Did a piece for the New Statesman that started out as a reflection on the fact that when prices change on a large scale, in a short space of time, what this delivers is not a neat and tidy “price signal”, as Friedrich Hayek famously imagined, but an information bomb.
"I’m unpersuaded because if we are talking about poverty, which Jack Monroe is - poverty as defined by the urgent search for the cheapest can of baked beans - then we should talk about poverty. And, no, that is not a transitory problem. But price controls on basics are not generally a good way of addressing poverty, except in emergencies where the apparatus of regulation is already in place (e.g. in current energy market shambles). "
I view this as pretty much the same move as talking about the distributional effects of monetary policy but from a different angle. in principle i would subscribe to the "one fix at a time an specifically tailored to the problem"-principle but i think we see that political economy does not work this way and ignoring these distributional effects without cedible commitment to fixing the other problems which are ignored leads to not solving them at all.
"More generally the embrace of the discourse of the “cost of living crisis”, rather than alternative formulations like “the crisis of low pay”, or the “crisis of inadequate state benefits”, seems dangerous. It plays into the hands of inflation hawks. Tender concern for the cost of living of the struggling pensioner has long been a staple of conservative anti-inflation rhetoric. "
I think at the moment this talk does seems more plausible as most workers see the payment side of their balance sheet as fixed and feel the only mutable side is inflation. No realization that battling inflation implies slower growth with bad knock-on effects arguably worse than the current situation. On the one hand it speaks to not thinking in counterfactuals and marginal analysis (who would blame people for that?), but more importantly to the lost hope through the marginalization of unions / a real labour movement. Most just do not think it possible to get more income because of inflation, as this has not been lived experience in their lifetime.
Great post. Hipocrisy of Bailey. He is so depressing but also so transparent in his biases and his dreadful communication that he dispels the myth that Central Bankers are independent. Central Bankers are servants of capital. They are about as independent as any other industrialist.
When house prices and share prices were sky rocketing central bankers weren't worried about inflation. Only when that nonsense started feeding back into the real economy (ie wage increases) and politics that the Central Bankers started getting worried.
Try 18 months of higher longer term interest rates and see where everything that has been funding short goes. The problem they have now is that they cannot do anything with interest rates because we are at the end of another decade long credit bubble and popping that will push the economy back into recession. Therefore expect more stuff like this from Bailey and other Central Bankers but don't predict interest rates going above 2% for very long.
The TUC are one of the few voices of reason who have the resources to argue against the narrative from the Bank of England, government, CBI and most of the media. They make a good point. Bailey should worry about financial stability more and less about workers getting pay rises.
Great post. It's infuriating how rarely macroeconomic indicators are ever discussed with some consideration for the income and wealth distributions. At some point it amounts to littlre more than propaganda for rentiers.
Thanks for this latest piece. Apart from consumer price increases, any thoughts on commodity price increases being damaging,please? Only ask because my understanding of economics is flimsy but enjoying reading The Lords Of Easy Money, by Christopher Leonard.
"I’m unpersuaded because if we are talking about poverty, which Jack Monroe is - poverty as defined by the urgent search for the cheapest can of baked beans - then we should talk about poverty. And, no, that is not a transitory problem. But price controls on basics are not generally a good way of addressing poverty, except in emergencies where the apparatus of regulation is already in place (e.g. in current energy market shambles). "
I view this as pretty much the same move as talking about the distributional effects of monetary policy but from a different angle. in principle i would subscribe to the "one fix at a time an specifically tailored to the problem"-principle but i think we see that political economy does not work this way and ignoring these distributional effects without cedible commitment to fixing the other problems which are ignored leads to not solving them at all.
"More generally the embrace of the discourse of the “cost of living crisis”, rather than alternative formulations like “the crisis of low pay”, or the “crisis of inadequate state benefits”, seems dangerous. It plays into the hands of inflation hawks. Tender concern for the cost of living of the struggling pensioner has long been a staple of conservative anti-inflation rhetoric. "
I think at the moment this talk does seems more plausible as most workers see the payment side of their balance sheet as fixed and feel the only mutable side is inflation. No realization that battling inflation implies slower growth with bad knock-on effects arguably worse than the current situation. On the one hand it speaks to not thinking in counterfactuals and marginal analysis (who would blame people for that?), but more importantly to the lost hope through the marginalization of unions / a real labour movement. Most just do not think it possible to get more income because of inflation, as this has not been lived experience in their lifetime.
Great post. Hipocrisy of Bailey. He is so depressing but also so transparent in his biases and his dreadful communication that he dispels the myth that Central Bankers are independent. Central Bankers are servants of capital. They are about as independent as any other industrialist.
When house prices and share prices were sky rocketing central bankers weren't worried about inflation. Only when that nonsense started feeding back into the real economy (ie wage increases) and politics that the Central Bankers started getting worried.
Try 18 months of higher longer term interest rates and see where everything that has been funding short goes. The problem they have now is that they cannot do anything with interest rates because we are at the end of another decade long credit bubble and popping that will push the economy back into recession. Therefore expect more stuff like this from Bailey and other Central Bankers but don't predict interest rates going above 2% for very long.
https://www.tuc.org.uk/blogs/bank-england-are-raising-interest-rates-because-imagined-wages-growth
The TUC are one of the few voices of reason who have the resources to argue against the narrative from the Bank of England, government, CBI and most of the media. They make a good point. Bailey should worry about financial stability more and less about workers getting pay rises.
Great post. It's infuriating how rarely macroeconomic indicators are ever discussed with some consideration for the income and wealth distributions. At some point it amounts to littlre more than propaganda for rentiers.
Thanks for this latest piece. Apart from consumer price increases, any thoughts on commodity price increases being damaging,please? Only ask because my understanding of economics is flimsy but enjoying reading The Lords Of Easy Money, by Christopher Leonard.