Suppress inflation and 'grow' the economy

[1nvest]

You might expect a good government to have pre-prepared plans for the likes of pandemics, energy/financial extremes ...etc. But not ours, ours just wing-it. Parliament doesn't do its job, is just a vanity fair and (individual) get-rich-quick means, largely in the pockets of money than serving those that elect it.

Really the existing Parliamentary system should be disbanded. Opines itself to be sovereign whilst repeatedly and openly expressing that it does not want to be sovereign. Is highly corrupt, isn't fit for purpose. Rightfully the people are sovereign, had that reinstated to them by majority vote (Brexit). However as-is that peoples sovereignty is diluted down to where less than 20% of the populations votes can instate governance control over a Parliament that claims itself to be sovereign, despite not wishing to be such.

[Tedx]

Small businesses suffer interest-rate insolvencies

One reason for this is the high interest rate, now set at 4.5% and due to rise to 4.75% on 22 June.

Kelly said: “For small businesses in particular, these higher rates make it increasingly difficult to take on and finance debt, with many having to use their emergency cash reserves to do so, thus intensifying liquidity issues.

“We’re seeing an uptick in the number of firms needing debt restructuring services and looking at ways to compromise their existing on and off balance sheet liabilities.”

https://www.printweek.com/news/article/ ... solvencies

In the words of Hans Gruber

You asked for a recession Theo.....I give you the B...O....E.

[Nimrod103]

Volatility of electricity prices could have been avoided if we had had 5 years of coal stockpiled at 10 thermal power stations. But we decided we didn't want that, and now we live with the consequences.

You might expect a good government to have pre-prepared plans for the likes of pandemics, energy/financial extremes ...etc. But not ours, ours just wing-it. Parliament doesn't do its job, is just a vanity fair and (individual) get-rich-quick means, largely in the pockets of money than serving those that elect it.

These emergencies were of a different nature. The pandemic really must have been impossible to predict (unless MI5 had inside info on what was going on in China). MERS and SARS proved to be small local threats, so my guess beforehand would have been that the chance of a dangerous Coronovirus emerging was extremely small. A bad flu year was much more likely.

OTOH the likelihood of a cost of energy crisis is highly likely because we import so much energy - I would have put a risk of 50% on it occurring in 10 year period. But successive Govts have not only had no plans, they stifled our escape routes of stored gas, nuclear and stockpiled coal.

Financial extremes/crises are difficult to quantify because essentially we rely on good economic management and sensible Chancellors and administrators to protect us, but they were shown up to have been completely incompetent during the GFC.

[1nvest]

These emergencies were of a different nature. The pandemic really must have been impossible to predict (unless MI5 had inside info on what was going on in China).

A 'global village' is open to the same as a small village, where real nasties have been contained by isolation, the entire village dying and then being burnt/torched. Emergency plans should exist with that in mind, be it stay at home and have all of your groceries being delivered along with patrols to police that ... or whatever. As-was the stay at home was just for some (high cost (furlough) for as good as no benefit whatsoever), there was as good as no policing and home deliveries were mostly a failure, request ten different items and maybe get just a couple delivered at most. Covid quickly declined to being a 'go for herd immunity' situation as the only option - through bad policy/planning. Fortunately the kill rate was very low, but could just have equally evolved into a 100% rate and the UK government would have totally failed its population.

The government as-is has little regard for its primary role of defending the realm. Gives greater priorities to those who break into the UK and little regard to the risks that presents to the general population etc. Nor are individuals held to account, if they do a bad thing/job then there's just a review, that takes many years - that comes out with volumes of findings but no punishment. Little/no incentive to do a good job.

[CliffEdge]

These emergencies were of a different nature. The pandemic really must have been impossible to predict (unless MI5 had inside info on what was going on in China).

A 'global village' is open to the same as a small village, where real nasties have been contained by isolation, the entire village dying and then being burnt/torched. Emergency plans should exist with that in mind, be it stay at home and have all of your groceries being delivered along with patrols to police that ... or whatever. As-was the stay at home was just for some (high cost (furlough) for as good as no benefit whatsoever), there was as good as no policing and home deliveries were mostly a failure, request ten different items and maybe get just a couple delivered at most. Covid quickly declined to being a 'go for herd immunity' situation as the only option - through bad policy/planning. Fortunately the kill rate was very low, but could just have equally evolved into a 100% rate and the UK government would have totally failed its population.

The government as-is has little regard for its primary role of defending the realm. Gives greater priorities to those who break into the UK and little regard to the risks that presents to the general population etc. Nor are individuals held to account, if they do a bad thing/job then there's just a review, that takes many years - that comes out with volumes of findings but no punishment. Little/no incentive to do a good job.

There's no such thing as a global village. COVID was solved by the creation of effective vaccines which most people were sensible enough to take.

[NeilW]

In the short term, whether this money comes from borrowing or taxation is irrelevant from the pov of inflation.

It doesn't come from either. Government spending is *always* money creation - every penny every day. The Consolidated Fund Account at the BoE starts each day at zero. Yet the ~£400m state pension payment made every day at 8:30am never bounces.

Every penny is always 'borrowed' in an accounting sense and it occurs automatically and costlessly as a function of recording the payment journal in the Bank of England accounts. What was called in the 1850s 'book debt'.

What happens then is a function of the government's belief in Monetarism. The DMO swaps the zero interest zero cost borrowing for higher cost borrowing via refinancing 'cash management' repos (some of which expire on tax payment days when the flow is in the opposite direction).

Longer term HMG needs to balance its books (or at least appear to be doing so) or risk lack of confidence in the bond markets.

It doesn't. There is no need to do the cash management or debt management at all. Those are done entirely as a favour to the finance industry - because of the belief in Monetarism and the 'full funding rule' policy that instigates.

We don't need to do that at all. Paying the money changers in the temple is a political choice. Other stabilisation policies are available once we reject the failed Natural Rate hypothesis.

The simple act of saving Sterling - in any form - automatically causes the government sector to 'borrow'. Just as a bank deposit is the bank 'borrowing' from you. It's merely a balancing item in double entry bookkeeping that has been weaponised to frighten those who are hard of accounting.

"Balancing the books" means eliminating Sterling savings. If you believe that has to happen, then if you send all your Sterling savings to the Donations and Bequests Account at the Commissioners for the Reduction of the National Debt, that will move the books towards balance. It should be compulsory for anybody talking about 'balanced books' to donate any money they have saved - since that is what is causing the unbalancing.

[Tedx]

They'll not like that on here Neil

[CliffEdge]

In the short term, whether this money comes from borrowing or taxation is irrelevant from the pov of inflation.

It doesn't come from either. Government spending is *always* money creation - every penny every day. The Consolidated Fund Account at the BoE starts each day at zero. Yet the ~£400m state pension payment made every day at 8:30am never bounces.

Every penny is always 'borrowed' in an accounting sense and it occurs automatically and costlessly as a function of recording the payment journal in the Bank of England accounts. What was called in the 1850s 'book debt'.

What happens then is a function of the government's belief in Monetarism. The DMO swaps the zero interest zero cost borrowing for higher cost borrowing via refinancing 'cash management' repos (some of which expire on tax payment days when the flow is in the opposite direction).

Longer term HMG needs to balance its books (or at least appear to be doing so) or risk lack of confidence in the bond markets.

It doesn't. There is no need to do the cash management or debt management at all. Those are done entirely as a favour to the finance industry - because of the belief in Monetarism and the 'full funding rule' policy that instigates.

We don't need to do that at all. Paying the money changers in the temple is a political choice. Other stabilisation policies are available once we reject the failed Natural Rate hypothesis.

The simple act of saving Sterling - in any form - automatically causes the government sector to 'borrow'. Just as a bank deposit is the bank 'borrowing' from you. It's merely a balancing item in double entry bookkeeping that has been weaponised to frighten those who are hard of accounting.

"Balancing the books" means eliminating Sterling savings. If you believe that has to happen, then if you send all your Sterling savings to the Donations and Bequests Account at the Commissioners for the Reduction of the National Debt, that will move the books towards balance. It should be compulsory for anybody talking about 'balanced books' to donate any money they have saved - since that is what is causing the unbalancing.

Nice to see you again. Hadn't heard anything about the magic money tree on here for ages. Always appreciated your contributions. Is it worth you starting a new thread, there'll be a lot to discuss?

[funduffer]

Nice to see you again. Hadn't heard anything about the magic money tree on here for ages. Always appreciated your contributions. Is it worth you starting a new thread, there'll be a lot to discuss?

Yes, I agree. Neil is one of the most interesting posters on this board.

I don't necessarily understand all the points he makes, but he clearly has great depth of knowledge on how public finances work.

FD