NPR

JM2K6 wrote: ↑Thu Jun 22, 2023 1:12 pm

Sandstorm wrote: ↑Thu Jun 22, 2023 12:39 pm

Insane_Homer wrote: ↑Thu Jun 22, 2023 12:20 pm

In our current scenario, the inflation is not consumer-driven it's almost entirely driven by energy prices. (Gas, Elec and Petrol) - all of which dampens consumer spending, but it increased the costs of almost every company, who in turn raise their prices (cost-driven inflation, not consumer-led, demand-driven inflation) on almost all consumer goods ( significant increased cost of production & cost of delivery get passed along).

I understand this is happening and why....however supermarkets are talking the piss!!

1 litre Olive Oil at Tesco:

Jan 2021 - £1.90
Jun 2023 - £6.00

Fuck. Off.

Probably not a good example:

https://www.thegrocer.co.uk/commodities ... 06.article

I did not know that. Thank-you, I will tell the wife to stop whinging when I use it liberally on my soda bread.

Biffer wrote: ↑Thu Jun 22, 2023 1:00 pm

dpedin wrote: ↑Thu Jun 22, 2023 11:58 am

_Os_ wrote: ↑Thu Jun 22, 2023 11:53 am
The BoE's aim seems to be a recession to lower inflation. There's no consideration that using the old model may not be working. The UK currently has stagnant wages and millions of job vacancies, the textbooks say this is impossible (basic supply and demand, if there's not enough supply to meet demand then the price should go up, if someone believes only the market sets the price that is which as Tichtheid says isn't always true). I have no clue if a recession and high inflation is possible, but a recession looks probable and inflation isn't moving much.

Agree with Os analysis 100%. The Gov and BoE are driving the middle classes into the ground, the Gov have already Done that to the poorer working classes.

That's genuinely the point. Reduce the amount of disposable income so demand comes out of the market and prices stop rising. It's not hidden, it's the actual policy, as written in hundreds of economics text books for decades.

In the last 9 months I have seen several families move from houses they have borrowed heavily on and extended up and out to ridiculous levels because debt was cheap. They are now back in houses similar to where they were 10+ years ago and still have painful mortgages. The leased Merc has gone too, replaced with 2nd hand Kia/Nissan.

They have learnt some very painful lessons, but are probably ahead of the game now.

Am I wrong or weren't interest rates being pegged low to the extent of being effectively negative in a bid to stimulate the construction trade ( along with easing planning restrictions )? Inevitably the amount of borrowing must have increased sharply - and even now the amount of building work on new homes (apartment blocks here mainly) as well as loft conversions, extensions etc is at a level I've never seen.

At least a good proportion of borrowers seemed to get fixed rate mortgage deals, but the risk was always there for those on variable rates that things could go tits up badly and good things can't last. Second half of 2021 saw the base rate start to climb and of course the epic fail that was Truss/Kwarteng made it worse.

Sandstorm wrote: ↑Thu Jun 22, 2023 2:01 pm I did not know that. Thank-you, I will tell the wife to stop whinging when I use it liberally on her sofa beard.

Fixed

Sandstorm wrote: ↑Thu Jun 22, 2023 12:39 pm

Insane_Homer wrote: ↑Thu Jun 22, 2023 12:20 pm

In our current scenario, the inflation is not consumer-driven it's almost entirely driven by energy prices. (Gas, Elec and Petrol) - all of which dampens consumer spending, but it increased the costs of almost every company, who in turn raise their prices (cost-driven inflation, not consumer-led, demand-driven inflation) on almost all consumer goods ( significant increased cost of production & cost of delivery get passed along).

I understand this is happening and why....however supermarkets are talking the piss!!

1 litre Olive Oil at Tesco:

Jan 2021 - £1.90
Jun 2023 - £6.00

Fuck. Off.

Serves you right for shopping at Tesco, you awful Oink.

tabascoboy wrote: ↑Thu Jun 22, 2023 3:05 pm Am I wrong or weren't interest rates being pegged low to the extent of being effectively negative in a bid to stimulate the construction trade ( along with easing planning restrictions )? Inevitably the amount of borrowing must have increased sharply - and even now the amount of building work on new homes (apartment blocks here mainly) as well as loft conversions, extensions etc is at a level I've never seen.

At least a good proportion of borrowers seemed to get fixed rate mortgage deals, but the risk was always there for those on variable rates that things could go tits up badly and good things can't last. Second half of 2021 saw the base rate start to climb and of course the epic fail that was Truss/Kwarteng made it worse.

There's the whole thing with headline inflation figures having housing costs removed as well. Deliberately done to stop the bank having to raise interest rates and so they could pretend there wasn't a part of the economy that was overheating.

Biffer wrote: ↑Thu Jun 22, 2023 1:00 pm

dpedin wrote: ↑Thu Jun 22, 2023 11:58 am

_Os_ wrote: ↑Thu Jun 22, 2023 11:53 am
The BoE's aim seems to be a recession to lower inflation. There's no consideration that using the old model may not be working. The UK currently has stagnant wages and millions of job vacancies, the textbooks say this is impossible (basic supply and demand, if there's not enough supply to meet demand then the price should go up, if someone believes only the market sets the price that is which as Tichtheid says isn't always true). I have no clue if a recession and high inflation is possible, but a recession looks probable and inflation isn't moving much.

Agree with Os analysis 100%. The Gov and BoE are driving the middle classes into the ground, the Gov have already Done that to the poorer working classes.

That's genuinely the point. Reduce the amount of disposable income so demand comes out of the market and prices stop rising. It's not hidden, it's the actual policy, as written in hundreds of economics text books for decades.

Assumes functioning competitive markets or failing that well regulated markets. Is it beneficial to increase rates due to costs of an essential thing like food where the demand is less elastic? Prices are falling in many areas most importantly in energy though not always being past on to us. With food supply it will probably get better over time when we get better harvests (the UK's choice to damage parts of its own agricultural sector with brexit is a very special way of contributing to lowering supply) and once Ukraine stabilises (as it was a major grain supplier). Of course that will be proof of the success of increasing rates rather than just accepting in certain instances there is bugger all you can do and it came down on its own. Increasing interest rates seems like a blunt instrument.

According to MMTers all the Treasury needs to do now is ramp up taxes which will effortlessly control inflation.

Slick wrote: ↑Thu Jun 22, 2023 3:40 pm

Sandstorm wrote: ↑Thu Jun 22, 2023 12:39 pm

Insane_Homer wrote: ↑Thu Jun 22, 2023 12:20 pm

In our current scenario, the inflation is not consumer-driven it's almost entirely driven by energy prices. (Gas, Elec and Petrol) - all of which dampens consumer spending, but it increased the costs of almost every company, who in turn raise their prices (cost-driven inflation, not consumer-led, demand-driven inflation) on almost all consumer goods ( significant increased cost of production & cost of delivery get passed along).

I understand this is happening and why....however supermarkets are talking the piss!!

1 litre Olive Oil at Tesco:

Jan 2021 - £1.90
Jun 2023 - £6.00

Fuck. Off.

Serves you right for shopping at Tesco, you awful Oink.

Give me Valvona & Crolla or give me death


edit, I just checked their prices - you can pay forty quid for a 75cl bottle of Olive Oil in V&C.

Biffer wrote: ↑Thu Jun 22, 2023 1:00 pm

dpedin wrote: ↑Thu Jun 22, 2023 11:58 am

_Os_ wrote: ↑Thu Jun 22, 2023 11:53 am
The BoE's aim seems to be a recession to lower inflation. There's no consideration that using the old model may not be working. The UK currently has stagnant wages and millions of job vacancies, the textbooks say this is impossible (basic supply and demand, if there's not enough supply to meet demand then the price should go up, if someone believes only the market sets the price that is which as Tichtheid says isn't always true). I have no clue if a recession and high inflation is possible, but a recession looks probable and inflation isn't moving much.

Agree with Os analysis 100%. The Gov and BoE are driving the middle classes into the ground, the Gov have already Done that to the poorer working classes.

That's genuinely the point. Reduce the amount of disposable income so demand comes out of the market and prices stop rising. It's not hidden, it's the actual policy, as written in hundreds of economics text books for decades.

Yes. But they don't seem to have thought through what inducing a recession means. Significant interest rate rises have now been going a year, yet inflation isn't moving, if everything they thought was true actually was true then this shouldn't be happening. They have no convincing explanation of why core inflation is rising (my guess is it's the interest rate rises themselves, due to the amount of financialisation/debt in the economy). They're going to keep going with what the textbooks say, giving up on their beliefs is more scary to them than playing it as they see it and looking at all the facts (as per my previous post, economics is more ideological than many economists admit).

So that means a recession they imagine they can control. But when you look at some of the facts, it looks potentially very uncontrollable, one of my old posts:

_Os_ wrote: ↑Sat May 27, 2023 1:54 pm UK housing stock is valued at about £9tn.
Residential mortgages are around half (majority?) of loans in the UK financial system. Some banks have well over 50% of their loan book made up of residential mortgage debt.
Lloyds alone has about a third of a trillion of outstanding UK mortgage debt on its books, about £50bn of that buy to let.
Help To Buy is about £30bn of loans, and is all highly exposed to any collapse.
Pension funds are invested in property through real estate investment trusts, which enabled them to invest into large tranches of property. Not sure about the numbers here.

Something that should be just another uninteresting commodity, has been turned into an financial asset an entire nation is completely obsessed by. People have poured their entire life's work into property, they've used it for saving/pension/inheritance. The property market has become a proxy for the UK economy. Madness but that's the situation. If it collapses (and interests rates over 5% is a good place to start) the damage is going to be everywhere.

I've since discovered more that can be added to the list, things people don't consider which are directly linked to interest rates:

Around 30% of cars are leased, debt directly linked to interest rates, this market is worth £16.3bn.
Privatised water companies in England have built up large debts (around £50bn), around 20% of customer bills goes towards debt servicing. Thames Water has £13bn of debt, it spends £400m on debt servicing from a revenue of £2bn. United Utilities has a debt of £7.6bn, and also spends about £400m servicing debt from annual revenue of about £2bn. The debt to capital value ratio is around/above 60% in water companies. Northumbrian Water and Wessex Water are both geared to near 70%.

I'm not sure it has been fully considered what committing to interest rate rises until there's a recession could do.

_Os_ wrote: ↑Thu Jun 22, 2023 7:43 pm

Biffer wrote: ↑Thu Jun 22, 2023 1:00 pm

dpedin wrote: ↑Thu Jun 22, 2023 11:58 am

Agree with Os analysis 100%. The Gov and BoE are driving the middle classes into the ground, the Gov have already Done that to the poorer working classes.

That's genuinely the point. Reduce the amount of disposable income so demand comes out of the market and prices stop rising. It's not hidden, it's the actual policy, as written in hundreds of economics text books for decades.

Yes. But they don't seem to have thought through what inducing a recession means. Significant interest rate rises have now been going a year, yet inflation isn't moving, if everything they thought was true actually was true then this shouldn't be happening. They have no convincing explanation of why core inflation is rising (my guess is it's the interest rate rises themselves, due to the amount of financialisation/debt in the economy). They're going to keep going with what the textbooks say, giving up on their beliefs is more scary to them than playing it as they see and looking at all the facts (as per my previous post, economics is more ideological than many economists admit).

So that means a recession they imagine they can control. But when you look at some of the facts, it looks potentially very uncontrollable, one of my old posts:

_Os_ wrote: ↑Sat May 27, 2023 1:54 pm UK housing stock is valued at about £9tn.
Residential mortgages are around half (majority?) of loans in the UK financial system. Some banks have well over 50% of their loan book made up of residential mortgage debt.
Lloyds alone has about a third of a trillion of outstanding UK mortgage debt on its books, about £50bn of that buy to let.
Help To Buy is about £30bn of loans, and is all highly exposed to any collapse.
Pension funds are invested in property through real estate investment trusts, which enabled them to invest into large tranches of property. Not sure about the numbers here.

Something that should be just another uninteresting commodity, has been turned into an financial asset an entire nation is completely obsessed by. People have poured their entire life's work into property, they've used it for saving/pension/inheritance. The property market has become a proxy for the UK economy. Madness but that's the situation. If it collapses (and interests rates over 5% is a good place to start) the damage is going to be everywhere.

I've since discovered more that can be added to the list, things people don't consider which are directly linked to interest rates:

Around 30% of cars are leased, debt directly linked to interest rates, this market is worth £16.3bn.
Privatised water companies in England have built up large debts (around £50bn), around 20% of customer bills goes towards debt servicing. Thames Water has £13bn of debt, it spends £400m on debt servicing from a revenue of £2bn. United Utilities has a debt of £7.6bn, and also spends about £400m servicing debt from annual revenue of about £2bn. The debt to capital value ratio is around/above 60% in water companies. Northumbrian Water and Wessex Water are both geared to near 70%.

I'm not sure it has been fully considered what committing to interest rate rises until there's a recession could do.

Are small UK businesses like the Irish ones before the GFC, i.e. all leveraged out the wazoo, because they used their imaginary property values to expand & make themselves ultra sensitive to interest rate changes, or D/L ratios, or dog forbid a drop in the imaginary value of their premises ?

fishfoodie wrote: ↑Thu Jun 22, 2023 8:05 pm Are small UK businesses like the Irish ones before the GFC, i.e. all leveraged out the wazoo, because they used their imaginary property values to expand & make themselves ultra sensitive to interest rate changes, or D/L ratios, or dog forbid a drop in the imaginary value of their premises ?

Depends on the business. Tradesmen will own all the tools they regularly use and may own the van (if it's old it's owned). A lot of sole trader type businesses don't require much capital investment, unless that person has grand ambitions/delusions of being much larger.

Businesses that need to scale/take on employees/invest in capital equipment, to get anywhere (not some grand empire, just survival) are different, and in my experience in the UK need to take on a huge amount of debt close to the outset of the venture to compete with rivals that do take on debt. If they don't take on huge debts then they will first fail to fully compete and then fail in absolute terms. Banks always want collateral, even from a ltd with some small cashflow, which means the house. The premises will be rented, so that again exposes them to interest linked debt, because you can be sure landlords will only go under after everyone else does.

I'm sure there's businesses out there which hit it out of the park when they were in backrooms/bedrooms/garages and never took on any debt, I just don't know any. if you're starting say a franchise fast food place in a not great area of a city you're going to need £250k, anything in the creative/tech industry even for a very small operation and you're looking at much more than that.

Probably need to do some research and put some hard numbers on that for SMEs generally, but that's my experience.

fishfoodie wrote: ↑Thu Jun 22, 2023 8:05 pm

_Os_ wrote: ↑Thu Jun 22, 2023 7:43 pm

Biffer wrote: ↑Thu Jun 22, 2023 1:00 pm

That's genuinely the point. Reduce the amount of disposable income so demand comes out of the market and prices stop rising. It's not hidden, it's the actual policy, as written in hundreds of economics text books for decades.

Yes. But they don't seem to have thought through what inducing a recession means. Significant interest rate rises have now been going a year, yet inflation isn't moving, if everything they thought was true actually was true then this shouldn't be happening. They have no convincing explanation of why core inflation is rising (my guess is it's the interest rate rises themselves, due to the amount of financialisation/debt in the economy). They're going to keep going with what the textbooks say, giving up on their beliefs is more scary to them than playing it as they see and looking at all the facts (as per my previous post, economics is more ideological than many economists admit).

So that means a recession they imagine they can control. But when you look at some of the facts, it looks potentially very uncontrollable, one of my old posts:

_Os_ wrote: ↑Sat May 27, 2023 1:54 pm UK housing stock is valued at about £9tn.
Residential mortgages are around half (majority?) of loans in the UK financial system. Some banks have well over 50% of their loan book made up of residential mortgage debt.
Lloyds alone has about a third of a trillion of outstanding UK mortgage debt on its books, about £50bn of that buy to let.
Help To Buy is about £30bn of loans, and is all highly exposed to any collapse.
Pension funds are invested in property through real estate investment trusts, which enabled them to invest into large tranches of property. Not sure about the numbers here.

Something that should be just another uninteresting commodity, has been turned into an financial asset an entire nation is completely obsessed by. People have poured their entire life's work into property, they've used it for saving/pension/inheritance. The property market has become a proxy for the UK economy. Madness but that's the situation. If it collapses (and interests rates over 5% is a good place to start) the damage is going to be everywhere.

I've since discovered more that can be added to the list, things people don't consider which are directly linked to interest rates:

Around 30% of cars are leased, debt directly linked to interest rates, this market is worth £16.3bn.
Privatised water companies in England have built up large debts (around £50bn), around 20% of customer bills goes towards debt servicing. Thames Water has £13bn of debt, it spends £400m on debt servicing from a revenue of £2bn. United Utilities has a debt of £7.6bn, and also spends about £400m servicing debt from annual revenue of about £2bn. The debt to capital value ratio is around/above 60% in water companies. Northumbrian Water and Wessex Water are both geared to near 70%.

I'm not sure it has been fully considered what committing to interest rate rises until there's a recession could do.

Are small UK businesses like the Irish ones before the GFC, i.e. all leveraged out the wazoo, because they used their imaginary property values to expand & make themselves ultra sensitive to interest rate changes, or D/L ratios, or dog forbid a drop in the imaginary value of their premises ?

Most I know lease their premises so whilst their exposure to interest rates etc isn’t zero it isn’t as large as it could be. For small businesses in a really bad recession the issue will more be personal guarantees given over their own houses than anything directly related to commercial property.

Thanks Gents !

The classic case in Ireland was someone who had their home, & a Pub, & maybe a BTL or two, & used the valuations of these to expand sideways, & left themselves open to losing everything but the family home, when it all went South.

The other case I heard a couple of times were construction contractors; in one case it was a guy who heavily invested in new & more heavy equipment, & when the arse fell out of building, lost the lot because he couldn't make the payments. It was a awful situation, with it being a multi-generation business, & ended in the worst way imaginable

My families experience in the 80s shaped me with an absolute personal prohibition on getting into debt; I'm afraid a whole new generation is going to go thru the same experience.

_Os_ wrote: ↑Thu Jun 22, 2023 7:43 pm They have no convincing explanation of why core inflation is rising (my guess is it's the interest rate rises themselves, due to the amount of financialisation/debt in the economy).

Looks like you're of the Erdoğan school of economics which is considered, let's say "unorthodox" to put it mildly - this line of thinking has basically bankrupted Turkey.

Even after today's rise BoE interest rates remain significantly below their 40 year average. The last few years of super-low interest rates are the historical anomaly even though people seem to think that cheap money was the new "normal". Sure enough, as predicted by classical economics and the "economic textbooks" you seem so dismissive of, these years of increased money supply have eventually resulted in inflation because the economy isn't growing fast enough to absorb it.

No economic theory predict an instantaneous responses to interest rate rises you seem to expect. Economies do not consist of simple on/off switches, taming inflation is usually a multi-year process. Interest rate rise primarily affect future spending patterns - so take a while to have any affect at all. Generally the US Fed spends years raising rates (and in later cycles, years lowering them) - this is typcially the times scales at which these things work.

derriz wrote: ↑Thu Jun 22, 2023 11:07 pm Looks like you're of the Erdoğan school of economics which is considered, let's say "unorthodox" to put it mildly - this line of thinking has basically bankrupted Turkey.

I have no clue about Turkey's economy. How much private debt did they have relative to incomes? Average house price to median income etc, of those actually engaging meaningfully in the economy (in developing economies a large segment of the population isn't engaging much in the economy and distort broad averages downwards). I'm not hopeful I'm going to agree with some dictator guy on much.

derriz wrote: ↑Thu Jun 22, 2023 11:07 pm Even after today's rise BoE interest rates remain significantly below their 40 year average. The last few years of super-low interest rates are the historical anomaly even though people seem to think that cheap money was the new "normal". Sure enough, as predicted by classical economics and the "economic textbooks" you seem so dismissive of, these years of increased money supply have eventually resulted in inflation because the economy isn't growing fast enough to absorb it.

The historic average is 5%-7%, but the level of debt is much higher than average. So in real terms interest rates aren't below the average at all.

Why did the historical anomaly of near 0% (and below zero in real terms) interest rates come about? Could it be that the financialisation of the UK economy under Thatcherism failed in 2008 (as did the neoliberal system more widely in the developed world, but especially in the UK and US which went further than most, the UK doing it without the scale of the US and with a welfare state), and the low interest rates were a response to the failure of the system, in an attempt to get some growth (but not change the system). Because that's what happened. It's why those two countries have been hit the hardest by populism too.

First the plan was to privatise everything. Then the plan was free money for a decade and half. And then the plan is to crush everyone that accepted the free money, which will end up hitting everyone. There is no plan and this is a failed system, that is the orthodoxy.

Why is there no growth, and what role do you think the state plays in creating it? Are things like education and health funded by the government costs or are they really investments made by the government into the economy? The former view has dominated the UK since Thatcher and is the logic of austerity too. You see the increased money supply as the problem, not the lack of government spending and resulting stagnant growth since 2008. If I'm Erdogan, you're John Redwood.

derriz wrote: ↑Thu Jun 22, 2023 11:07 pm No economic theory predict an instantaneous responses to interest rate rises you seem to expect. Economies do not consist of simple on/off switches, taming inflation is usually a multi-year process. Interest rate rise primarily affect future spending patterns - so take a while to have any affect at all. Generally the US Fed spends years raising rates (and in later cycles, years lowering them) - this is typcially the times scales at which these things work.

How long has the UK be raising interest rates again, and what were the forecasts for mid 2023 this time last year?

_Os_ wrote: ↑Thu Jun 22, 2023 11:32 pm How long has the UK be raising interest rates again, and what were the forecasts for mid 2023 this time last year?

Or as I saw someone point out; they raised interest rates by 5%, & brought down inflation by -1%

What is the rest of, The Plan ?

What do they say about doing the same thing again, & again & expecting different results ..... ?

fishfoodie wrote: ↑Thu Jun 22, 2023 9:53 pm Thanks Gents !

The classic case in Ireland was someone who had their home, & a Pub, & maybe a BTL or two, & used the valuations of these to expand sideways, & left themselves open to losing everything but the family home, when it all went South.

The other case I heard a couple of times were construction contractors; in one case it was a guy who heavily invested in new & more heavy equipment, & when the arse fell out of building, lost the lot because he couldn't make the payments. It was a awful situation, with it being a multi-generation business, & ended in the worst way imaginable

My families experience in the 80s shaped me with an absolute personal prohibition on getting into debt; I'm afraid a whole new generation is going to go thru the same experience.

It's an interesting one - atm British business are notorious under-investors, so a lot of what you're describing may happen in some isolated cases but is unlikely to be structural. Where debt sits in our economy is much more on the personal level - mortgages for a lot will get very tight, student debt won't bankrupt people but just keeps going up, and unsecured loans/credit card debt for a staggering amount of people and a staggering amount of money.

Paddington Bear wrote: ↑Fri Jun 23, 2023 8:22 am

fishfoodie wrote: ↑Thu Jun 22, 2023 9:53 pm Thanks Gents !

The classic case in Ireland was someone who had their home, & a Pub, & maybe a BTL or two, & used the valuations of these to expand sideways, & left themselves open to losing everything but the family home, when it all went South.

The other case I heard a couple of times were construction contractors; in one case it was a guy who heavily invested in new & more heavy equipment, & when the arse fell out of building, lost the lot because he couldn't make the payments. It was a awful situation, with it being a multi-generation business, & ended in the worst way imaginable

My families experience in the 80s shaped me with an absolute personal prohibition on getting into debt; I'm afraid a whole new generation is going to go thru the same experience.

It's an interesting one - atm British business are notorious under-investors, so a lot of what you're describing may happen in some isolated cases but is unlikely to be structural. Where debt sits in our economy is much more on the personal level - mortgages for a lot will get very tight, student debt won't bankrupt people but just keeps going up, and unsecured loans/credit card debt for a staggering amount of people and a staggering amount of money.

There must be a whole load of people who got into buy-to-let who will end up struggling when debt isn't absurdly cheap. I've still got my flat in the UK that I rent out and it only makes sense because the mortgage is relatively small.

tc27 wrote: ↑Thu Jun 22, 2023 5:21 pm According to MMTers all the Treasury needs to do now is ramp up taxes which will effortlessly control inflation.

I guess that means less disposable income which leads reduced demand so prices stop going up. Sounds familiar. Nobody takes MMTers seriously.

robmatic wrote: ↑Fri Jun 23, 2023 8:44 am

Paddington Bear wrote: ↑Fri Jun 23, 2023 8:22 am

fishfoodie wrote: ↑Thu Jun 22, 2023 9:53 pm Thanks Gents !

The classic case in Ireland was someone who had their home, & a Pub, & maybe a BTL or two, & used the valuations of these to expand sideways, & left themselves open to losing everything but the family home, when it all went South.

The other case I heard a couple of times were construction contractors; in one case it was a guy who heavily invested in new & more heavy equipment, & when the arse fell out of building, lost the lot because he couldn't make the payments. It was a awful situation, with it being a multi-generation business, & ended in the worst way imaginable

My families experience in the 80s shaped me with an absolute personal prohibition on getting into debt; I'm afraid a whole new generation is going to go thru the same experience.

It's an interesting one - atm British business are notorious under-investors, so a lot of what you're describing may happen in some isolated cases but is unlikely to be structural. Where debt sits in our economy is much more on the personal level - mortgages for a lot will get very tight, student debt won't bankrupt people but just keeps going up, and unsecured loans/credit card debt for a staggering amount of people and a staggering amount of money.

There must be a whole load of people who got into buy-to-let who will end up struggling when debt isn't absurdly cheap. I've still got my flat in the UK that I rent out and it only makes sense because the mortgage is relatively small.

BTL definitely in trouble, I don’t count them as businesses though

Still as delusional as ever!!!

Paddington Bear wrote: ↑Fri Jun 23, 2023 11:33 am

robmatic wrote: ↑Fri Jun 23, 2023 8:44 am

Paddington Bear wrote: ↑Fri Jun 23, 2023 8:22 am

It's an interesting one - atm British business are notorious under-investors, so a lot of what you're describing may happen in some isolated cases but is unlikely to be structural. Where debt sits in our economy is much more on the personal level - mortgages for a lot will get very tight, student debt won't bankrupt people but just keeps going up, and unsecured loans/credit card debt for a staggering amount of people and a staggering amount of money.

There must be a whole load of people who got into buy-to-let who will end up struggling when debt isn't absurdly cheap. I've still got my flat in the UK that I rent out and it only makes sense because the mortgage is relatively small.

BTL definitely in trouble, I don’t count them as businesses though

I still don't quite understand how BTL to works, especially with properties that you are only allowed to buy as BTL. Why not let people who actually want to live in them buy them?

There's talk of the government offering mortgage support to home owners. Nice if they do it. But unlikely.
However they'll probably offer it to BTL owners too - should only be available on first home.

We're already seeing BTL owners raising the rent to meet the increased mortgage costs & renters are being priced out.
It's going to be a UK property bloodbath in a minute.

Well with the prospect of what they see as their core voters getting pissed off, they moved...but is it enough?

Mortgages: Banks offer more flexibility to struggling borrowers

Banks and building societies will offer more flexibility to struggling mortgage-holders as rates soar. The move comes after bank bosses met the chancellor, Jeremy Hunt, in Downing Street on Friday.

Borrowers will be able to make a temporary change to their mortgage terms, then will be able to return to their original deal within six months. This would allow some to have lower repayments for a short time, by just paying the interest on the home loan.

Mr Hunt said the temporary flexibility on switching terms would not affect credit scores. However, it will still be the case that missing payments or taking a total break on payments, known as a mortgage holiday, will still harm someone's ability to borrow in the future. Lenders also agreed to a 12-month delay before taking repossession proceedings against borrowers unable, or unwilling, to pay over the long term.

Bank chief executives described it as a "productive" meeting as they left Downing Street.

Earlier this week, the Labour Party issued a five point plan which it said would ease what it called "the Tory mortgage penalty" and help limit repossessions. Labour said the typical British household was paying £1,000 more in mortgage payments than neighbours in Germany, France, the Netherlands and Ireland.

The meeting between lenders and Mr Hunt comes after Thursday's shock decision by the Bank of England to raise interest rates to 5%, up from 4.5%, as it tries to tackle inflation.

Millions of UK households will see their budgets squeezed as a result.

Some, including the National Residential Landlords Association (NRLA), are calling for government action, such as the reintroduction of mortgage interest relief and the unfreezing of housing benefit rates.

The NRLA warned that interest rates of 5% could force landlords to sell 735,000 rental properties which it said would "exacerbate the ongoing supply and demand crisis across the private rented sector".

But Mr Hunt and Prime Minister Rishi Sunak have dismissed suggestions that the government should step in, arguing providing support for borrowers could undermine the Bank of England's battle against inflation. Figures released on Wednesday showed remained stuck at 8.7% in May.

After the interest rate rise was announced, Mr Sunak said the government would remain "steadfast and stick to its plan" to bring down inflation.

https://www.bbc.co.uk/news/business-65990833

On a positive note, if you die in debt then it can only be discharged in so far as you have assets to settle the bill.

Your beneficiaries will get nothing, but they won't inherit the consequences of your profligate, spendthrift ways.

Sandstorm wrote: ↑Fri Jun 23, 2023 12:05 pm There's talk of the government offering mortgage support to home owners. Nice if they do it. But unlikely.
However they'll probably offer it to BTL owners too - should only be available on first home.

I doubt it, unless there's the possibility of s systemic risk (too big to fail), which seems unlikely. Anyone that geared too high is fucked.

Sandstorm wrote: ↑Fri Jun 23, 2023 12:05 pm We're already seeing BTL owners raising the rent to meet the increased mortgage costs & renters are being priced out.

That was happening a year ago already, the renter cuts back on everything else to keep a roof over their head. The phase we're in now is the renter starts demanding a pay rise from their employer.

Raising interest rates should make businesses without debt more competitive. It doesn't work so well when every business has huge debts and are passing on the higher debt servicing costs in the form of higher prices. In the private rental sector there is no cheaper alternative a renter can move to. Any landlord that goes under, means there's less supply whilst demand remains the same (or increases depending on location).

It's a similar story in retail, if a supermarket has undergone debt funded expansion rising interest rates is another factor that's going to go into the cost of the food it sells (above Brexit supply chain issues, and Ukraine/fuel). Which is why ASDA isn't as cheap as it was, it has huge debts (north of £6bn), tellingly ASDA is hardly the most expensive supermarket despite this (ie it's still competitive on price, because others are also carrying huge debt like Morrisons).

This is missed even by those who are extremely critical of the Tories and the BoE, like Blanchflower:
https://sites.dartmouth.edu/blanchflowe ... t-they-do/
They don't mention the debt factor and instead focus on inflation being supply side so supressing demand doesn't do anything.

Mr SportsDirect might be regretting the takeover fever he's had the last few years.

fishfoodie wrote: ↑Thu Jun 22, 2023 11:42 pm

_Os_ wrote: ↑Thu Jun 22, 2023 11:32 pm How long has the UK be raising interest rates again, and what were the forecasts for mid 2023 this time last year?

Or as I saw someone point out; they raised interest rates by 5%, & brought down inflation by -1%

What is the rest of, The Plan ?

What do they say about doing the same thing again, & again & expecting different results ..... ?

I'm always tickled by the way people can convince themselves that entire fields of scientific/academic consensus are bullshit IF the the consensus is at odds with their political views.

On the right, you have outright dismissal of climate science and evolutionary biology, and on the left economics. Both sides often scoff at the others' tendency to ignore expertise/scientific consensus.

By swapping two words, we get the mirror image:

Or as I saw someone point out; they introduced a lockdown, & brought down death by covid by -1%

What is the rest of, The Plan ?

What do they say about doing the same thing again, & again & expecting different results ..... ?

The kind of shallow "analysis" which will have those on the same political side as you nodding in agreement but will irritate the "other". It just a waste of words.

Back to the subject at hand, anyone is claiming that all economists (regardless of political views) are wrong and that raising interest rates is causing inflation, is no better than others claiming that CO2 in the atmosphere doesn't warm the planet.

derriz wrote: ↑Sat Jun 24, 2023 6:58 am

fishfoodie wrote: ↑Thu Jun 22, 2023 11:42 pm

_Os_ wrote: ↑Thu Jun 22, 2023 11:32 pm How long has the UK be raising interest rates again, and what were the forecasts for mid 2023 this time last year?

Or as I saw someone point out; they raised interest rates by 5%, & brought down inflation by -1%

What is the rest of, The Plan ?

What do they say about doing the same thing again, & again & expecting different results ..... ?

I'm always tickled by the way people can convince themselves that entire fields of scientific/academic consensus are bullshit IF the the consensus is at odds with their political views.

On the right, you have outright dismissal of climate science and evolutionary biology, and on the left economics. Both sides often scoff at the others' tendency to ignore expertise/scientific consensus.

By swapping two words, we get the mirror image:

Or as I saw someone point out; they introduced a lockdown, & brought down death by covid by -1%

What is the rest of, The Plan ?

What do they say about doing the same thing again, & again & expecting different results ..... ?

The kind of shallow "analysis" which will have those on the same political side as you nodding in agreement but will irritate the "other". It just a waste of words.

Back to the subject at hand, anyone is claiming that all economists (regardless of political views) are wrong and that raising interest rates is causing inflation, is no better than others claiming that CO2 in the atmosphere doesn't warm the planet.

Economics is not a science.

Biffer wrote: ↑Sat Jun 24, 2023 8:02 am

derriz wrote: ↑Sat Jun 24, 2023 6:58 am I'm always tickled by the way people can convince themselves that entire fields of scientific/academic consensus are bullshit IF the the consensus is at odds with their political views.

Back to the subject at hand, anyone is claiming that all economists (regardless of political views) are wrong and that raising interest rates is causing inflation, is no better than others claiming that CO2 in the atmosphere doesn't warm the planet.

Economics is not a science.

Exactly. It is a choice if investment is made by the government into infrastructure/schools/hospitals, or austerity is implemented and that choice is informed by ideology, not some neutral value set that exists above politics. The current consensus emerged at the end of the 1970s, in the UK's case with Thatcher, which should be enough to tell you it's ideological (was it good or bad to run down the UK's manufacturing sector and concentrate more economic activity in London?).

Keynes says you increase the deficit and invest into the economy (infrastructure etc) during economic downturns and target employment and stable wages, and during upturns you raise taxes to prevent inflation. Neoliberals (like George Osborne) say you do the opposite, during downturns you reduce the deficit and implement austerity and you stimulate the economy through low taxes and interest rates, during upturns you cut taxes (there seems to be no condition when they favour higher taxes?) and use interest rate rises to prevent inflation. One is more about employment/wages, the other is more about inflation/interest rates. Which one is right? Because what we're being told is one is correct for all of the rest of history because of the 1970s/1980s. Osborne now argues austerity prepared the UK for the pandemic, whilst Mazzucato says austerity meant under investment in the UK economy higher debt and lower GDP, which is right?

What economists try to do is model extremely complex interactions between people. When people start doing things outside the model (it being normal to have £200k+ of debt at some ridiculous multiple of salary, was outside anyone's model when the neoliberal consensus was formed), the model starts failing. It's really easy to find academics at odds with the consensus on inflation/interest rates:

"This would make cost-push effects more relevant when the interest rate differential (IRD) is larger and longer-lasting. The new model accounts for cost-push effects and suggests that a persistent higher IRD can evoke multiple responses, including currency depreciation, specialization, inflation, and wage drift. The model suggests that excessive long-lasting IRD can spark a chronic interaction between inflation and currency depreciation. "
https://www.tandfonline.com/doi/full/10 ... 20.1795526
"I also showed that while interest rate rules work well to keep inflation low in a low-inflation regime, getting inflation down from high levels to low levels is a transition issue which raises other concerns. For such transitions, the role of quantitative instruments such as the money supply or the monetary base is crucial because the interest rates in a high inflation regime are hard to interpret."
https://www.tandfonline.com/doi/full/10 ... 19.1565396
"We show that the cost channel adds significantly to the explanation of inflation dynamics in forward-looking sticky-price models for the US, the UK, and the Euro area"
https://www.sciencedirect.com/science/a ... 8907002308
A Nobel winner saying inflation targeting is a "crude recipe is based on little economic theory or empirical evidence; there is no reason to expect that regardless of the source of inflation, the best response is to increase interest rates":
https://web.archive.org/web/20180413021 ... geting.pdf


... derriz is correct cost-push is dismissed by the consensus and isn't in the textbooks, because it was shown to be wrong in the 1970s/1980s. But the key part of that sentence is "in the 1970s/1980s". It seems to me if it's correct or not depends entirely on if there's much costs to push on.

You can tell this is all ideological because one consensus is replaced by another when the previous one fails, which up until that point most supported (if you argued against austerity in the UK in the early 2010s you would've been very lonely). It's not like the science of the natural world where descriptions of reality are only replaced by better descriptions of that same reality. Instead whatever works, which is entirely contingent on the passing conditions, comes out on top.

Biffer wrote: ↑Sat Jun 24, 2023 8:02 am

derriz wrote: ↑Sat Jun 24, 2023 6:58 am

fishfoodie wrote: ↑Thu Jun 22, 2023 11:42 pm

Or as I saw someone point out; they raised interest rates by 5%, & brought down inflation by -1%

What is the rest of, The Plan ?

What do they say about doing the same thing again, & again & expecting different results ..... ?

I'm always tickled by the way people can convince themselves that entire fields of scientific/academic consensus are bullshit IF the the consensus is at odds with their political views.

On the right, you have outright dismissal of climate science and evolutionary biology, and on the left economics. Both sides often scoff at the others' tendency to ignore expertise/scientific consensus.

By swapping two words, we get the mirror image:

Or as I saw someone point out; they introduced a lockdown, & brought down death by covid by -1%

What is the rest of, The Plan ?

What do they say about doing the same thing again, & again & expecting different results ..... ?

The kind of shallow "analysis" which will have those on the same political side as you nodding in agreement but will irritate the "other". It just a waste of words.

Back to the subject at hand, anyone is claiming that all economists (regardless of political views) are wrong and that raising interest rates is causing inflation, is no better than others claiming that CO2 in the atmosphere doesn't warm the planet.

Economics is not a science.

Some areas within it are (research quality and evidence bases in behavioural economics are generally decent), but more generally, I agree that it’s driven primarily by ideology, rather than strong evidence. This famous example of errors in one of the key pieces of evidence for the effectiveness of austerity measures is a good example of just how flimsy the ‘science’ can be:

https://theconversation.com/the-reinhar ... mics-13646

Chronic under-investment in UK infrastructure since the 90s is going to fuck this island in the arse. No lube.

Sandstorm wrote: ↑Sat Jun 24, 2023 8:36 pm Chronic under-investment in UK infrastructure since the 90s is going to fuck this island in the arse. No lube.

Tories decided you were a services economy, & that was that !

As has been called out numerous times on this thread, the UK is great at research, but the ideas die after that in the UK, because there isn't the investment to support the innovations, or the manufacturing industry to bring them to market.

The real worry must be that the new isolation from the EU will have those who lead the research just deciding to cut the bullshit, & do the research in the EU, or US, where they'll get the funding, the VC, & can bring the ideas to market all in one place.

Huffpost...

"Tory Despair After Rishi's Worst Week Since The Last One"

Insane_Homer wrote: ↑Sun Jun 25, 2023 8:39 pm Huffpost...

"Tory Despair After Rishi's Worst Week Since The Last One"

His interview this morning on LK's BBC show was appalling.

C69 wrote: ↑Sun Jun 25, 2023 10:19 pm

Insane_Homer wrote: ↑Sun Jun 25, 2023 8:39 pm Huffpost...

"Tory Despair After Rishi's Worst Week Since The Last One"

His interview this morning on LK's BBC show was appalling.

I heard Mr Nominative Determinism's cruelest jokes interview on radio was similarly painful, with the interviewer laughing at his complete inability to answer even the most basic question; i.e. What is Rishi doing to reduce Inflation ?

This country has always been fucked, deliberately in some cases.. it was just all the seriously fucked up bits were easily ignored before, with a dismissive mixture of bigotry, finger jabbing, deranged middle class morality tales and self serving contempt.

Is the country really in the mood for another 10 years of austerity, because that's what hunt is offering.

I knew the tories in power would be seriously bad, but fucking'ell.




The post, "post truth" era is going to be very interesting.

Reality bites.

Here is part of why we have a high level of economically inactive in the workforce!

https://www.bbc.co.uk/news/health-65992173

The lack of investment in the NHS over the years and a miserable lack of focus on public health has meant we have an NHS chronically understaffed and under resourced which in turn means the Gov has overseen a drop in the health of our workforce over the last 10 years. Interesting to see out NHS is regarded as one of the most efficient with a low level of spend on management and administration. I await the publication of the workforce plan with interest and a high degree of scepticism - I suspect there will be modest increase in investment in education and training but a whole batch of spurious investments in 'new things' that will increase use of AI/IT etc, reduce the professionalism of our workforce and 'redesign patient processes'. All the usual high tech/management speak bullshit that you would expect from our head boy PM who really really wants to go and work in high tech in California.Anyone remember when Babylon Healthcare were the next best thing since sliced bread ...

https://www.digitalhealth.net/2023/05/s ... e-private/

It's worth remembering whilst reading this that Primark has about £2bn of debt. It's able to do all of the following: sell to the bottom of the market, increase prices, make more profit. It can do this because everyone else is in debt and cannot out compete them.

We're then told inflation is coming from wage demands (despite no wage growth in real terms for 15 years), by people who ideologically do not believe cost push exists. They literally think if a business is up to its eye balls in debt, and interest rates go up, those higher debt servicing costs will not mean higher prices and therefore will not create inflation. Their way to combat inflation is to increase the spending power of those that own their home without a mortgage and have savings, whilst crushing the spending power of everyone else. The inevitable outcome being demands for higher wages. To eliminate worker bargaining power, in the future they'll need a recession that increases unemployment and decreases vacancies along with it.

ABF raises profit outlook after lifting prices

Hiking prices has proved profitable for Primark-owner Associated British Foods.
ABF has told shareholders this morning it now expects adjusted operating profit for the current financial year to be “moderately ahead of last year,” having previously expected to be “broadly in line”.
Sales across the group have grown 17% so far this year, and were up 16% in the third quarter (the 12 weeks to 27 May).
Primark, the discount clothes chain, has seen good demand for summer ranges, ABF says. Total sales were up 13% in the last quarter, while like-for-like sales grew 7%, “supported by higher average selling prices.”
Those higher prices will be a blow to struggling households. But despite them, sales at Primark’s flagship city centre stores have “continued to be good”, ABF adds.