Off Topic The Politics Thread
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Went to vote today choice between 3 labour 3 Tories; 1 green,
Lib Dems didnt field a candidate, Labour/Lib Dems pact alive and well in Heston
Lib Dems didnt field a candidate, Labour/Lib Dems pact alive and well in Heston
There wasn’t anybody on the ballot paper I’d want to endorse. If there was a ‘none of the above’ box I’d make the effort.
Any economists out there? Serious ‘I’d like to know, not points scoring’ question: in current circumstances - slowing economic growth, falling demand; rising inflation due to raw materials price explosions; high employment - how does raising interest rates help?
I can understand putting them up to control an overheating economy, reducing demand to calm things down, but I would have thought reducing demand at the moment will drag us quicker into stagflation, recession plus inflation, which some of us are old enough to remember and which was sparked by a huge rise in energy prices beyond national control - just like now. If people stop spending because they have to pay their energy bills it will cost jobs ultimately, especially if higher cost of servicing household debts through higher interest rates and inflation outstripping wage growth are thrown in.
I must be missing something. I have no objection in principle to higher interest rates, the last 10 plus years of near zero interest rates have been bizarre, but I don’t understand why raising them now will make a difference.
I can understand putting them up to control an overheating economy, reducing demand to calm things down, but I would have thought reducing demand at the moment will drag us quicker into stagflation, recession plus inflation, which some of us are old enough to remember and which was sparked by a huge rise in energy prices beyond national control - just like now. If people stop spending because they have to pay their energy bills it will cost jobs ultimately, especially if higher cost of servicing household debts through higher interest rates and inflation outstripping wage growth are thrown in.
I must be missing something. I have no objection in principle to higher interest rates, the last 10 plus years of near zero interest rates have been bizarre, but I don’t understand why raising them now will make a difference.
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Anyone watch the Piers Morgan show? If so do you know the other 6 viewers
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From what I recall from my Economics days at University, the aim is to stifle demand to help bring inflation back under control. The problem is that the demand pressures are from everyday goods so no matter what the price is, we will still make purchases (within reason before substitution effect takes place). If the demand for luxury goods was reduced, this would help a little to control inflation. There is a bit of a "perfect storm" which will inevitably lead to a worldwide recession. Factors of scarcity of supply (following two years of pandemic), exaggerated demand for Ukrainian & Russian produced goods, plus increased costs of raw materials and costs of production method changes to reduce emissions etc. add to the problem. Also, economies such as UK which are service led, will suffer greater inflation as the substitution for alternative goods will also come from abroad and with the costs of shipping also contributing, there is huge pressure on businesses to increase prices to cover the costs.
There are other factors in play, such as low consumer confidence but these are an effect of policies and trends. I hope that is as clear as mud!
Woken up and had a look at the news over breakfast...no great surprise. Labour and Lib Dems make massive gains whilst Conservatives have lost a lot of ground.
How does raising interest rates stifle demand?
Is it because people with mortgages and loans will have less money to spend?
Wouldn't that hurt the economy even more?
As you can tell, I don't really get it.
How does raising interest rates stifle demand?
Is it because people with mortgages and loans will have less money to spend?
Wouldn't that hurt the economy even more?
As you can tell, I don't really get it.
Not sure I do either...but my " in-house economist" told me...
increasing interest rates...encourages ( richer) people/companies to leave their savings in banks to get interest....and stops people borrowing money, due to the interest they have to repay.
People will stop doing things they haven't got the money for.. ( white goods, holidays, house improvements)
In current circumstances, neither do IHow does raising interest rates stifle demand?
Is it because people with mortgages and loans will have less money to spend?
Wouldn't that hurt the economy even more?
As you can tell, I don't really get it.
Which reduces inflation in holidays, home improvements etc, but our current problem is inflation in basics which we can’t do without a 4ever points out - energy, wheat, fertiliser, cooking oil, transport costs - and I don’t see how reducing the amount people have to spend by raising interest rates will help us here. While I don’t think this rise will be a huge burden in effect it adds to the troubles of those with least to spend already……..
Its all beyond me too Col. What i do know is that people have less and less money to spend which surely has a knock on effect for the economy. A recession is just around the cornerHow does raising interest rates stifle demand?
Is it because people with mortgages and loans will have less money to spend?
Wouldn't that hurt the economy even more?
As you can tell, I don't really get it.
Exactly this.
By increasing interest rates, people are more likely to leave savings and reduce spending on non-essential items. This reduces demand for some goods and services which keeps the prices from being pushed up further and therefore prevent inflation. As discussed above, the inflation pressures are from essential goods and services, so the effect of the interest rate increase will have only a limited effect on inflation. One thing for certain is that there will be a recession, just a question of how sustainable it is and the impact on jobs. The chancellor is banking on no recession and even small growth to fulfill his budget pledges. Hold on tight, it will be a rough ride for almost everyone and could seriously generate poverty amongst those least able to afford to ride out the storm.
Said I didn't understand it.
If a few lucky people do have money to spend on white goods, improvements...surely the government should encourage that....trickle down economy.
It will provide work/ money for the people who provide these services.
No I Don get it either
Mine has gone up over 75% in less than a decade. I’ll be able help my kids but worry it won’t be enough to get on the property ladder.