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Here's an Alternative to using Base Rate to Influence Inflation

crunchie1967
Posts: 8 Forumite
This is a simplistic view, but why do we (or rather the Bank of England) use the Base Rate to influence inflation?
Surely inflation is the rate at which prices are rising. How about the government (or maybe some independent body) asking the public to be more aware of what they are spending their money on.
The effectiveness of this could be controlled by the amount of information released. If inflation is high, rigourously release information about the retailers who are contributing to this. If inflation is on target, then the release of information can slow down. If inflation is too low, again those shops could be named and people are more likely to shop there so prices can increase.
The highest contributors to inflation (often retailers who are making the most profit) could be named and then the public can make an informed decision if they want to shop there or walk (click) along to the next retailer.
I know this would be trial and error at first, but now is the best time to implement this, when interest rates are low and not being used to influence inflation.
This would:
1. Give a voice and power back to the public so we can each make an informed choice if we want to help ease inflation.
2. Mean that the only losers in this would be the retailers who are creating the rising inflation in the first place.
3. Free up the Base Rate so it can be used more effectively in other areas.
I stress, this is not a plan to keep interest rates low, it is a plan to influence inflation at its cause rather than with a blanket policy.
The current system aims to put a squeeze on the public at a time when they are feeling the hit of inflationary price rises. This seems a bit unfair when the retailers who cause the high inflation seem to be enjoying run away profits.
If you agree with the principle of this post, I am open to suggestions as to how we could take this forward.
Regards
Colin.
Surely inflation is the rate at which prices are rising. How about the government (or maybe some independent body) asking the public to be more aware of what they are spending their money on.
The effectiveness of this could be controlled by the amount of information released. If inflation is high, rigourously release information about the retailers who are contributing to this. If inflation is on target, then the release of information can slow down. If inflation is too low, again those shops could be named and people are more likely to shop there so prices can increase.
The highest contributors to inflation (often retailers who are making the most profit) could be named and then the public can make an informed decision if they want to shop there or walk (click) along to the next retailer.
I know this would be trial and error at first, but now is the best time to implement this, when interest rates are low and not being used to influence inflation.
This would:
1. Give a voice and power back to the public so we can each make an informed choice if we want to help ease inflation.
2. Mean that the only losers in this would be the retailers who are creating the rising inflation in the first place.
3. Free up the Base Rate so it can be used more effectively in other areas.
I stress, this is not a plan to keep interest rates low, it is a plan to influence inflation at its cause rather than with a blanket policy.
The current system aims to put a squeeze on the public at a time when they are feeling the hit of inflationary price rises. This seems a bit unfair when the retailers who cause the high inflation seem to be enjoying run away profits.
If you agree with the principle of this post, I am open to suggestions as to how we could take this forward.
Regards
Colin.
0
Comments
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oil
gas
metals
imported food
exchange rate0 -
crunchie1967 wrote: »The highest contributors to inflation (often retailers who are making the most profit) could be named and then the public can make an informed decision if they want to shop there or walk (click) along to the next retailer.
This already happens.
Profits at BP, Tesco, Vodafone etc are announced to an interested media.
As the media think everyone in the UK is stupid and won't understand the big numbers they tend to be converted to more emotive exchange rates i.e. BP tend to make £ profit/ second, and the salaries of the board members tend to be expressed as a multiple of nurses pay.
There will be an interview with the boss of the company on the BBC Radio 4 Today show who will be asked to justify the daylight robbery. Luckily, I don't need to listen because, as the BBC think I'm a retard, the next interview will be with a BBC business correspondent who can explain what the previous interviewee just said.
After we've all been suitably outraged we then rush out to fill our car at a BP petrol station, shop at Tesco and buy the latest must-have device from Vodafone.0 -
i cant relate BPs profits to my filling my car because BP is an international companies whose profits come from many sources and petrol is a commodity that is traded in its own right! they cant control that price.
What i do think is simplistic in the worldwide economy is that inflation can be controlled by interest rates-after this vat increase comes in spending will drop off as people pay off the debt-but real inflation will come from all the imports that we suck in--the Americans have made the rod by EQ3 raising all the commodity prices which will feed into our economy--cotton oil just about anything has been pushed up in value-we are a nation which just imports!mfw'11 No68- 55k mortgage İO--little to nothing saved! i must do better.0
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