Originally Posted by Chrysalis
It wouldnt be normally such a big issue, but the problem is the previous short lived PM drawn attention to the countries finances by not attempting to explain how her tax cuts were funded and withholding important economic data, this led to the currency crashing and the BoE having to intervene to prevent a financial meltdown. Even the IMF started commentin[g on the situation.
As to historical debt, I have the mindset that I dont hold entities for things that happened decades ago. Both parties have changed radically over the years from their historical positions and will continue to do so. Because of this I tend not to be loyal to one given party over my lifetime.
Also comparing 2010 to now, if you look at spending graphs there is a clear difference. Back in 2010 housing and community funding got absolutely decimated as did the welfare system, it was a clear target and there was also funding cuts in real terms for governmental departments, this time round welfare has actually been protected and in real cash terms things are either going up below inflation or stagnant, but no 2010 level cuts. It is austerity but its nothing like what we seen in 2010.
---------- Post added at 00:44 ---------- Previous post was at 00:27 ----------
It is an interesting take, the issues I have with it is I think the current inflation has not been caused by an over supply of money, most of the inflation is on essentials which will get brought regardless of the money supply, as proven by the EPG, the 10% rise for the poor and CoL payments, the government will buy essentials for people when they can no longer afford to do so. I would say the primary driver of current inflation is a combination of a shift in the energy market and shareholder driven.
The government has recognised this and has announced they are adopting a policy of isolating us from the energy market for our energy, the plan is to be self dependent on our energy requirements which would then shield us at least to a degree from a now very volatile market.
The inflation rises has led to (in my opinion) opportunistic price increases on various goods, which is now impacting things like food and other products, further increasing inflation. Time will tell if demand for goods brought from supermarkets go down as people get poorer, but my expectation is there will not be a significant drop.
One area where I think spending will go down is hospitality, that sector is going to get absolutely decimated, but will we see deflation there? unlikely as many hospitality business owners have revealed they simply cannot afford to do so, if anything further price increases are on the way, instead will just be a lot of liquidated businesses.
The areas that will be first to see change is luxury goods, Phones, computer components in particular are clearly currently overpriced, previously tolerated by the consumers, but the problem here is that these arent really the current problem, we not in this crisis because people cannot afford to buy a TV.
The BoE have a remit thats controlled by the government, and one obvious problem during Truss's reign is she was working against the BoE. Instead of with it. It has a remit to control inflation, and it has only limited tools to do so, the idea behind raising rates been to reduce the money supply which in turn would be expected to curb consumer spending and of course that slows down growth, yet the PM and the chancellor for the time adopted an aggressive growth strategy totally at odds of what the BoE was trying to do.
There is also an argument that any spending needs to be well targeted, you give a poor person £1000 its pretty much a given thats going straight back into the local economy, they have no choice but to spend it for their day to day living. Give it to a top wage earner, and there is a fair chance it just sits in a bank account for a decade or more which does far less for the economy.
So those are my issues with the view point offered in that article.
|