But what is true is that wealth is always harmed by inflation. That is the only reason it is an economic priority when seriously disruptive inflation is a virtually unknown economic problem.
Well, two interesting ideas.
The first that wealth – which is rarely in cash, usually and near entirely in assets – is hit by inflation. The assets rise in value, assets are a very good inflation hedge.
The other is that seriously disruptive inflation is a virtually unknown economic problem. Well, outside the places that follow Spud’s economic precepts – so not Venezuela or Zimbabwe – perhaps….
What astonishes is that he manages to get two such entirely contrary to reality statements into only two sentences.
I liked this statement:
‘It is true that for those on low fixed incomes, inflation is a major issue. Most of them are elderly, Reform of old age benefits could address that issue.’
He’d increase the value of the Triple Lock? Is there no limit to what MMT can do?
If wages were not just allowed but encouraged to rise in line with inflation, then most of the rest of the claim that poorer people suffer the brunt would fall away.
I thought this guy was over 60? Indeed one of his more comical posts was that he’ll still be pushing these adolescent fantasies until senility or death stop him. Either he was too stoned/pissed in the 70s to remember wage price spirals or he has an ulterior motive.
Either way he is seriously unhinged
One if my mates got married and bought a house in the late 1970s. It’s a three bedroomed semi, it cost £5,000. My house, three bedroomed semi bought in 1993 cost £39,000. I don’t know what these houses are worth now, it’s been a while since I checked, but I suspect that they have held their own. Classic cars and motorcycles seem to be quite sound things to have. With hindsight Lambrettas seem to have been the thing to buy 50 years ago when you could pick them up for next to nothing. Now there are lots of scooter enthusiasts who wouldn’t be seen dead on a Vespa and only a limited supply of Lammies.
“If benefits and wages had been allowed to rise to match and interest rates had not been raised as they clearly do not work to control infaltion what harm would have been done? Please spell it out, precisely.”
this is Murphy.. i’m speechless
I thought this guy was over 60? Indeed one of his more comical posts was that he’ll still be pushing these adolescent fantasies until senility or death stop him. Either he was too stoned/pissed in the 70s to remember wage price spirals or he has an ulterior motive.
I’m 16 months older than Spud and left school in 1972 aged 15 for an Army apprenticeship. I clearly remember the price wage spirals as we were getting pay rises every month, but that didn’t help because every time we went out to buy something the price had gone up and price rises were always way ahead of pay increases.
My father also had a pub so I was very conscious of how people were feeling about it and what they were grumbling about, a lot of the time that other workers got bigger pay rises than them so they were going on strike. The worst of it was past by around ’76.
Spud went to university so probably didn’t leave until around 1980 by which time we were once again experiencing high inflation but that felt different because Maggie refused to get in to micro management of the economy and the biggest problem was unemployment. Privatisation helped because it meant that nationalised industry unions didn’t have a Labour government to blackmail.
So my guess is Spud really doesn’t understand the pernicious effect of a wage/prices spiral.
O/T
There are many pearl-clutching reports in todays media, including on the bbc news front page, about the Justgiving appeal set up to support the met officers who have now been dismissed following their somewhat controversial traffic stop of two black athletes 3 years ago.
Within the last hour Justgiving have decided to remove all messages and comments posted by donors – 99% of which were critical of the met’s decision. I wonder if the appeal will still be live later today or more likely removed altogether.
“assets are a very good inflation hedge.” Tell that to the people, and banks, who own and fund American office blocks.
I read on a blog somewhere that equities are not a good defence from inflation. What they do, however, is pay you compensation after the inflation has passed. I suppose that boils down to equities being a hedge if you are confident that you can live long enough and hold on to them. Are you feeling lucky?
assets are a very good inflation hedge.
I’d contest that Tim. Depends why inflation.If it’s government printing money inflation, maybe. But there’s another sort of inflation, isn’t there?
The value of money, the real stuff we use ever day, not the government shit, is related to the total of the goods & services currently in the economy. It’s the production & consumption of those goods & services is commerce. (Wages from employment are for the service the employee provides to the employer. There is nothing else in any economy but goods & services.) Government fiat money’s just the token of exchange we use for convenience.
If the production of those goods & services falls there’s less of them in the economy. So markets, it will take more money to buy the same amount of goods & services. In extremis, asset owners will be wanting to sell assets to eat.
Looking at the way Net Zero plans are going to be reducing the utility of so many goods & services. (And that’s why we goods & services. For their utility. Commerce is the business of raising utility) I’d predict the production of goods & services is going to fall off a cliff. So what are assets worth?
Isn’t this the process brought the Roman Empire down? Eventually no amount of money could buy certain things because they were no longer produced.
To an extent – and only an extent – an economist would try to describe that as deflation…..
“I read on a blog somewhere that equities are not a good defence from inflation.”
Surely it depends on the individual company? A business like Tesco just takes a cut of what passes through its hands. As such it doesn’t matter if thats £100m or £1bn, as long as costs have broadly inflated by the same as the shelf prices. Which seems to be the case – the supermarkets have managed to maintain their profit margin despite rampant inflation over the last 18 months. Which many people (our host included) take to be evidence of non-profiteering. Whereas I consider that the power to maintain your profit margin in the face of rapid cost inflation suggests a considerable power to raise prices. If they didn’t have that power their margins would have been decimated.
What astonishes is that he manages to get two such entirely contrary to reality statements into only two sentences.
That’s pure hyperbole, Timmy. As you well know, Murphy only writes multiple sentences that entirely contrary to reality on days that end in “y”.
Inflation and rising home prices has turned my 200k home from a 200k debt to 100k net positive wealth;)
Only if you can sell it to someone, Agammamon. The only thing real is the price of a transaction between buyer & seller. And since the transaction the satisfies both, the price is now historic. Value is a fantasy, away with the birds.
It would depend on the sales volume, Jim. Also the gearing. Volumes are flexible but fixed costs aren’t. Margins are a percentage, of interest only to fools. What’s real is the money made. If volumes were down, profits may have been down. With people being poorer & cutting back on spending, that’s entirely possible.
Asset price inflation won’t protect wealth where capital gains tax is an issue, however, and where you are typically taxed on nominal gains. It very much depends.
O/T
The fundraising page for PC Clapham and PC Franks is still up.
https://www.justgiving.com/crowdfunding/Clapham-Franks
It says
“The support on the page has been a huge comfort to Jonny, Sam and their families. Thank you for every donation and word of support as it has genuinely made a difference.
There were so many amazing words of support, however to respect the impending Appeal; Comments have been taken down.”
I think that’s from the people who set it up, not from JustGiving.
Oh, and it also says “£90,340 raised of £50,000 target by 5176 supporters”.