Are we starting to see the wage increase vs inflation increase death spiral?

chroniclard · 28 Jun 2022 at 17:11

People are not necessarily shouting and screaming to help themselves, many of us are doing ok thanks, many of us want a better run country. Were not going anywhere, we like the UK in the whole we just think it could be better. One of the steps to that is a better government.

Trifid · 28 Jun 2022 at 17:12

danlightbulb said:
Can take the view that a person's wage is always right. I.e, if a company will pay it, and you will accept it, its the right number.

Like you said, if you don't think its enough, and company won't pay more, you walk.

But unions complicate that picture substantially in certain sectors which are large enough to come together and create some real issues if they act as one voice. And if employees walked all the time, companies would have massive turnover issues. So its in their interests to try and keep staff happy if they want to retain.

To add a little bit more nuance to the situation, where you have banded job roles and a single large employer across the country, there is a need to balance out the sides when negotiating pay. Not that I've been keeping track of all unions, but as far as I can see, RMT is the only one that has stood up for their members over the past 15 years, where as the others have taken their fees and gone to play golf...

arknor · 28 Jun 2022 at 17:12

200sols said:
No it isnt. Wage price spiral is little more than theory and inflation pressures in the UK are mostly external.

what? our government printed stupid ammounts of monies since they came to power and now it's coming back to haunt us. USA have done the same.

gov tries to make out like its outside influence they can't control when they made it happen

Dolph · 28 Jun 2022 at 17:16

arknor said:
what? our government printed stupid ammounts of monies since they came to power and now it's coming back to haunt us. USA have done the same.

gov tries to make out like its outside influence they can't control when they made it happen

And yet MMT still remains a popular theory in some quarters...

200sols · 28 Jun 2022 at 17:30

arknor said:
what? our government printed stupid ammounts of monies since they came to power and now it's coming back to haunt us. USA have done the same.

gov tries to make out like its outside influence they can't control when they made it happen

So then you are saying QE is responsible and not wage growth. As I said, it's a myth.

R.P.L · 28 Jun 2022 at 17:37

200sols said:
So then you are saying QE is responsible and not wage growth. As I said, it's a myth.

The myth is that the state can print huge amounts of cash without any ill effects.

Hades · 28 Jun 2022 at 17:39

200sols said:
So then you are saying QE is responsible and not wage growth. As I said, it's a myth.

Increasing the supply of money will devalue it. Every £1 will have less buying power. i.e. inflation.

V F · 28 Jun 2022 at 17:40

danlightbulb said:
You mean like a lot of others have got?

You mean the super rich? Not the people that has to budget.

StriderX · 28 Jun 2022 at 17:44

I'm pretty sure quantitative easing was not printing money.

Mr Jack · 28 Jun 2022 at 17:44

Hades said:
Increasing the supply of money will devalue it. Every £1 will have less buying power. i.e. inflation.

So every time anyone takes out a loan money gets less valuable?

arknor · 28 Jun 2022 at 17:46

StriderX said:
I'm pretty sure quantitative easing was not printing money.

yea they just add digits onto bank balances then devlaue our currency compared to other currencies, then things cvost more to import, then prices rise

Hades · 28 Jun 2022 at 17:48

Mr Jack said:
So every time anyone takes out a loan money gets less valuable?

Yes in theory. But such a small amount would cause an insignificant change. However, in the case of QE, the government printed billions. That has an affect.

200sols · 28 Jun 2022 at 17:54

Hades said:
Yes in theory. But such a small amount would cause an insignificant change. However, in the case of QE, the government printed billions. That has an affect.

Well loans come from a bank using existing money, QE buys bonds, financial assets etc using new money. There is a distinction.

dlockers · 28 Jun 2022 at 17:54

Mr Jack said:
So every time anyone takes out a loan money gets less valuable?

What a stupid question - the money isn't printed to serve the loan

Dis86 · 28 Jun 2022 at 17:59

dLockers said:
What a stupid question - the money isn't printed to serve the loan

No, but sometimes the money loaned can also be money that is loaned etc. so there is an artificial inflation of the amount of money in circulation.

Hades · 28 Jun 2022 at 18:00

200sols said:
Well loans come from a bank using existing money, QE buys bonds, financial assets etc using new money. There is a distinction.

From the Bank of England:

How is money created?

Most of the money in the economy is created by banks when they provide loans.

www.bankofengland.co.uk

Most of the money in the economy is created by banks when they provide loans.

Most of the money in the economy is created, not by printing presses at the central bank, but by banks when they provide loans.

Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account.

Mr Jack · 28 Jun 2022 at 18:14

dLockers said:
What a stupid question - the money isn't printed to serve the loan

The money you receive when you take out a loan is created by the bank, to a very large degree. Banks are only required to hold a very small amount of money for each pound they create in loans. Every time a loan is taken out the amount of money in circulation increases.

200sols said:
Well loans come from a bank using existing money

No. They don't. There's a common misconception that when you borrow money from a bank it's lending you money it already has from savings, etc. but this isn't true. The amount it loans you is, predominately, created de novo when it credits it to your account.

danlightbulb · 28 Jun 2022 at 18:14

Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account.

There is an accompanying liability on the banks balance sheet I would assume? But yeah, they don't take it from their account and put it in yours in a literal sense.

And when loans are paid back this money disappears I would think which is the reverse of the process.

Whereas QE money is very long term new money.

Begs the question - why can't I become a bank myself, create some money and lend it to myself then pay it back to myself.

200sols · 28 Jun 2022 at 18:16

danlightbulb said:
There is an accompanying liability on the banks balance sheet I would assume? But yeah, they don't take it from their account and put it in yours in a literal sense.

It's all in his link, he just didn't selectively quote those bits.

Hades · 28 Jun 2022 at 18:23

200sols said:
It's all in his link, he just didn't selectively quote those bits.

Because those parts I "selectively" didn't quote are not relevant to the statement of "Loans come from a bank using existing money". In most cases they don't come from existing money as per the sections I quoted.