Economics Nerd Central/ The Global Inflation Thread

[Stacky]

Definitely.

I don't know why young folks in their 20s aren't already at that point in the UK. Housing is utterly unaffordable for them, they've been screwed by university debt, salaries haven't kept pace with inflation. Financially, they're fucked, the system is totally biased against them, primarily to keep well off voting baby boomers in the luxury to which they are accustomed.
When they have kids, good luck, shit gets worse, you have to survive 3 years with literally zero childcare support from the state, even when it does kick in, it's not vaguely enough for your average punter.

But no, no, no, we couldn't possibly increase inheritance tax.


The incentives in the UK are nuts. That's where I think labour should be making a strong case for the state to offer cheaper childcare, reducing university debt, building more housing, adult learning and ways for those who leave education without qualifications to be able to get ahead

These are the wealthy homeowners and investment property Tory Party members who will be voting for Prime Minister Pork Markets to reduce taxes and thus reducing U.K. public services to an even more perilous state so they can be sliced and diced and flogged to U.S. interests and totally destroy the futures for young people in the U.K. (They have already destroyed their future to live, work, study, set up a business or settle down etc in Europe).

 

[How bad boy]

These are the wealthy homeowners and investment property Tory Party members who will be voting for Prime Minister Pork Markets to reduce taxes and thus reducing U.K. public services to an even more perilous state so they can be sliced and diced and flogged to U.S. interests and totally destroy the futures for young people in the U.K. (They have already destroyed their future to live, work, study, set up a business or settle down etc in Europe).

I'm just surprised there isn't more anger at the stitch up job done on young people, just to keep the Tories in power.

That said, once unleashed, that anger is hard to put back into the bottle.

 

[Stacky]

I'm just surprised there isn't more anger at the stitch up job done on young people, just to keep the Tories in power.

That said, once unleashed, that anger is hard to put back into the bottle.

The Brexit cult-like sunlit uplands are just around the corner if you just believe harder and put your shoulder to the wheel.

Distract people with unaffordable tax cuts and culture wars along with mass media denialism and invent an enemy in the E.U. while feigning victimhood.

Meanwhile huge NHS waiting lists and economic problems and the only people challenging them are the unions while Labour is too scared to mention the elephant in the room (Brexit) for political reasons.

People just prefer to be lied to as the harsh reality is too much to even face.

Give people just about enough to live on while working 2 low paid jobs or living off a food bank but too weak to riot in the streets.

U.K. inflation-paying more to get less:

 

[How bad boy]

The Brexit cult-like sunlit uplands are just around the corner if you just believe harder and put your shoulder to the wheel.

Distract people with unaffordable tax cuts and culture wars along with mass media denialism and invent an enemy in the E.U. while feigning victimhood.

Meanwhile huge NHS waiting lists and economic problems and the only people challenging them are the unions while Labour is too scared to mention the elephant in the room (Brexit) for political reasons.

People just prefer to be lied to as the harsh reality is too much to even face.

Give people just about enough to live on while working 2 low paid jobs or living off a food bank but too weak to riot in the streets.

I think we're at a really interesting inflection point in macroeconomics.

Before the Great Depression, Mercantilism was the prevalent theory (in the west...) of how a good economy worked. The world wars and that recession put paid to that. Keynes happened, sweeping it all away.
Until the 70s, Keynesianism was dominant, which was toppled by Monetarism, mostly off the back of the likes of Hayek and Friedman, that Negative Liberty was freedom, limited state is the right way to go. Captured by Reagan's joke, "The top 9 most terrifying words in the English Language are: I'm from the government, and I'm here to help.”"


I think the financial crisis 10 years has clearly demonstrated that's an insufficient way of approaching the economy. And there are enough examples where it has been proven to be utterly nonsense, China being a great example of absolutely phenomenal, sustained, long term growth.
In parallel, following the collapse of the Soviet Union as an existential threat, Globalisation really kicked into high gear, the WTO's admittance of China being a key changing point there. China's emergence (and to a lesser degree, India, Vietnam and a few others) also kinda messed with the west's economies. Those closed loop balances that would previously have pushed up inflation and wages when demand rose, no longer did so.

I now think the tide is turning against purist free market monetarism and there's a recognition that globalisation has had major costs as well as huge benefits.

This isn't saying I'm anti globalisation, I'm very pro globalisation.
I don't think the losers from it have been even vaguely compensated by the winners and governments haven't been thoughtful about how you deal with the hollowing out of sectors that get offshored and decent career paths from manual labour to a decent middle class living.
Additionally, politics has turned into what you're against (IMO, an outcome from an ideology of negative liberty) rather than what you're for, how government will make your life better in tangible ways by acting in the collective good. Not surprisingly, this is called Positive Liberty.

Labour should be the party of positive liberty, here is a way that things are better when the government comes to you and says "I'm here to help". But we have to learn those lessons of the failure of Keynesianism. The solutions of the 50s, 60s and 70s will not work now and are likely to end in the same sort of failures they did in the 70s.


I have some thoughts on what those solutions might be, but I've already spent too long writing this post...

 

[Stacky]

I think we're at a really interesting inflection point in macroeconomics.

Before the Great Depression, Mercantilism was the prevalent theory (in the west...) of how a good economy worked. The world wars and that recession put paid to that. Keynes happened, sweeping it all away.
Until the 70s, Keynesianism was dominant, which was toppled by Monetarism, mostly off the back of the likes of Hayek and Friedman, that Negative Liberty was freedom, limited state is the right way to go. Captured by Reagan's joke, "The top 9 most terrifying words in the English Language are: I'm from the government, and I'm here to help.”"


I think the financial crisis 10 years has clearly demonstrated that's an insufficient way of approaching the economy. And there are enough examples where it has been proven to be utterly nonsense, China being a great example of absolutely phenomenal, sustained, long term growth.
In parallel, following the collapse of the Soviet Union as an existential threat, Globalisation really kicked into high gear, the WTO's admittance of China being a key changing point there. China's emergence (and to a lesser degree, India, Vietnam and a few others) also kinda messed with the west's economies. Those closed loop balances that would previously have pushed up inflation and wages when demand rose, no longer did so.

I now think the tide is turning against purist free market monetarism and there's a recognition that globalisation has had major costs as well as huge benefits.

This isn't saying I'm anti globalisation, I'm very pro globalisation.
I don't think the losers from it have been even vaguely compensated by the winners and governments haven't been thoughtful about how you deal with the hollowing out of sectors that get offshored and decent career paths from manual labour to a decent middle class living.
Additionally, politics has turned into what you're against (IMO, an outcome from an ideology of negative liberty) rather than what you're for, how government will make your life better in tangible ways by acting in the collective good. Not surprisingly, this is called Positive Liberty.

Labour should be the party of positive liberty, here is a way that things are better when the government comes to you and says "I'm here to help". But we have to learn those lessons of the failure of Keynesianism. The solutions of the 50s, 60s and 70s will not work now and are likely to end in the same sort of failures they did in the 70s.


I have some thoughts on what those solutions might be, but I've already spent too long writing this post...

Geopolitically we cannot trust Russia or China and we have become dependent on them for energy and cheap stuff shipped across the globe and now post C-19 and populist Trump etc the U.S. and E.U. are shortening supply lines and moving manufacturing nearer their base from "just in time" to "just in case" as the amount of new build logistics warehouses here and the U.S. as well as manufacturing buildings skyrockets.

Climate and water/food shortages via famines and huge global displacement of populations will be another huge issue and we simply ignore Africa on our doorstep where Nigeria will soon have a bigger population than the entire E.U.

De-globalise, pay more for quality, better staff wages and conditions and less air travel as the very costly profit at all costs and to hell with the planet party is coming to an end.

 

[How bad boy]

Geopolitically we cannot trust Russia or China and we have become dependent on them for energy and cheap stuff shipped across the globe and now post C-19 and populist Trump etc the U.S. and E.U. are shortening supply lines and moving manufacturing nearer their base from "just in time" to "just in case" as the amount of new build logistics warehouses here and the U.S. as well as manufacturing buildings skyrockets.

Climate and water/food shortages via famines and huge global displacement of populations will be another huge issue and we simply ignore Africa on our doorstep where Nigeria will soon have a bigger population than the entire E.U.

De-globalise, pay more for quality, better staff wages and conditions and less air travel as the very costly profit at all costs and to hell with the planet party is coming to an end.

I strongly disagree about deglobalising.

I think there needs to be a more intelligent approach to globalisation, but I fundamentally think the free movement of goods, services, capital and labour is the right starting point.

I don't think the average punter understands the benefits and drawbacks of globalisation.
Personally, I started working with China in 2003, sending very simplistic circuit boards over there for manufacture. Their testing was hilariously bad. They had rudimentary understanding of electronics, at best. Their productivity was awful.
But they improved, fast. 10 years later, they were the ones designing not just the phones but the chips going into phones. They achieved it through both fair means and foul.

And that benefitted the west, the smartphone revolution wouldn't have happened at anything even vaguely approaching the same speed without China.
That breakneck development dragged hundreds of millions in China out of poverty.

The same needs to be done in places like Nigeria. The west sells a story that African countries can't develop unless they adopt the western negative liberty model. I think that's wrong. China, South Korea, Taiwan, all demonstrate that a certain level of protectionism is necessary for development from a poor country to a rich one. Once you get above a certain development level, wide levels of protectionism tend to be counterproductive. But the final answer is not no protectionism, it's low levels of intelligently targeted protectionism. The west already does this (e.g. the EU's Common Agricultural Policy), but really doesn't properly account for it in their economics or political models.

 

[Stacky]

I strongly disagree about deglobalising.

I think there needs to be a more intelligent approach to globalisation, but I fundamentally think the free movement of goods, services, capital and labour is the right starting point.

I don't think the average punter understands the benefits and drawbacks of globalisation.
Personally, I started working with China in 2003, sending very simplistic circuit boards over there for manufacture. Their testing was hilariously bad. They had rudimentary understanding of electronics, at best. Their productivity was awful.
But they improved, fast. 10 years later, they were the ones designing not just the phones but the chips going into phones. They achieved it through both fair means and foul.

And that benefitted the west, the smartphone revolution wouldn't have happened at anything even vaguely approaching the same speed without China.
That breakneck development dragged hundreds of millions in China out of poverty.

The same needs to be done in places like Nigeria. The west sells a story that African countries can't develop unless they adopt the western negative liberty model. I think that's wrong. China, South Korea, Taiwan, all demonstrate that a certain level of protectionism is necessary for development from a poor country to a rich one. Once you get above a certain development level, wide levels of protectionism tend to be counterproductive. But the final answer is not no protectionism, it's low levels of intelligently targeted protectionism. The west already does this (e.g. the EU's Common Agricultural Policy), but really doesn't properly account for it in their economics or political models.

Not really sure about the "benefitting the West" apart from great new cheap smartphones every year that we do not need and disposable fashion along with cheap electronics shipped to here from across the globe (the West always had someone somewhere to provide cheap commodities and labour historically) years after denuding the U.S. of its manufacturing base that then led to Trump populism and the Brexit fantasy of "Global Britain" rather than successful blocs like NAFTA & the E.U. looking dated in the face of populism and strongmen like Putin & Orban etc.

+the huge implications for the climate of billions of newly wealthy Indians and Chinese etc wanting all the same crap that we have and crossing the globe in jets to get it. Once you get "rich" you get rich countries problems.

Africa is on our doorstep and it has been ignored for too long and we can start to invest and develop there or just keep fooling ourselves.

 

[How bad boy]

Another 0.75% on interest rates by the Fed, if you haven't fixed your mortgage, do it now

US makes huge interest rate rise to tame soaring prices

The Federal Reserve is increasing interest rates for a fourth time as it tries to control inflation.

www.bbc.co.uk

 

[Stacky]

Another 0.75% on interest rates by the Fed, if you haven't fixed your mortgage, do it now

US makes huge interest rate rise to tame soaring prices

The Federal Reserve is increasing interest rates for a fourth time as it tries to control inflation.

www.bbc.co.uk

The E.U. continuing to let the U.S. take the lead and do all the heavy lifting on global inflation but Americans are now spending 5% more than pre-C-19 as sales rise.

 

[Swanforthelough]

Another 0.75% on interest rates by the Fed, if you haven't fixed your mortgage, do it now

US makes huge interest rate rise to tame soaring prices

The Federal Reserve is increasing interest rates for a fourth time as it tries to control inflation.

www.bbc.co.uk

That’s 2 hefty hikes in a row, more to come but would doubt it will be again 75 at the next meeting.

Companies in US like Walmart, Costco etc already feeling it at the till. Housing starts down so this will have a ripple effect for the rest of the year. This is not a bad thing to get inflation under control.

Intels Q2 results were appaling yesterday with PC sales plummeting but their situation does not reflect that industry as a whole as that whole company needs to be rebuilt top to bottom.

The US economy is still quite strong but how Europe manages the gas situation in the Winter is the big Elephant in the room.