Who do you believe: Sunak or the IMF?

MazieD Thanks for posting this link, I've just had a quick skim and it's really interesting. One to read properly, I think and it challenges some well held beliefs in a measured and comprehensible way.

I don't know why either you or Maizie think you are the only authorities on the economy. I don't think I am anything close to being an authority. However, I know that many don't agree with the litany Maizie follows and that the far left finds it very useful.

It would be nice to have some good, evidenced, counter arguments to debate to.

I object to the word 'litany' though; it's evidenced based and factual, not a plea to the Almighty..

And will you stop it with that 'far left' rubbish.

It's not 'far left' to point out a different way of approaching the economy using the state's ability to create its own money. In fact, the state's ability to create money has been extensively used by the tories in the past few years, much to the benefit of their friends and donors. Which kind of speaks to my point that MMT is completely apolitical.

MaizieD

^I don't know why either you or Maizie think you are the only authorities on the economy. I don't think I am anything close to being an authority. However, I know that many don't agree with the litany Maizie follows and that the far left finds it very useful.^

It would be nice to have some good, evidenced, counter arguments to debate to.

I object to the word 'litany' though; it's evidenced based and factual, not a plea to the Almighty..

And will you stop it with that 'far left' rubbish.

It's not 'far left' to point out a different way of approaching the economy using the state's ability to create its own money. In fact, the state's ability to create money has been extensively used by the tories in the past few years, much to the benefit of their friends and donors. Which kind of speaks to my point that MMT is completely apolitical.

I think you need to look at some other economists Maizie.

The fact that you think you can tell me that I must see the spectrum of ideologies from your perspective and stop seeing it from my own says it all. That, and the fact that you feel free to misrepresent what I said (again!) would certainly make me ask why I would want to "debate" with someone with such entrenched views?

It doesn’t matter which economists you happen to agree with the same principles apply, if you spend too much or even propose unjustified spending the value of the currency falls.
We saw this in September the Truss plan was uncosted and caused chaos for a few weeks, so it is important to maintain international confidence.
Currencies do collapse and default fairly regularly, and although the UK is not at risk, vigilance has to be maintained or we are all worse off, and the poorest suffer most. There is nothing that the Tories are likely to do to turn the economy round and the debt legacy they leave the next government will be a challenge, so look at 4-5 yrs before we notice much difference. With that prospect the IMF are not likely to be impressed with the UKs economy.

I suggest that energy costs are coming down considerably over the summer months and that this will lead to a drop in inflation. The government is just sitting on its hands over public sector pay rises and once inflation is lower, then public pay demands will be settled at much lower percentages than currently requested. I suggest…..

I think you could well be right ronib.

I think Sunak may be a little wiser than some people credit him with.
But it all depends of course on peoples' points of view on where they want the country to go anyway.

The rate of inflation will come down because it measures the difference in prices over a year. When energy prices rose after the Russian invasion of Ukraine they caused a big difference between prices in, say, April 2021 and April 2022. The percentage increase is 'inflation'. But now that prices have stabilised there won't be a big increase to record between April 2022 and April 2023. So the inflation figure will be lower.

The lower inflation figure will not have been the result of any government or Bank of England measures. It's just a consequence of energy price stabilisation.

However. Prices will still be at the high level established last year and workers still need the pay increases they've asked for because they are coping with these highly inflated prices right now, and have been all year.

I don't think that union leaders are stupid; they won't fall for the spurious reasoning ronib suggests might be put into play.

Though I can see that it might be accepted by a few voters who can't exercise some logical thought...

"It doesn’t matter which economists you happen to agree with the same principles apply, if you spend too much or even propose unjustified spending the value of the currency falls."

Just to clarify this as it's not entirely true. Japan has more than twice the debt as a percentage of GDP than the UK, the US also has a higher level of debt but both the yen and the dollar are stronger than the pound. It's not just about the level of debt it's who holds the debt (the Bank of Japan holds 70% of their huge debt whereas the Bank of England holds less than 30%) and also confidence ie a country can have high levels of debt but if holders of that debt are confident that the money is safe then the currency stays stable. Truss and Kwartang didn't cost their budget and the market reacted accordingly!

MaizieD have you factored in that about 50 per cent of the population is in some way reliant on the State? So incoming tax revenues are limited to half the population and that public sector workers are numerically huge?

The stupidity level of trade unionists is not the question. Demographics is.

ronib

MaizieD have you factored in that about 50 per cent of the population is in some way reliant on the State? So incoming tax revenues are limited to half the population and that public sector workers are numerically huge?

The stupidity level of trade unionists is not the question. Demographics is.

Frankly, I don't see what this has to do with your suggestion about Sunak's possible strategy.

I can't answer it unless you can clarify its purpose.

MaizieD the purpose of Mr Sunak sitting on his hands do you mean? Yes to avoid hyper inflation?

Hyperinflation will not be the result of giving pay rises in line with inflation. Where do you get that idea from?

But I wanted to know what was the purpose of your statements about people being reliant on the state, and taxation?

ronib

I suggest that energy costs are coming down considerably over the summer months and that this will lead to a drop in inflation. The government is just sitting on its hands over public sector pay rises and once inflation is lower, then public pay demands will be settled at much lower percentages than currently requested. I suggest…..

I’m not confident that they energy costs to the consumer will be coming down, but I do think that there will be no more roses, with a fair wind of course.

ronib

MaizieD the purpose of Mr Sunak sitting on his hands do you mean? Yes to avoid hyper inflation?

Hyperinflation is also not expected. In fact inflation is expected to gradually drop now to below 2% by 2026.

Have learnt not to believe politicians and especially since the Johnson fiasco.

Whitewavemark2

ronib

I suggest that energy costs are coming down considerably over the summer months and that this will lead to a drop in inflation. The government is just sitting on its hands over public sector pay rises and once inflation is lower, then public pay demands will be settled at much lower percentages than currently requested. I suggest…..

I’m not confident that they energy costs to the consumer will be coming down, but I do think that there will be no more roses, with a fair wind of course.

I don't think energy costs will come down, either, though the Bank of England data seems to think they will in the course of the next few years.

See their CPI forecast chart (5th one down) on Richard Murphy's blog this morning

www.taxresearch.org.uk/Blog/2023/02/03/the-uk-is-facing-economic-failure-on-a-grand-scale-and-the-bank-of-england-is-just-compounding-it/

But the current high prices to the consumer need to be compensated for now in inflation linked wage increases.

MaizieD if public sector has 19 per cent pay increase then private sector will want the same. This will further increase all prices? I understand that hyper inflation kicks in around 50 per cent? I think the Uk would be headed towards that figure… Printing money to cover this is thought to be inflationary by some economists.

I understand that population is an aging one and that some younger people are not particularly healthy. Even if about half the population is in receipt of various State provisions, and if anything I think they are at a poor level, then the remaining half of the population needs to find ways of financing this.

Yes indeed because Mr Sunak is refusing to pay 19 per cent pay increases to the public sector. It is a case of waiting for jam tomorrow but of course it is going to be a very long wait.

Last post in reply to Whitewavemark2 about 2 per cent inflation

ronib

MaizieD if public sector has 19 per cent pay increase then private sector will want the same. This will further increase all prices? I understand that hyper inflation kicks in around 50 per cent? I think the Uk would be headed towards that figure… Printing money to cover this is thought to be inflationary by some economists.

I understand that population is an aging one and that some younger people are not particularly healthy. Even if about half the population is in receipt of various State provisions, and if anything I think they are at a poor level, then the remaining half of the population needs to find ways of financing this.

You’ve missed the point ronib. The public sector need a large pay rise to catch up with the pay rises the private sector have had over the last 12 years. That’s all they are asking for.

Casdon

ronib

MaizieD if public sector has 19 per cent pay increase then private sector will want the same. This will further increase all prices? I understand that hyper inflation kicks in around 50 per cent? I think the Uk would be headed towards that figure… Printing money to cover this is thought to be inflationary by some economists.

I understand that population is an aging one and that some younger people are not particularly healthy. Even if about half the population is in receipt of various State provisions, and if anything I think they are at a poor level, then the remaining half of the population needs to find ways of financing this.

You’ve missed the point ronib. The public sector need a large pay rise to catch up with the pay rises the private sector have had over the last 12 years. That’s all they are asking for.

Yes.

My son works for a government agency and the only time he has had a pay rise as opposed to in effect a year on year pay cut because nothing keeps up with inflation - even at 2%, is when he has had promotion.

The staff are highly skilled mostly scientists with Phd, and as a result the agency is now having incredible difficulties employing the calibre of people needed. They are choosing to work elsewhere including Europe of course.

ronib

MaizieD if public sector has 19 per cent pay increase then private sector will want the same. This will further increase all prices? I understand that hyper inflation kicks in around 50 per cent? I think the Uk would be headed towards that figure… Printing money to cover this is thought to be inflationary by some economists.

I understand that population is an aging one and that some younger people are not particularly healthy. Even if about half the population is in receipt of various State provisions, and if anything I think they are at a poor level, then the remaining half of the population needs to find ways of financing this.

It's not that simple. At some stage of their lives, the majority of people are in receipt of "state provision" (including pensions, child benefit/family allowance, free prescriptions, various top up benefits). However, for most people, this changes over a lifetime. Single, childless fully employed people in good health receive the least, but that can change almost overnight, if somebody becomes unemployed or falls ill. Life is a rollercoaster for most people with times when they are net contributors and times when they receive support. Paying tax acts as a giant and complicated insurance policy against the troughs. The idea that people can be divided into givers and takers is nonsense, as is the idea that public services don't provide value and generate wealth. A first world country needs healthy and well-educated people.

Casdon I think the point is 2 .3 trillion debt. I believe that is the elephant in the room.

ronib

Casdon I think the point is 2 .3 trillion debt. I believe that is the elephant in the room.

2.3 trillion is just the public debt, including commercial and domestic debt it is nearly £8 trillion.

Whitewavemark2 PhD scientists can command salaries in excess of £120k with start ups in the Uk plus share options. I understand how you feel about your son but in fact scientists with entrepreneurial skills can become very wealthy both here and abroad.
There’s no way that the State can compete with these financial opportunities . At the end of the day, it’s a personal choice about the direction of travel.