Why do so when there is already a shortage of demand inside European economies, and when it is known that raising interest rates can only work as a tool to tackle inflation when there is excess demand?
And why raise interest rates when this inflation is clearly being caused by a shortage of oil, gas, fertiliser, food, and other materials, none of which will in any way be made more available by increasing interest rates?
Well Dickie, if you reduce demand then you’ve solved the shortage, haven’t you?
“And why raise interest rates when this inflation is clearly being caused by a shortage of oil, gas, fertiliser, food, and other materials,”
Good to see Spud has come round to the idea that we need to produce our own hydrocarbons, and end the Net Zero nonsense. Much joy in heaven over a single sinner that repenteth, and all that.
the mental acrobatics he will perform to conclude that increasing supply is not, in fact, the solution to a shortage will be world class.
A shortage of money would fix this, shame there obviously isn’t one.
Inflation often being the decrease in value of tokens due to adding more of them to the pool chasing the same things.
cf: “In this video, I challenge one of the most deeply embedded assumptions in modern economics: the idea that there is a shortage of money.”
Higher prices ≠inflation
These higher prices are supply and demand, not devaluation of the currency.
I’m finding it difficult to disentangle the two at the moment. Clearly there has been inflation, due to the huge increase in the money supply, particularly over lockdown. But also clearly there’s an oil price problem caused by non-monetary issues.
Since oil prices feed through into so many other things, how does one tell which is which?
The currency is always being devalued. Broad money supply figures rarely drop, and often rise dramatically and over time (1-2 year timescales) always trend upwards. The only reason it is not easily noticeable is that every fiat currency does exactly the same, so measured relative to each other the inflationary effects are hidden from the public. If there was a non-inflating currency to measure all the others against it would become blatantly obvious. One could argue the price of gold is doing that right now, but its more of an asset than a currency.
True, but some times it happens a lot faster than others.
“Broad money supply figures rarely drop”
Am I right that that isn’t inflationary so long as the increase in broad money is no more than the increase in actual output? So if the broad money stays constant relative to actual production of goods and services, then all is well.
But that’s probably one of those useless economic theories because achieving that balance is, in practice, impossible.
Indeed even having sufficiently reliable statistics to know whether you’ve achieved it is impossible (as Mr Cowperthwaite probably said).
Agreed. If only a government had sufficient self-control to constrain the growth in narrow money to less than the growth in output then the growth in broad money would grow roughly in line with output and inflation would be tolerably low,
From 1953 (excluding 1952 because hangover from Atlee lasted throughout it at decreasing intensity) to 1963 (before Wilson started) inflation of 32.8% in ten years averaged 2.88% – not perfect but bearable even for those on pension fixed in money terms. Wilson mark II – inflation from 1973 (2 months before) to 1980 (a few months after) was 153.4% – the shilling you had in your pocket at the end of the Labour government only bought as much as 4p bought before the beginning. Anyone on a fixed income was (actually or near-) destitute.
“Am I right that that isn’t inflationary so long as the increase in broad money is no more than the increase in actual output? “
In a service economy that rapidly becomes a circular argument. My haircut used to cost £10, now it costs £13. The ‘output’ of the barber has risen, GDP number go up! Yet I’m still only getting one haircut…..
The Swiss Franc used to be pretty good so rich people living in countries that continually debased their currencies tried to deposit any spare cash not needed in a very short term in Switzerland. This became a problem for the Swiss economy when it got too large and the Swiss introduced negative interest rates on bank deposits to discourage it.
Hmmm… why didn’t the Swiss just buy foreign currencies to stabilise the Swiss franc, even if they just printed the money? Seems like a plan. Much like the Norwegian sovereign wealth fund.
They have done exactly that. In great volume too. The Swiss N Bank has a truly, truly, weird balance sheet at times.
My non-inflating-base-currency is the loaf of bread. 30 years ago I could get 4 Loafs per Pound, now it’s 0.5 Loafs per Pound. That’s about 8% inflation per year.
Off topic – I see that Spud has finally commented on the Henry Nowak case. Not on the case itself, other than to excuse the actions of the police, but on last night’s protests in Southampton.
He really is a slimy, nauseating c*nt.