Fair’s fair.

RikM

qwert_yuiop said:

The govt should be pleased. Inflation drives down debt, by devaluing the earlier debt issues. 

Well, yes, but not if it’s your debt and it’s subject to interest rate rises in tandem with inflation. 

A friend here was building a house late last year. Thanks to a surge in material and labour costs, the builder was unable to complete within tendered price and pulled out. Usually it’s a fairly simple matter to get another contractor to finish. Not this time - no one wants to commit. 

Yes, I was thinking of sovereign debt, rather than consumer mortgages. The govt benefits, the consumer gets stuffed. Always the way

Money_Grabber13579

RikM said:

qwert_yuiop said:

The govt should be pleased. Inflation drives down debt, by devaluing the earlier debt issues. 

Well, yes, but not if it’s your debt and it’s subject to interest rate rises in tandem with inflation. 

A friend here was building a house late last year. Thanks to a surge in material and labour costs, the builder was unable to complete within tendered price and pulled out. Usually it’s a fairly simple matter to get another contractor to finish. Not this time - no one wants to commit. 

Yes, I was thinking of sovereign debt, rather than consumer mortgages. The govt benefits, the consumer gets stuffed. Always the way

I’m not sure it can be said that the government benefits (maybe they do and the taxpayer just gets even more stuffed).

The interest on debt which the UK will be expected to pay this year is about £120 billion, having more than doubled what it was in 2021. Whilst the value of the debt might have been devalued, it comes with a huge increase in the annual interest payments, and can only be funded by more tax rises (which aren’t feasible) or spending cuts/freezes.

The reason why the government isn’t giving in to public sector workers is because it can’t. It has no money to be able to do anything with and no means of raising new sources of revenue either. The last 40 years of government policy has been to sell off public assets and use the proceeds, along with debt, to fund public services. Basically, we’ve become addicted to cheap debt financing and now it isn’t so cheap anymore, we’ve got a problem…

RikM

But that's a misunderstanding of govt finances? They don't have to "balance the books" because they make the money. The charade of "austerity" and "good housekeeping" is just that, it's a fig leaf over the right wing urge to punish the poor and reward the rich. They can spend exactly what they want to.

The only real affect of spending is on whether debt is more or less expensive. 

And the thing about the kind of spending on wages: they get it back. Firstly through taxes (which are at their highest for decades), secondly through improved growth/decreased shrinkage (because people spend the extra cash they get, they can't afford not to).

Any pretence the govt have that "we can't afford it" is pretence, not fact.

Money_Grabber13579

RikM said:

But that's a misunderstanding of govt finances? They don't have to "balance the books" because they make the money. The charade of "austerity" and "good housekeeping" is just that, it's a fig leaf over the right wing urge to punish the poor and reward the rich. They can spend exactly what they want to.

The only real affect of spending is on whether debt is more or less expensive. 

And the thing about the kind of spending on wages: they get it back. Firstly through taxes (which are at their highest for decades), secondly through improved growth/decreased shrinkage (because people spend the extra cash they get, they can't afford not to).

Any pretence the govt have that "we can't afford it" is pretence, not fact.

It’s not a misunderstanding of government finances; to argue anything different would be to pretend that the government has a magic money tree which it can use to fund anything it likes. The fact is that it can’t (despite what it might have seemed like in the past). What happened during the ill -fated Truss government is a perfect illustration of that. The government tried to spend money it didn’t have and which no one wanted to lend to it which ultimately increased everyone’s borrowing costs and if it had been left unchecked, would have pushed inflation even higher.

Governments are constrained by exactly the same problems as everyone else. Money borrowed has to be repaid at some point and it is not free. Just because governments have much bigger “credit limits” doesn’t mean that there doesn’t come a time when a government can’t borrow any more or it becomes prohibitively expensive to do so. 

RikM

Truss tried to do something idiotic. Obviously idiotic. Which hammered confidence. Which then raised rates. Govts aren't constrained by money - they make the money. No one limits it for them. That's what taxation is, these days. It is removing money from circulation, controlling money supply. Not raising funds.
No one cares what they spend, so long as it's justified.

The "magic money tree" analogy is particularly specious, because it's exactly what they have, within reason. They can carry on spending for as long as they can sell debt on the open market. The limits on that are not in any sense physical, they are purely a matter of market confidence.

qwert_yuiop

You can print all the money you like, provided you have your own currency. It just causes currency debasement, as demonstrated by everyone from Weimar to Zimbabwe.

qwert_yuiop

One of the reasons for the single currency was to prevent just this - supposedly to have the European Central Bank imposing discipline on member states, rather than to allow politicians to misbehave. Of course it remains to be seen how this will weather the latest problems.

RikM

But of course the current situation is not because there is too much money sloshing around, it's the distribution. Prices have gone up because of profiteering and there's actually too little money in the hands of consumers. It needs re-distributing, somehow. Whether that's by taxing the excess profits and giving to people who will spend it, or just pumping more money into the spending side, financed by debt. 

The govt answer is "austerity" - which has been proven to not work, as it reduces the amount of available consumer spending and thus reduces growth. Not something we need after the (continuing) hits of Brexit and Covid.

turnitround

I have 2 friends and a relative who are nurses. All 3 say the same thing, they are paid a decent wage but are overworked and understaffed. One of them made a point that if the nurses were told -There will be no pay rise but your workload will be reduced, then most nurses would be accepting of that. Money is not the issue, it does not cost a nurse more to live than the woman on the till in Tesco. Its the fact that they cannot work safely and are under such stress. 
Giving our nurses a 19% pay rise will only mean less money for the other areas of the NHS, a job does not become any easier because you get paid more to do it.
What happens next? Every workforce decides they want more, the cost of living goes even higher.

What's needed are extra trained hands. One of my friends said 'I dont need more money, yes it would be nice but what I really need is to be able to enjoy spending what I earn rather than being called on for extra hours constantly, going home drained every day

qwert_yuiop

RikM said:

But of course the current situation is not because there is too much money sloshing around, it's the distribution. Prices have gone up because of profiteering  

Not really. There was too much stimulus associated with Covid which did indeed lead to too much money sloshing around. This was followed by a jump in energy prices due to Ukraine, accompanied by a surge in grain price since it’s a huge exporter of wheat and maize, and Russia impaired access to ports. Profiteering hardly started this year. 

Now that oil and gas are less expensive than earlier this year, inflation figures  ought to settle soon. Unless something else strange happens.