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ECONOMIC PERFORMANCE 2022 Who is to blame for the cost of living crisis? 
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Who is to blame for the cost of living crisis? (Shutterstock) Original article: https://www.thearticle.com/who-is-to-blame-for-the-cost-of-living-crisis Peter Burgess COMMENTARY I think it was William Shakespeare that wrote something about '... full of sound and fury signifying nothing ...' There is a huge amount of media and political noise about inflation at the present time (August 2022) and most of the talk does not signify very much. It is all to obvious that prices in the supermarket and general stores have gone up faster in the last year than in any year in many years ... but this is more because the macro management of the economy in many major ecoomies including the UK and the USA has been better managed than in any prior crisis as big as the Covid pandemic. Not everything was done perfectly ... not by a long chalk ... but the global economy (in the rich countries) was healthier early in 2022 than most economic pundits expected. Frankly, there has been a lot of inappropriate exploitation of this economic strength by the business community and the banks (and financial intermediaries). This is the way capitalism works, and there is little question that capitalism works pretty well for the capitalist. There are however, a multitude of flaws in the basic capitalist model, some of which have been addressed quite well in the United States by the Biden administration. Where corporations have dropped away from as many social obligations as they can, the US government has started to step up in recent months more than at any time since the Johnson era and his Great Society initiatives. The price inflation currently being experieced is a problem but it is driven by big consumer demand and a huge amount of embedded profit at almost all stages of the supply chain. Inflation and record profits would normally be lauded as the sign of a healthy economy, but only if these record profits were arising with a Republican administration. With Democrat in the White House this is all terrible according to the GOP ... but in reality it is not too bad, and could have been really bad. I am struggling to understand just how strong the global economy could have been if the investment community was somewhat more thoughtful about where they put their money to work. The potential for great success exists, but investors seem hell-bent on avoiding the migration from most everything old and dying to most everything new and flourishing !!!!!!!!! Peter Burgess | ||
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Who is to blame for the cost of living crisis?
TheArticle Written by Daniel Johnson ... @DANBJOHN ... @DANBJOHNSON Thursday March 24, 2022 We are going to be poorer. That was the underlying message of this week’s Spring Statement — a Budget in all but name — by the Chancellor. Higher taxes, lower growth and above all soaring inflation will combine to cause the largest fall in living standards for a single year since records began in 1956. The nation is reeling from the delayed impact of measures to cushion us from the pandemic, the financing of which by the Bank of England has fuelled the fastest price rises for 30 years. And the global energy crisis, greatly exacerbated by the war in Ukraine, is hitting the entire economy. Beset by such a perfect storm, Rishi Sunak’s package inevitably seems inadequate. Tinkering with thresholds cannot disguise the fact that the overall tax burden, at well over 36 per cent, is now higher than at any time since the 1940s. The worst of it is not just that most of us will be poorer, but that there will be many more poor families. Some estimates of the disproportionate impact of high inflation on the poorest income groups suggest that they will suffer an 8 per cent cut in living standards. Energy costs will fall as the weather improves, but by next autumn they will be rising again to unaffordable levels. We must expect to see many more telltale signs of real poverty: homelessness, food banks, begging and drug dependency. We can also expect more conflicts between employers and employees, of which the ugly P&O ferry dispute may be a harbinger. Public sector unions will strike to preserve their salaries against inflation, while the private sector will pass on higher labour costs to the consumer in the form of price rises. For the over-60s, some aspects of the present cost of living crisis are all too reminiscent of the 1970s. Then, too, a complacent attitude to the money supply allowed inflation to get out of control. Energy prices multiplied after the 1973 Yom Kippur War prompted OPEC cartel of oil producers to penalise their Western customers. Industrial disputes crippled the economy, public spending and taxes rose sharply, the Labour Government ran out of money and credit. Having just joined the European Economic Community, as it then was, Britain found itself ridiculed abroad as “the sick man of Europe”. Not all of this applies now. The present Government has not presided over anything like the levels of poverty or industrial strife seen in the Seventies. Nor is there any problem about borrowing — except for the cost of interest, now running at £83 billion a year, roughly twice our anaemic defence budget. We are unlikely to witness anything as humiliating as Rishi Sunak flying to Washington to beg for a loan from the IMF, as his predecessor Denis Healey did in 1976. Neither a Three Day Week nor a Winter of Discontent is on the cards — though the police would be well advised to be on guard against a repetition this summer of the riots of 2011 or other violent forms of protest. The underlying strength of the economy means that though this year may be an annus horribilis, the long-term prospects are brighter. The overriding priority must be to get inflation under control, at all costs. The Bank of England deserves much of the blame. Despite the statutory duty of the independent Bank to keep inflation below 2 per cent, Governor Andrew Bailey and his colleagues failed to read the danger signals and to take timely action — even though some respected economists had been warning them for years. Perhaps the first to raise “the spectre of inflation” was Brian Griffiths, writing here in TheArticle in August 2020. Lord Griffiths then called on the Treasury to “confirm its commitment to the 2 per cent inflation target, publicly endorse the operational independence of the Bank of England, and produce a convincing plan to show how the deficit can be financed without excessive money creation”. The Chancellor did none of these things. Instead Rishi Sunak and Andrew Bailey have indeed between them resorted to excessive money creation through Quantitative Easing, a measure that may have been appropriate after the 2008 financial crisis but was singularly inappropriate during the pandemic. As Stephen Beer argued here last week, this was a “panic move” by which the Bank in effect printed the money to pay for hugely increased Government spending. Now the bills are coming in. Bailey and Sunak must bear joint responsibility for the cost of living crisis. Both have their excuses, more or less plausible, but politics is unforgiving. Both Governor and Chancellor are now on borrowed time. How trivial what were until recently the obsessions of the Westminster bubble now seem, compared to the real hardships faced by millions in this country and the existential struggle for survival of the Ukrainians. Hitherto the Government has handled the war well. That success does not excuse two unfortunate lapses of taste by Boris Johnson. He should not have mentioned the war in Ukraine in the same breath as Brexit at the Conservative Spring Conference, nor been caught smirking yesterday while the Chancellor spoke about that war. The Prime Minister will survive these lapses, as he has survived “Partygate”, but cumulatively they convey an impression of frivolity at a time when the public expects better. Today’s NATO summit gives him a chance to redeem himself. Don’t blow it, Boris. A Message from TheArticle We are the only publication that’s committed to covering every angle. 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