this inflation..
The government couldn't have spent at the level they did if they had to sell their bonds in the private market. The Bank of England encouraged their bad habits. Money supply growth needs to be held to the economy's long-term growth rate, come hell or high water.
@@ednorton47 Modern Monetary Theory was all the rage at the time in fortunately.
TLDR didn't answer the question they put in the title of this video. Fiscal policy caused inflation and not monetary policy. Go look at UK energy bills in comparison to EU energy bills.
A tight or loose monetary policy in 2019 would not have made any difference.
For the first time ever, I am not upvoting a TLDR video.
Yes. The money printing is the inflation. Money printer go brrr
Can you make a video on the various public surveys about sentiments and various integrity issues in them?
No government borrowing to pay for covid. But the bank is to blame to . Not increasing interest rates for more than two years. Didn't want to limit government borrowing. Now we all play catch up.
I really liked this video, i hope we get more of these explanations.
Ground news will be the gods who decide what is accurate news and what is not. They don't have their own biases. Very trustworthy. Honest.
The BoE should remain independent, the issue is the Gov didn't appoint the best candidate for Gov (they were so obsessed with finding a candidate who wouldn't directly criticise Brexit); and the Monetary Policy Committee (who vote to set the rates) had members who weren't hawkish enough on inflation.
The BoE may not be perfect but returning it to government / political would be a disaster. I was around when UK interest rates exceeded 15% and the BoE was under political control. UK politicians are too short term focussed driven by election cycles and too self-serving, to be able to provide a stable economic framework for managing UK interest rates over the long term.
A point made by Zac in the TLDR Podcast rings out loud with this:
'Politicians only care about the short-term, even if its not to the country's benefit long-term. Bankers are the opposite, and thats why theyre better suited for running the Bank of England'
The idea was to hit the ground running and create Singapore on Thames. So it was pretty difficult for the BOE to raise interest rates after Brexit. So, yes, the current situation is clearly the fault of Brexit, or, rather with trying to cope with Brexit.
Yeah ,well we've left mate thank god , never to return, hopefully.
My understanding of the issue with current (UK) inflation is that its being driven by supply issues not demand... The BoE rasing interest rates is pointless I this case unless they actually want to create a recession. In this case the issue is the government and its lack of investment in our primary and secondary industries tied to the raising of trade barriers with our closest markets while loosen ties with other less standards driven markets...
I think you hit the nail on the head. The Bank wants to create a recession, to enable it to level down the economy. The less money ordinary folk have the more they and their kind have.
At some point, Deindustrialization was to bite our arses. It is such a stupid theory, disassembling your industrial capacity and focusing only on services was bound to be an utter failure.
Raising interest rates to curb spending and bring inflation down might make sense if a good portion of the public have disposable income and are splurging. However, if we're struggling to pay our utility bills, mortgages and put food on the table, but inflation still isn't coming down, then the idea that public spending is to blame is a lie.
I love how we likely had this video as a result of a debate between Zack and Ben on a podcast that originally had other plans 😂
Great report as always :)
What about the massive fiscal stimulus during the pandemic? The furlough scheme? small business support scheme? energy support scheme? Hundreds of billions of government stimulus, which basically forced the bank into active QE. How taxpayers will have to pay back these huge bills with massive interest.
Interest rate by itself is a very blunt instrument in managing inflation. In addition to it, government also needs to use higher taxation and public spending cuts to reduce demands.
The inflation is not demand-led - we have severe labour shortage which the government could do something about. I hope those morons who voted for Brexit will shut up about high inflation
You mean like they have been doing for the past decade?
@@adblocker276in what industries do we have a Labour shortage? Mad immagration policies have led to the housing crises and shortages in school places and hospitals, allowing more in will make things worse not better
@@mattymc6802 don't fall for the Daily Mail line. It's not immigration causing those problems, its chronic neglect and underfunding by the government for over a decade. Yes we do have a labour shortage, as everyone from the EU has left, ranging from NHS staff to fruit pickers
It would disaster if government take over BOE. They raise interest rate to tame inflation but government keeps spending at record levels. Now imagine government controls interest rates itself. They would be even more greedy on spending because they could keep interest rates low to borrow money for very cheap. These times showed us that the only guy who can’t reduce spending is government
This was a very well analysed information
I wonder what would happen if we taxed a lot out of the wealthiest people in the UK, just 2% tax would generate £22 billion so what if 90%?
The top 1% of earners pay @ 28% of all income tax, the bottom 50% of earners pay a tiny 10%.
@@jjefferyworboys8138”…the bottom 50% of earners pay a tiny 10%”
Then increase pay of bottom earners, they’ll get to bring more to home and pay more of their share on income tax. You’ll reduce pay disparity, and reduce inequality in your country.
@@lv3609absolutely spot on could not have put it better myself. Wage stagnation in the UK is amongst the worst in all developed countries.
@@XxBruce5002xX
As much as I concur with you, personally I don’t think this will happen (in UK, in USA), or not that easily.
But hey, nothing is to be taken for granted, your side of struggle, (+ our side of struggle), and the world will slowly change, we’re not 1840 and should resist going back.
6:29 why do i get the feeling this "consensus" is brought to you by a bunch of really rich men with cayman island funds.
Yeah, it it? I wonder. Maybe one point to consider is that they are the only ones who can issue the British pound...
Low employment in the economy isn't as positive as the government & banks make out as unfortunately the cost of living for the poor, working, middle class have their standards of living crippled.
Interest rate increases only affect those on variable rate mortgages. Making them struggle with money and not spend as much. Even worse lose their home. Although the government say they will protect those on mortgages...however not all are with a mortgage.
There should be a limit to the incompetence of BoE board. If inflation reaches a certain limit, let's say 8%, they should all be fired. At least their head should be fired.
Not true that high interest rates only benefit the rich, artificially low interest rates is what has spiraled the real estate market out of control, affecting the bottom 80% the most. High interest rates means real estate prices have to come down.
Total payment with 10% interest rate on a 100k dollar home vs. 1% interest rate on a 1 000k dollar home comes out to the same sum. Banks aren't incentivized to drive up the sized of loans if interest rates are allowed to rise instead.
It's called the interest income channel. The money supply increases when holders of government debt get higher payouts.
Since Thatcher, there have been times when inflation was high and had to be corrected.
Every time this happened the chancellors at the time raised interest rates well above 10% except one time when it was about 9%.
Imagine an interest rate of 10% today.....
A £200k mortgage costing £20k p.a. just on interest alone!
For someone to get £20k cash, they would have to earn at least £30k before deduction os Tax, N.I., Pension Contributions etc....even more if they were high earners, then about £40k!
Who knows what the future will hold but if the Government's aim is to INFLATE the economy out of DEBT by keeping interest rates low at about 5%, then everybody will suffer for sure,
It appears also that if interest rates go up to 10%, then we will be heading right back to 2008 when people could not pay their lenders and had to hand back theor keys....
That's the choice today in the UK.
5% = High Inflation, Recession and Devalued Sterling.
10% = Recession and back to 2008 Banking Crisis.
Great choice eh?
What other choices are there?
Ans....Screw the pensioners and savers instead?
One thing is guaanteed and that is the Market and Banks are Gods and must be protected as happened since 2008 when FREE Money and IOUs were printed and dished out to the Banks for them to s//pend as they saw fit....
Thsi pushed up Propertty and Rent prices as well as Stocks and shares.
Almost like the game of monopoly where to continue the game, the "Banker" must keep dishing out the paper money.....BUT the winners get richer and almost everybody loses.....At the end os the game there is only one winner!
We need to add estate agents to the list of blame then for over inflating House prices.
I fail to see how interest rates can possibly go over 10% now, all but the very rich would be able to keep a roof over their heads.
Great Britain's high inflation is not caused by an "overheating economy." It is cased by Brexit. There's not much the Bank of England can do about that.
That's deflationary
A shock in the supply of labour a inflationary
It's not in the BoE's control, but isn't the cost of energy a major factor driving inflation? If we renationalised the utilities surely that would help stem inflation a bit... The government could be doing a lot better
The cost of energy and food inflation. The latter being mostly Brexit-related, the first one due to little brexitannia's lack of storage.
Did the UK build any storage facilities since last autumn? Genuine question.
Back then Germany had storage facilities (mainly oil) for 3 months of average energy consumption, since then 5 fully operational LNG terminals were built.
Back then the UK had storage facilities for ca 3-5 days, hence needed - still needs? - to buy on the spot market just to keep everyone afloat. Spot market is pricey.
Greetings from Bavaria
The bank of England puts up interest rates to slow "demand" in the economy. But could it be argued that inflation at the moment is driven by lack of "supply" rather than too much "demand" and record high profits by companies. So the government taxing the profits of companies and increasing domestic supply would bring down inflation, not the bank of England increasing rates
You need to do a video on the rampant profiteering following the pandemic. How is this driving inflation and why isn't it regulated? What can be done about it?
If corporations cannot curb their profits, workers should never demand less money. It's not like food and fuel will get cheaper.
It was a mistake to increase intetest rates.
It was a mistake not to have increased them much earlier, which probably would have happened if not for the Pandemic. The current bae rate is still quite modest.
@@jjefferyworboys8138 clearly increasing the interest rates in times when the issue was with supply of goods was misguided. What we needed was new people in power with new and bold ideas on how to weather the storm. Instead we have allowed the people who caused this country to fall to rule over us for even longer and make even more mistakes. Even before the pandemic there were no plans to increase the base rate and even if there was no pandemic the interest rates would not have been increased since there was no need for intervention.
Now we will all feel the pain for years to come. 2024 will be an interesting year indeed with governments trying to balance the budgets and people trying to remortgage or obtain a loan.
The Bank of England has acted correctly given its very limited instruments at their disposal. The government however has been lacking in policies to help reduce a lack of supply which is made worse due to Brexit in Britain.
However the governor could watch his tongue a bit more to avoid out of touch comments.
Back to the policy of raising interest rates this has been very healthy as the UK is way too dependent on large mortgages. People should not have taken out mortgages with such small deposits. The reason people are even taking out mortgages with small deposits is because interest rates were way too low. This will drop house price which needs to happen regardless of inflation. There should be discussions though on how reasonable 5yr mortgage terms are when they are often much longer on the continent.
if you look at the inflation status. Its gone down by 2 percent since october.
I love how much theory you've gone into here
while missing the entire point of money printing.
next he will ramp bitcoin....
Interest rates have been far too low for too many years.. This is not sustainable.. The "Credit Crunch" was never actually resolved.....
Clear proof that the South Sea Company was the superior financial institution.
This is a great follow-up to my comment on the previous video on this topic. People need to understand that it's not simple, there's no easy answer, but that above all, the answer of increasing rates is political, and it picks a winner and a loser in the economy.
" highest level since 2008" , the rate has been ridiculously and dangerously low since the financial crisis . The rate isn't at its historical average yet, and is less than a quarter of what it has been in the past . The central banks of the world have done an awful job since the financial crisis long suspected they need it to last just long enough for the CBDC to take over , and the bad management for over a decade was deliberately to force the adoption, as there is no excuse or other logical explanation for the poor decisions of so many central banks for so long .
The simpler answer is the UK has been in a productivity/growth slump since the financial crisis and low interest rates and QE were the main tools available to promote growth. Thing is this also boost lots of things including prices of assets bought with debt like housing, and that's been damaging in other ways.
Austerity hasn't helped either, and fiscal policy has been so unimaginative that we haven't promoted the growth of any industries to replace the big hole left by the shrink in tax take from finance after 2008, which due to increased regulation never recovered.
YES. In particular the current Chair. Should be sacked🇬🇧
Difficult to argue that the £412bn the BoE printed to write off the governments COVID debt hasn't contributed in part to the current inflation. That is £412bn more sloshing around the economy chasing even fewer goods than before thanks to Brexit restrictions and Ukraine disruptions.
Most of which ended up in the pockets of friends and those who were kept in the loop of where to invest
The current situation seems quite clear. Given the core causes of this bout of inflation, tuning the interest rate is a poor way of influencing it anyway and fiscal policy measures or the other monetary method (tightening the money supply) would have a much better impact. Nobody dares even talk about tightening the money supply, for obvious reasons. The government is therefore right to reject the Truss-type insanity of blaming the bank, but they also refuse as a matter of principle to apply fiscal measures. So we end up with the government supporting the bank's use of interest as the sole method of controlling inflation, with all sorts of unpleasant consequences.
Isn't the whole point of raising interest rates to "tighten the money supply"?
Increasing interest rates does reduce the money supply as it add a cost to borrowing, that is exactly what they are doing. The issue is they haven't done it soon enough of fast enough, the Federal Reserve was suggesting inflation was transient, and the reality is they knew it was more important to stop the Coronavirus recession not to become a death spiral.
The issues the UK are facing, a partially exactly as was vote for, with Brexit, printing money, Coronavirus reducing efficiencies of just in time supply chains, the war in Ukraine, but the reality is the main issue is a decade of Tory policy damaging the country meaning when you fall, and the economy is cyclical so always falls, you want to do it from a high place so the bottom isn't as low. What the Tories did is stagnant it for a decade, fail to utilise the low interest rates for investment, massively drove up government debt to fund their mates, and now are going to leave the tax payer holding the bucket.
@@derpmansderpyskin Not exactly. To directly tighten the money supply you need to take existing money out of circulation.
Inflation is always and solely a monetary phenomena. Who owns monetary policy? Then you have your answer.
To be fair, no country’s inflation is entirely under its control due to international trade being done in U.S. dollars. So the value of the U.S. dollar and the money policies of the U.S. are going to have influence on the value of the UK pound.
And yet our government has actively exacerbated the issue by throwing away the investment potential of this country
While the Bank of England isn't above reproach in this situation, interest rates are spiralling out of control because of food and fuel increasing, and you can't tell people, "Just go hungry." Monetary policy won't cut it. The government needs to stop finger-pointing and do some bloody work for once.
You say "ill advised" I say out of touch and incompetent.
How can such people be trusted to have anyone's best interests in mind, except for the wealthiest of people.
Oh don't say the printers have broken down FFS😂
Inflation is a TAX!!! It BENEFITS the central bank (which is PRIVATE)
there is a third called competing currencies its about letting the market to decide wich currencie is the best
I'm sure the tories are more than happy to Offload the blame for their car crash of a government over the last 12 years 😡
*I'm favoured, $230K every weeks! I can now afford anything and also support God's work and the church.*
Wow that's huge, how do you make that much monthly? I'm 37 and have been looking for ways to be successful, please how??
@@sammyrobert5448I earn from investing in the digital market with the guidance of Mrs Mary Margaret Schimweg
Brokerage services...
Wow wow please is there a way to reach there services, I work 3 jobs and trying to pay off my debts for a while now!! Please help me
@@ainanarvaez9496she will guide you👇👇
She’ll guide you ✅
Interest rates are not the tool to manage inflation. It clearly doesn't work. The only reason it worked from 1997 to 2008 was due to the Financial Sector propping up the economy. When this bubble burst the Bank of England found that their tool of choice was broken and we had interest rates as low as 0.25% and supposedly no inflation (which of course was nonsense as prices in reality still rose).
Then when the Government had to fund furlough during COVID via QE they basically lent all this money eventually to the rich.
The current inflation is not caused by "Too much money chasing too few goods" but is caused by input costs increasing due to the Energy crisis, Brexit and workers wanting, quite rightly, their wages to catch up with inflation. Not one of these input costs is affected by raising interest rates and indeed just makes everyone worse off and will cause a private sector property crisis and make business borrowing and investment next to impossible.
This adherence to what is called neo-monetarist policy is the root cause of too many current issues and will further damage our economy.
Even the stupidity of measuring our economy in terms of economic growth (boom and bust or bubble and recession) is not helped by these policies.
1-2% inflation doesn't mean everything is getting expensive by 1-2% every year. It's an average across what the "average" consumer might purchase in a year. If your purchase pattern deviates from that "average", your expense might rise faster (or even rise slower). And if rent rose by 10% and inflation is stated to be 1%, then something else is dropping in price to make overall inflation reach 1%.
Over the last 30 years, electronics prices have dramatically dropped for one example. 20 inch TV might have been 500 USD (1200 inflation adjusted today), but you can buy a 24 inch TV today for 150 USD (way better image quality in every respect too).
@@chinguunerdenebadrakh7022 You merely prove one of the points I was making, that inflation is personal to each person. Property price fluctuations make no difference to my circumstances, food price increases and increases in prices of other services certainly do. So my inflation rate certainly was not 1-2% between 2008 and 2021 it was much higher, had I time I could calculate what it was.
Poor economic measures like RPI and other inflation rate measures are meaningless if your income is static but prices have increased. You are then poorer than you were. But these price increases were not caused by the volume of money supply increasing, it is down to the realities of supply of goods and services.
Hence why both GDP and Inflation rate measures need abandoning in the former case and overhauled in the latter case.
We need measurements that discover the health of the economy and the real economics of the majority of people.
The new economics as proposed by Kate Raworth and Thomas Picketty offer an alternative but neither Labour or Conservatives understand the realities. they are only interested in political vote chasing.
You are overcomplicating it. The BoE printed £412bn to write off the governments COVID debt. This means more money is sloshing around. This means even without the shortages that you correctly cute, there would still be inflation.
Also, interest rates still have a dampening effect because higher rates reduce the amount of debt people can afford to take on, reducing access to cash.
@@MUSTASCH1O The Economy is far more complex than you give it credit for. For the vast majority of people they don't have more money "sloshing around" in fact quite the opposite, most have no spare disposable income. Making debt more expensive does not reduce access to cash for 99% of economic actors, what it does do is reduce business investment and thus (even with the limited blinkers of neo-monetarist economic theory) reduces economic productivity and growth. It works against thriving economies and of course makes mortgages unaffordable for some.
Hayek was wrong, he was wrong in 1985 when my macroeconomics paper asked why the Conservative government's aim to get 2% growth 2% inflation and 2% interest rates was entirely mythical task when you have on tool - interest rates - to achieve it and your economic formula is fundamentally flawed. It was the easiest paper in the exam to answer. Nothing has sadly changed and that is all economists are now taught, no wonder they are clueless.
@@timregester1173 doesn't matter how complex the economy is or whether individually people don't have much disposable income; £412bn was injected (£70bn direct cash handouts) which in aggregate through millions of transactions will have a effect on prices as it permeates through the economy. It will be contributing to current inflation.
You haven't actually given a clear reason why increasing interest rates would not slow down borrowing. If the cost of borrowing by people and institutions goes up, they will borrow less, and therefore money multiplication will be slowed. The financial crash didn't change this fact.
Definitely 💯
The current system is flawed, yes, but if it's flawed people (such as policymakers) to diligently review the data and construct policies that target the key issues.
Having an independent central bank is a great idea to keep the economy in the hands of the ultra-wealthy without any democratic repercussions.
Central Bank independence is a staple for any real democracy. Political parties need to steer very clear of the central bank as their interests are conflicting.
The woes of the British central bank depend, simply put, by the extremely st*pid decision to assign them the second mandate. A central bank has no business controlling unemployment, it's like asking a plumber to vaccinate your goldfish.
The failed fiscal policy might have an even bigger role in the uncontrollable inflation this time around. Don't think bringing BOE back under government control would help.
“Should it be brought back under Government control?”
*Looks at Türkiye:* hmmmmmm
The place that had a mass of natural disasters, is near a warzone, and has an influx of every refugee in the area?
How would the "independent" bank of england fix that?
No. The UK govt is. They did the following.
Pumped money, during pandemic.
Ignored investment in domestic energy supply. No, new nuclear power plants, coal/gas power plants, and wind/solar power. This is due to NIMBYism in rural areas.
High cost of renting, due to ignoring the housing crisis. Again NIMBYs to blame.
Disruption of fuel supplies after Ukraine war.
(reading your post)
UK the land of Harry Potter magic wand
If Coutts replaced the BoE as the UK central bank, would they close the nations account as soon as the tories run our account balance to below £3 million?
No, Brexit supply chain issues are responsible, we are over paying for everything that's imported and exported! Changes to interest rates are going to do didley squat because the costs will still be high!
We are trying to address supply side inflation by reducing demand.
Why? Because financial and monetary policy are the only levers of control that we have.
I don’t believe increasing interest rates are going to work especially well because:
1-,people have gotten used to getting what they want when they wan and putting it on credit
2- increasing interest rates only impacts this with mortgages. It doesn’t impact these with enough money, and it doesn’t impact millennials and younger who have been priced out of real estate all together
Isn't that chart at 5:29 suppose to be stagnant? Inflation at 2% and pay rises at 2%, it should be perfectly flat in an ideal situation.
It is stagnant, a graph that shows rising real term wages would show the blue line steadily rising above the red one. That is what prosperity looks like.
@@Alex-to8espay inflation above the inflation rate would mean the inflation rate goes up.
Prosperity is based on volume not rate of income above inflation rate. You can have a salary increase of 3% a year and still be below living wage with a 2% inflation rate also completely depending on the hours you work too.
If you drew a best fit line on that chart you want it as flat as possible for a perfectly stable economy, stable meaning growth across wages and inflation are in sync.
@@jamm8284 Real terms pay increases do not have to cause inflation, they are a national metric, where as causes of inflation are an international one, 70M being paid 30% more isn't relevantly going to effect the international cost of anything in a world of 7 billion.
@@Alex-to8es that's true it's not just income rate, but in general workers don't keep their money in cash under their mattress or in off shore account or only pay 19% tax rate like corporate. The more money taken from the 19% tax of profit of companies means more money being taxed at 20% and the majority of the time the rest of the extra income is spent with VAT or put into bank accounts where it's used.
The central banks inflation rises are often to curb spending and increase saving.
The more money we have the more we spend and the amount of products we buy goes up and the supply doesn't keep up. That's a main driver for inflation. Supply and demand.
@@jamm8284 All you have said is that there would be less money, an individual, especially at a higher tax band, would pay more than a corporation, Taxation is a method use to balance the money supply, it doesn't have to be spent again.
Demand and Supply is also pretty irrelevant to international goods, less than 1% of the populace have 20% of more money, while having an effect, won't have an effect of 20% inflation. It wouldn't even have a 1% inflationary effect all while the individuals are 20% better off, or 19% better off.
The concept that high interest rates benefit the wealthy is not quite accurate given the last 15 years. Ultra low interest rates has fueled asset price inflation, which primarily benefits those who were asset rich. Given the 15 year time frame, this asset price rise became entrenched and has forced new entrants to the housing market to borrow more and more to afford basic housing. The recent return to relatively low interest rates from ultra low levels has then produced a problem primarily for those who have significant borrowings on their houses - as in the early 1990s. If you had reduced your exposure during covid by selling assets to minimise borrowings you would have locked in your gains in cash terms which you can only really do if you have multiple property assets etc. Given real wages have not increased over this 15 year period then 85%+ of the benefits have of the last 15 years have flowed to the ultra-weathy. Higher interest rates will benefit those with cash savings, but bear in mind many of these have been run down given lack of increases in real wages and given poor returns, have been switched into riskier assets - which are now depreciating in value. Perhaps the Bank of England needs to have avoiding asset price bubbles added to its objectives which all seem to pull in differing directions - but how it deals with this with only one real tool - interest rates I don't know. For the majority of the UK population, the best outcome here would be a return to the days when housing was seen as a need to be met via multiple routes rather than provided via monetised assets.
The inflation in the UK is the result of easy money policies by the UK as well as UK being no longer in the EU.
This type of inflation cannot be easily brought under control by just raising interest rates. Worst still, the UK government did not raise the savings rate in tandem with the increase in interest rate.
UK should be trying to secure other sources of supply of energy and food to counter the inflation of energy and food prices or negotiate with certain countries to control the cost of food and energy. However, UK government refuses to change its stance on Ukraine, and continues to purchase expensive energy unnecessarily and then passing the cost to the ordinary UK citizens and companies.
The UK government do not control the savings rate, that is controlled by individual banks themselves. Unfortunately, although we generate more than enough electricity for our needs, that electricity is sold on the global marketplace, then bought back at a higher price, and I'm not even joking. The Tories sold off all of the generation, supply and transmission sectors to foreign investors, so the profits are disappearing into offshore accounts so no taxes are even being paid on the profits. As for gas, the government sold off the last of the storage sites a few years ago, and although we buy very little from Russia, we do buy a lot of LNG from just about everyone else.
As for food prices, low food prices were promised as one of the benefits of Brexit, but just like every single one of the promised benefits, it was all lies.
Liz Truss thinks it's a good idea? Well, I think we know the answer to the question then.
Could you also do a vid on the recent revelations/ scandals of greedflation?
Well...perhaps flooding an entire economy with near endless money probably wasn't the best idea, eh?
I am so tired of people who make almost 20 times more than me telling me that it's I who have to make the sacrifice. This kinda shit is why the guillotine was used.
Honestly if the bank of England failed we would be not watching this vedio right now cause the inflation would kill us like hell...
The prooblem is goverment policy limiting supply, that is outside the BoE's control, not the economy overheating. Interest rates will have a very limited effect.
This is a Tory government failing, not BoE.
Negative real-rates for 15+ years wasn't "running the economy hot"?
Very naughty the way in which GN is announced 😡
Wasn’t the BoE job to fix supply led inflation, but with the total inactivity of the Govt they tried anyway.
Part of the UK’s problem is we in the US are raising the value of the global trade currency, the USD, as we try to get our own inflation under control.
BoE printing 10% more money, causing each Pound to devalue by 10% (monetary inflation)?
Nah, of course not!
The person who wanted more control (liz trust) is also the same person who crash the pound value and crushed people's living standards in a matter of a few months
I felt like truss's premiership was a con from the start she was only there to cause market chaos for the rich to profit from
7.5% is not high inflation, that's nothing, in argentina we have that monthly.
Low interest rates also benefit the richest people; they’re still the ones borrowing the most.
Saying that because a Governor states that are "lessons to be learned" the "model is clearly flawed" as you did... meh.
There are always lessons to be learned, none of this is physics, and surely he didn't mean it in the way you quoted him.