Rather the point of having an economics editor is that they know something about economics. The Observer fails here by employing Phillip Inman.
So why, when pay growth is low everywhere except the finance industry and businesses affected by Brexit-related staff shortages, are the rest of the population being told their salary increases are so high that borrowing costs must rise?
Not only do higher mortgage costs hit millions of homebuyers, but the effects also bleed into rents, because so many landlords have bought properties with huge loans.
Higher mortgage costs do not increase rents – they reduce landlord profits instead. For the landlords are already charging every last penny they can – they’re bastard capitalists, right?
But the bigger and deeper error. Inman is moaning about City pay. And linking it to interest rates. Which is tosh, rubbish and bollocks. Higher sterling interest rates do indeed make more money for the lending books of the domestic banks. Which is, in fact, near completely toss all to do with The City. That’s retail banking, not wholesale. And yes, it is more money, rising interest rates decompress the gap between lending and deposit rates, banks will make more as rates rise.
But that retail banking, Lloyds, NatWest, then to lesser extents Barclays and HSBC – on their sterling retail lending books. Which is a trival portion of The City. The City being the wholesale financial markets for half the world. What some spiv gets paid for trading Japanese equities out of Canary Wharf has entirely fuck all to do with sterling interest rates. Equally so the partners at Magic Circle law firms and on through what The City actually does.
The City is those wholesale markets, profits in which are near entirely unaffected by sterling interest rates. So what’s the fucker talking about?
Well, what Inman is actually talking about is his ignorance. Unless he does in fact know but still makes the same complaint which is worse of course.