Tag Archives: interest rates

22 September 2022 – today’s press releases

  • Fracking: Rural areas treated like guinea pigs
  • Interest rates: Homeowners being punished by Government failure to control inflation
  • Recession: Blame lies with Conservative MPs
  • NHS announcement an ‘A, B, C of failure’
  • Lib Dems table motion to cancel Parliament recess and scrutinise mini Budget
  • Kwarteng growth plan: Shocking admission of Conservative failure

Fracking: Rural areas treated like guinea pigs

Responding to the British Geological Survey’s Report on fracking, Liberal Democrat Environment Spokesperson Wera Hobhouse said:

The government’s own experts have refused to say fracking is safe. That they choose to plough on regardless shows a callous disregard for our communities and countryside. From Surrey to Somerset, the government are treating people in rural areas like guinea pigs.

The Conservatives obsession with fracking lays bare that they don’t actually think that Climate change is happening and are not willing to take the urgent action needed. They are delaying climate action at every corner. The mask has finally slipped and is revealing Liz Truss and Jacob Reece Mogg as climate change deniers. It is bizarre that this has become their priority, rather than renewables: the cheapest and most popular form of energy.

If people suffer polluted water and dangerous earthquakes, this decision will prove unforgivable.

Interest rates: Homeowners being punished by Government failure to control inflation

Responding to the Bank of England raising interest rates by 0.5%, Liberal Democrat Treasury spokesperson Sarah Olney MP said:

This a hammer blow to struggling homeowners who are being punished by the Government’s failure to control inflation. This monster rate rise could have been avoided if Conservative Ministers bothered to take action sooner on energy bills and the rising cost of living. Instead, the Bank of England is left with no choice but to hike mortgage costs for millions.

It is first time buyers I fear for the most, who have scrimped and saved for their first house. Tomorrow Liz Truss has to clean up the mess made by this Conservative Government and bailout families and pensioners who will suffer as a result of this mortgage hike. This should start with re-installing an Emergency Mortgage Support Fund which was cruelly scrapped by Conservative Ministers.

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Lib Dems comment on dire economic news – but we need to say more

This week has had more than its fair share of dire economic news. The prospect of a deep, prolonged recession at a time of soaring prices means that people on the lowest incomes are really going to suffer. Let’s think about what that looks like. It means that people on the lowest incomes will simply not be able to afford the basics that they need to survive. If they don’t face the prospect of losing their home, heating it to an adequate level will be a challenge.  Putting food on the table will be tough.  Even if they just manage to get by, an unexpected car repair bill, or a washing machine breakdown, could be problems that they can’t cope with. It is quite likely that we will see levels of poverty and suffering that we thought were gone for good.

It’s the most terrifying economic landscape since 2008. And with recession comes the prospect of people losing their jobs. We didn’t have energy and living costs on a steep upward curve then.

I remember only too well the recession of the 1980s. That ITN Jobs round up every Friday showing so many jobs being lost every week. Soaring unemployment as, one by one, our key manufacturing industries crumbled.  Remember UB40’s One in Ten?

At that point though the welfare state met more of your living costs if you lost your job. You at least had some chance of getting by. And students could get help with Housing Benefit and could sign on during the long Summer holiday if they couldn’t get a job. Now, benefits are less generous, and woe betide you if you dared have more than two children since 2017 because you won’t be able to claim any Universal Credit for them.

During the 90s recession, I worked in the civil courts in England and it was heartbreaking to see the huge rise in both mortgage and rent possession cases. Each one of those meant that someone was in danger of losing their homes, and many did.

As interest rates rise, so do mortgages. Already high private sector rents are likely to increase as landlords pay more on their buy to let mortgages.

It all seemed terrible back then, but now the prospects and the pressures on incomes are even worse.

Inflation on its own is bad enough but then you have a nearly £1300 rise in energy costs from their already high level from October with the prospect of further rises every three months. If you are on a low income you are more likely to be on a prepayment meter and will find it more difficult to access help while you pay proportionately higher prices.

And all the time prices continue to rise with the Bank of England warning that inflation could hit 13%.

There is not much in the way of respite coming your way. The extra money already announced isn’t going to go very far if you are low paid.

All of this comes at a time when the Conservative Government have been cutting public services for too long. So where councils might have been able to provide much needed help in the past, they are not able to do so now. Advice agencies also need investment so that they can help people find their way through and advocate on their behalf.

Senior Liberal Democrats have been talking about the crisis. Here’s Ed Davey on the news of the energy price cap rise:

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Does “Assume” Make an Ass out of U and Me?

Once upon a time our assumptions about interest rates were that they were always in plural digits. Now we accept near zero interest rates and some accept negative interest rates as normal as they have been around for about a decade.

What would happen if currently “normal” mortgage rates returned to their higher previous “normal” rates? What would happen to car sales and the like if we returned to the “old normal” interest rates? How can people and institutions save when interest rates are nominal and interest fruitful amounts of money are so vulnerable?

With near zero interest rates, is the stock market the only actual vehicle for investment income? Is it reliable for the many?

Another previous normal assumption was that massive money creation would result in inflation/excessive inflation. It hasn’t. (Assuming relevant data is accurate). Can we now assume that the massive use of money trees does not, in practice, affect inflation significantly?

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What is monetarism and what happened to it?

In the late 70s and early 80s economic monetarism was espoused by Margaret Thatcher and Sir Keith Joseph  who wanted a radical alternative to the prevailing Keynesianism of previous governments. The theory seemed to be simple enough. The idea was that the money supply was a key parameter of our economy. Therefore, if we wanted to control inflation, and it did need to be controlled at the time, all Government needed to do was control the supply of money. Inflation would then fall and all would be well. Very quickly the Government and Treasury economists learned that they could not actually do that. It was difficult enough to define what money actually was let alone control the amount of it. Is it base money M0, which is just the amount of notes and coins in circulation? Or is it M1 which includes travellers’ cheques and demand deposits? Or, maybe M2 which includes savings deposits? Or M3 or M4?  For anyone who cares to look it up they can find out what MZM means. There are lots of ways we can create money and lots of ways to try to define it. If I write out an IOU that is a form of money. As Minsky famously said, anyone can create money. It is getting it accepted which may be the problem.

But if we think about it, we can see that the money supply, no matter how we define it, does not tell us anything much at all. If the Bank of England were to, say,  create £10 trillion of banknotes and keep them securely in their vaults they would have absolutely no effect at on the economy. But if they were stolen and scattered around the country by dropping them from a proverbial helicopter then they certainly would have an effect. They would be spent. So it is not so much the amount of money that exists that matters. It is the amount of money that is spent.

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Opinion: Getting radical with the money supply

Last week the OECD forecast that Britain was about to experience a double-dip recession, for the first time since 1975. Vince Cable in his Centreforum paper Moving from the financial crisis to sustainable growth asks “How far should monetary policy now be expanded further in the UK to boost demand and head off a period of poor growth?

He goes on to say “There is no possibility for further meaningful interest rate cuts – real short term rates are now minus 4 percent. That means further recourse to quantitative easing.

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