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Cost of living increases

I'm no expert but for my A-level we did an in-depth study of the UK (and global) 2008 financial crisis so I got a fair bit of insight into the issues we faced and continue to face financially.
I did A-level economics as well. We were treated to a trip to the European Central Bank for a couple of hours and then the 2nd day was spent at a Stella Artois brewery 🍺🍺🍺🍺🍺

I then started to skip the occasional double Economics on a Friday afternoon for a trip to The Oak (Lodge Lane, Grays) instead. Occasionally bumped into the teacher who was also skipping the lesson

Needless to say I failed. I didn't even know you could get a "N" grade :Dunce:
 
Yeah - maybe into winter - next gas/elec rise is in Oct, and obviously weather gets colder, plus the lag in bills - let's hope for a mild winter
I reckon Feb will be the month many people will have a reality shock. My gas bills are due in early Nov, then Feb which in theory will be for the 3 coldest months of the year.
Add to that the cost of Christmas for many people as well who use a credit card to pay for it, & you have a recipe for financial hardship for many.
 
I did A-level economics as well. We were treated to a trip to the European Central Bank for a couple of hours and then the 2nd day was spent at a Stella Artois brewery 🍺🍺🍺🍺🍺

I then started to skip the occasional double Economics on a Friday afternoon for a trip to The Oak (Lodge Lane, Grays) instead. Occasionally bumped into the teacher who was also skipping the lesson

Needless to say I failed. I didn't even know you could get a "N" grade :Dunce:
At least you all had fun by the sounds of it :Thumbs up:
 
At least you all had fun by the sounds of it :Thumbs up:
I didn't fail my A level Economics exam but I'm still waiting for a reasonable explanation (other than that provided by Blues Exile)) as to why HMG and the Bank of England think that increasing interest rates can act as both a brake on economic growth and as a curb on inflation.
 
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I didn't fail my A level Economics exam but I'm still waiting for a reasonable explanation (other than that provided by Blues Exile)) as to why HMG and the Bank of England think that increasing interest rates can act as both a brake on economic growth and as a curb on inflation.

In today's scenario or the theory?

Theory is reduce the excess demand - this will reduce growth and reduce inflation in theory
 
In today's scenario or the theory?

Theory is reduce the excess demand - this will reduce growth and reduce inflation in theory
Today's scenario ie how can an increase in bank rates both reduce economic growth and also act as a brake on inflation (as I originally asked).I get the theory bit but your're really only addressing one half of the question here.
 
So for the last year or more I have been buying a box of Diet Coke, 30 cans for £8.50 at Asda. The best deal by far. Next best is normally £8 for 24 cans elsewhere. I went to get some at Asda a few days ago, and it's took a big jump to £11.
So back to the really important price increases. So yes, they hiked up my Diet Coke with a big leap up to £11 for 30 cans, from £8.50. But now back down a bit to £9.50.
 
I didn't fail my A level Economics exam but I'm still waiting for a reasonable explanation (other than that provided by Blues Exile)) as to why HMG and the Bank of England think that increasing interest rates can act as both a brake on economic growth and as a curb on inflation.
Today's scenario ie how can an increase in bank rates both reduce economic growth and also act as a brake on inflation (as I originally asked).I get the theory bit but your're really only addressing one half of the question here.
It does not act as a direct brake if that's what you're trying to say, but a reduction in inflation is an indirect consequence of an enforced recession through interest rates.

Banks will take money out of the monetary cycle through increased interest payments on mortgages/loans and people should invest more in savings at better rates (although I'd advise turning your savings into a dependable asset e.g. gold/silver in case of 2008 part 2) and this should lead to a reduction in demand.

Our current scenario however has variables that the theory never anticipated we'd encounter. We assumed if we all traded globally, there would be no need for conflict of any sort. External factors are affecting us, and the idea of global interdependence has come along to bite us on the rear. There are very few policy routes out of this mess as a result, we can't implement governance that will change what is happening in another country.

Crises the other side of the world are now also our problem, more so than ever before. Consequences of a highly globalised economy, long supply chains and very little contingency planning. The only ones who win are those with oligopoly status, global corporations that exceed nations in terms of the economic power they hold. Look at the profiteering of international fuel and energy companies for example. The cost of fuel impacts the cost of absolutely everything.

In the current case, I'd make you correct that interest rate rises will not solve the current inflation. Not sure what will solve it to be honest.

Also just to add, like in footy they say form is temporary, growth is temporary too. Our current financial systems and economic models provide for the boom/slump cycle and we're sadly on the downturn at the moment. What I will say, as always it's the ordinary people at the bottom who have to pay for it.
 
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Today's scenario ie how can an increase in bank rates both reduce economic growth and also act as a brake on inflation (as I originally asked).I get the theory bit but your're really only addressing one half of the question here.
It's less clear how the theory works in todays environment (not that I'm convinced it truly works anyway). I guess they're trying to address the one third to half of the inflation that is occurring in the domestic economy - and accepting they're not able to do much about the energy inflation - although the theory says if they reduce demand then maybe prices will go down (or stop increasing)
 
You will defo need a PAC code if you want to keep your phone number, but that's not the same as the phone being locked to their network
Yeah that’s what’s so tricky. Will have to give them a call or do an online chat. I’m determined to get a better deal aha. My phones memory is small too so it’s slow and heats up quickly. Guess what do u Expect with a budget android.
 
Can get a PAC code from your current provider quite quickly nowadays. Best of luck sorting out a new handset
 
Just booked week away in Shropshire for September, so will miss Torquay game, but in relation to this thread the price of the cottage has dropped over £100 from first advertised price. A combination of late booking and a drop of staycation demand maybe?

If foreign holidays are truly back to stay maybe 2nd homes will decrease and that could help house prices in some areas?
 
Today's scenario ie how can an increase in bank rates both reduce economic growth and also act as a brake on inflation (as I originally asked).I get the theory bit but your're really only addressing one half of the question here.
Yeah, what @hlane17 said, fundamentally. It's all very complicated, of course.

Economists tend to divide inflation into two types, demand-pull and cost-push.

There was an element of demand-pull, early on, arising from pent-up demand during the pandemic. Much of this came from the savings that people had accumulated during that time (less having been spent on holidays, meals out, etc.). People were able to spend more at the same time as there were supply bottlenecks, pushing up prices. The lack of available new cars has massively pushed up the price of second-hand ones, for instance. If the Bank increases the base rate during these times it will have an effect. The mortgage rate increases, the incentive to save increases while the incentive to borrow to finance expenditure decreases and business borrow less and invest less. All of this reduces spending and thus aggregate demand in the economy, reducing pressure on prices and the rate of inflation should fall. The side effect is a likely slowing of the rate of economic growth.

The main element over the last year has been cost-push. The cost pressures have been largely external. Increases in energy prices and food prices resulting from the Ukraine conflict have been the main drivers. The inflation is effectively "imported" as we rely on other countries to produce much of what we consume of these two commodities. Here, the base rate will be far less effective. The reason for this is that energy and food are essentials and therefore are relatively income inelastic. Reducing the money in consumers' pockets through the base rate won't greatly reduce their demand for these types of products and they'll be forced to pay the higher prices that producers ask for them. As heavily-weighted items of the CPI, they'll make a major contribution to the increased inflation rate that we see. However, demand for other products will fall, hence why the Bank is forecasting a fall in aggregate demand and thus negative growth as the year goes on.

The government has fewer levers at its disposal to counter the cost of living crisis than some others have. For instance, in France, since EDF is state-owned, the government has been able to instruct the firm to reduce prices for energy consumers and forego making a surplus. That's not possible here in the UK. The lack of levers is what's known as the assignment problem and makes it more difficult for the government to achieve a range of objectives, including a lower inflation rate and a steady rate of economic growth.

But there's a lot more to it than that...
 
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