scepticus
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11 hours ago, PrincessNutNut said:
The currency is already largely digital - CBs are not literally printing bank notes. A CBDC (assuming it's blockchain of some sort) wouldn't change much in and by itself. That's mainly an infrastructure challenge, I believe.
The real issue is the discussion of cutting out the high street banks by giving citizens bank accounts with the central bank.I agree the key change is retail accounts with the CB. However don't discount the impact of genuinely anonymous digital CB currency - it would politically allow the deprecation of paper cash, which is a key step on the road to an interest rate which can be negative or positive.
11 hours ago, PrincessNutNut said:That would be extremely inflationary, as the CB can then directly influence money velocity. The day they announce that - I will spend every penny I have.
Depends whether you believe negative rates are inflationary or deflationary - opinion is divided. Certainly never ending printing of money and issuance of new government borrowing (which are basically the same thing) is inflationary, but I think the point of a negative interest rate is as an alternative to that which can still sustain demand. And currently there is no alternative. So I would suggest that in the medium to long run, CBDC and the possibility of negative rates are a stablising factor set against ever expanding deficits and QE.
Time will tell, but if and when this ever comes to pass it will be a very significant money making opportunity for those that guess correctly how it will and won't pan out, and I'm not sure the hyper-inflationistas will be on the right side of history.
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12 hours ago, PrincessNutNut said:
Our unfortunate problem is, that no-one seems interested in slowly making the change either.There are slow burning changes underway including CB digital currency and -ve interest rates. The trigger hasn't been pulled yet but the system evolution pathway seems clear to me.
Obviously one doesn't pull that trigger when a stagflationary recession is all everyone is talking about but after the next blow off top and re-emergence of deflationary pressure that finger will be very itchy.
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20 hours ago, Locke said:
Bitcoin up or neutral
of course.
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The reason why rates can't go up that much is because the economy needs to re-balance. After 30 years of excess returns to capital (yes that is mine and your savings) and negative returns to labour, we'll need a good decade at least of excess returns to labour over capital. And that has to mean a loss in purchasing power of money.
It is a very much ignored fact that the targeting of price stability in the regimes of the last 50 years have been at the expense of wages. One picks one's poison - we all picked protecting the rich and pensioners rather than Joe Blow's income.
The only way rates really get to take off if is wage inflation really takes off, and I mean to the extent that its is in danger of undoing 30+ years of excess returns to capital. Don't hold yer breath.
A parallel but very important factor is ageing and demographics. With Brexit and the ending of a cheap influx of immigrant labour, wages are going to have to rise relative to return on capital due to this factor as well as past imbalances.
So my view is :
- rising wages, slowly at first and then accelerating as demographics bite
- rate rises must trail wage rises, and really here I mean wage rises at the bottom end of the market
- negative real return to capital for the forseeable. This will apply regardless of the nominal interest rate be it 0, +ve or -ve.
Rising rates imply downward pressure on real estate and other assets, but rising real wages imply rising real estate prices, at least within in a regime of negative real interest rates.
That said I do think a rise to 1% nominal rates may well blow the froth off the top of the market.
Lastly its interesting to note that one way for real wages to rise is for housing to get cheaper while actual income remains static. However its hard to see how the return on real estate can be de-coupled from the return on capital markets (what with BTL and all that) and we do have a housing supply problem in this country, and real estate will still be protected if the state can manage it since its real estate that backs the credit money supply.
It'll take quite some while for all this to play out. If we do get any sharp corrections they probably won't last, so if that happens consider taking the plunge if you have some margin.
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On 11/09/2021 at 09:59, PeanutButter said:
Having watched the progression of robotics in the Boston Dynamics videos, I have no doubt that given enough input data to learn from that AI will be able to negotiate these types of situations. The only question is when.
Self driving HGV convoys are quite an easy problem relatively speaking to self driving domestic vehicles. The AI lorries would not do the last 10 miles. They'll be the new canals. Out of the depot en-masse, maybe 2-5 vehicles per convoy, via a very familiar route, along the motorway, into a local distribution centre. Fully mapped and monitored the whole way from Glasgow to Rome. Bad weather could disrupt, but in most circumstances all the long haul human drivers can be replaced, and instead the humans do the last 10 miles and door to door delivery.
A network can be built like this, a bit like the backbone of the internet.
Only the lead vehicle and rear vehicle needs the full gamut of sensors and AI, one forward facing and one rear facing, and with a small array of side facing sensors on the middle ones.
Need not be fully autonomous anyway, they can be supervised by an ex-driver sitting at home, to deal with any unexpected weather events or motorway accidents etc, and for legal cover etc.
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8 hours ago, msi said:
Said before, when this goes from one-offs to into regular rises and inflation, then IRs go up - can't have the masses earning more
Quite so. Has always been the problem with the financial system logic. IRs must go up in line with inflation to protect real value of savings, but no such similar guarantee or protection for wages.
That boondoggle works for a while, but not forever.
Wages should go up and real rates should be negative to rebalance the wage/interest income situation.
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I did not question the standard definitions for nominal and real rates of return as you stated them above. I merely stated two opinions:
1) a nominal rate that differs significantly from the real rate is not a social benefit, its a social harm.
2) I question the 'standard' interpretation of the nominal rate as being simply the real rate plus expected inflation.
edit: oops I see my mistake. I should be talking about the nominal rate of interest versus the real rate of return. I do apologize!
Let me restate the above as:
I do not question the standard definitions for nominal interest rate and real rates of return, instead I state two opinions:
1) a nominal interest rate that differs significantly from the real risk free rate of return is not a social benefit, its a social harm.
2) I question the 'standard' wisdom that the nominal interest rate should be simply the real risk free rate plus inflation.
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On 15/08/2021 at 14:02, A.steve said:
I disagree... You refuse to recognise commonly accepted definitions and insist on using your own (undeclared) 'special' interpretations of common, and widely understood, phrases... which renders your debating position farcical. I am unclear if this is your conscious strategy or if you are genuinely confused by the terminology.
Its a shame you've chosen to ignore and not engage with my key points. It feels like the above is a shimmy to justify that, especially since you haven't highlighted what exact definition you think I've misused, which makes any kind of constructive further response on my part impossible.
I am unclear whether this avoidance is a conscious strategy on your part, or you are genuinely confused by what I have written.
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Seems like eating out will become permanently more expensive and so it should, hospitality staff are long overdue a pay rise. This will come about from lots of staff leaving that, and related, industries, as per recent news articles. Which doesn't really matter because no-one has to eat out to survive. The hospitality industry likely needs to get smaller to balance supply and demand and be able to recruit workers at sensible wage levels.
There is I'm sure some core inflation at work but in itself nothing to be scared of as so far as a whole as long as average wages in the lower range of wage earners are rising at least as much, or preferably more, than said inflation.
Alongside that there is a lot of rebalancing going on after a major shock, some of which is likely to become permanent.
Too early to unpick all the different drivers, I think. And also, its a good thing if median real wages rise, even if it makes discretionary purchases look expensive and inflation look significant. It would be a grievous mistake for monetary (or fiscal) policy to be employed to reduce employment in the median wage range in order to protect pensions and savings of the better off, or frankly the pensions and savings of cohorts which have previously been the beneficiaries of unwarranted protection whether better off or not. That will lead to tears all round sooner or later.
So, lots of stuff and prices changing, lots of supply and demand imbalances, during which sensible people looking for work, or to switch industries, or to invest savings need to remain calm and patient, and avoid tilting at windmills.
It would be a brave central banker who thinks he or she has the measure of exactly what is going on and would make any major changes either way to current policy apart from perhaps to try or signal a wee taper and see what occurs.
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2 hours ago, captainb said:
Tfl since inception has been a mixture of fares and gla grants unlike other central government funded local public transport.
TfL is only the latest chapter. It was owned by and funded by central government, sometimes under British Rail, over various periods from the end of WWII.
2 hours ago, captainb said:As for having 40% of your tax take being redistributed to the provinces being a "red herring", well it's clearly not given the vast material nature of the transfer.
That is no different to people who pay the highest rates of income tax to subsidise low earners and non earners.
2 hours ago, captainb said:At some point places like Bristol should stand on their own two feet.
"A first-rate city with a second-rate country attached.", neatly sums up the state of affairs.
What it neatly sums up, is your Thatcherite standpoint - which of course you are entitled to - and the rest of the country is free to (and likely to) take considerable issue with.
Bristol does stand on its own feet by and large - its quite lucky. Up north is a very different matter however.
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26 minutes ago, GregBowman said:
A few billion spent in the provinces isn't going to change that.
Well it certainly wouldn't hurt, either London or the regions, based on your view.
Based on what you said London will always be able to pay for itself and more, and so it should do, given it is part of the transfer union we call the UK.
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1 hour ago, GregBowman said:
The capital of any nation will always attract more hard investment and soft investment by way of private companies choosing to operate there
That’s just the way it is as the song goes
If London and the Home Counties pulled up the drawbridge that would be fine for us not so the provinces.
It’s not just the city boys who pay more tax , it’s across all industries the most talented from Lawyers to technologists gyrate to London and hence are paid more
Not so. The above is not the case in Germany or Australia for example.
Also from https://www.europarl.europa.eu/RegData/etudes/BRIE/2019/637951/EPRS_BRI(2019)637951_EN.pdf:
"A prominent trend is the concentration of pockets of relatively high wealth creation in almost every capital city region. Particularly high ratios were recorded in Inner London – West with a GDP per capita six times as high as the EU-28 average (i.e. 611 %), Luxembourg (258 % of EU average), the Irish capital city region (217 % of EU average) and the Belgian capital city region (200 % of EU average)."
So while one would in general expect a higher level of wealth in a Capital city, London is still a massive outlier thanks to post-war policy of both Labour and Conservative administrations.
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23 hours ago, captainb said:
You do realise that the per capita spend is funded through fares and buisness rates? At least was pre pandemic
If Bristol wants a crossrail then put a surcharge on business rates like all central London firms have been paying for years
Would love London to go independent or self management. Far too much London tax flows to the region's.
UK tax take per head including London is 12k, Londoners pay 18k. Crazy spread.
"During the financial year ending (FYE) 2019, total public sector revenue raised in the UK was £811.3 billion (£12,213 per head), representing an increase of £34.1 billion (£461 per head), from FYE 2018.
Most revenue was raised in London (£161.9 billion on a geographic basis and 162.1 on a population basis) and the South East (£131.0 billion on a geographic basis and £131.2 billion on a population basis). This is equivalent to £18,177 per head on a geographic basis (£18,195 per head on a population basis) and £14,341 per head on a geographic basis (£14,360 per head on a population basis), respectively.
Ah, a classic apology for a deep seated and long running London bias. Business rate funding for TfL only started from about 2017. Prior to that it was DFT grants.
Also, TfL benefits from a huge endowment of existing long term infrastructure, mostly funded in the past from central funding. This endowment produces a steady income from fares not enjoyed by most other urban areas because they never got the capital investment in the first place.
Restoring the long running iniquities of regional transport funding is going to have to involve London and the SE losing out to the regions, otherwise the gap will never be even slightly closed.
And the difference in tax take per head is a red herring, we are all well aware of the reasons for the difference.
I would be fine for London to devolve but only after 5 decades of preferential treatment has been reversed. I can certainly see why Londoners might like to pull up the drawbridge now.
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Interesting. I was completely unaware of this iBuyer thing.
I don't think its inflation hedging, its a middleman thing, buying a bit lower than private buyers and selling at market, possibly with some premium for brand reliability. So agnostic to inflation, but highly exposed to deflation/recession.
One undeniable upside is that it will squeeze EAs. There will be downsides though.
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Just add some evidence for the above, since writing that last respose I find this:
Which think makes the some of the same points I made above.
e.g.
In the first setting, we find that a central bank should place some weight on observed consumption inequality. That means the central bank will use monetary policy, by setting lower interest rates that stimulate growth and wages and thereby reducing consumption inequality, while tolerating inflation moving above its target. However, we find that this weight is generally small and thus output and inflation are not that different from those that would prevail if the central bank ignored inequality. Interestingly, a central bank pursuing such “optimal policy” cares progressively less about inflation and more about growth the higher the initial level of inequality. This is because when initial inequality is high the central bank will try harder to adjust interest rates to stabilize wages and protect the consumption of the poor. Thus, stabilizing wages, and hence inequality, coincides with stabilizing growth.
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13 hours ago, A.steve said:
Mon dieu! I'll answer only this bit - as it isn't even coherent - let alone a challenge.
unfair!
13 hours ago, A.steve said:The nominal rate of return will be in excess of the real rate if, and only if, the metric adopted for inflation has a positive value. This fact follows trivially from the standard definitions of 'real rate of return' and 'nominal rate of return'.
The accurate rate of inflation is a matter of opinion - hence: so is any 'real rate of return'.
Estimation of the real rate is indeed a matter of opinion, which is why its best left to the market to determine it.
I also think you are making the assumption that the nominal rate will always feature an inflation premium and where inflation is positive (in the opinion of a holder of money or bonds) then the nominal rate will be > real rate.
However I think this is wrong. As I have pointed out earlier, the nominal rate of interest, left to itself, will be set not just by what investors or savers think about inflation, but rather by the supply of, and demand for, savings in nominal instruments.
13 hours ago, A.steve said:So... you've asked: is deflation 'socially harmful'? Well - that depends what you want from society. A rate of inflation that is (unexpectedly) increasing benefits net debtors relative to net creditors. A rate of inflation that is (unexpectedly) decreasing benefits net creditors relative to net debtors. As long as participants in society have common, clear inflation expectations, I'd argue, the rate of inflation is neutral towards society as a whole. I am prepared to admit - of course - that volatile inflation (and volatile inflation expectations) are deeply damaging to society as this undermines efforts, across-the-board, to consciously plan ahead - which leads to inevitably poor outcomes.
No I didn't ask that. You've answered the question you wanted to answer, like a politician on a news channel interview. I asked whether a nominal interest rate curve is helpful in assisting people to form their inflation expectations, and the extent to which the divergence of this rate from the real rate is harmful to assessing inflation properly.
> As long as participants in society have common, clear inflation expectations, I'd argue, the rate of inflation is neutral towards society as a whole.
Ah but that ignores distributional effects, and is a typical economist argument. if there is inflation, and holders of nominal cash and bonds are protected against that inflation then the poor who have no savings but only wages are only protected if their wages rise. Yet, there is no guarantee that their wages will rise and since 2000 this has turned out to be the case, although possibly we are due a reversal soon. This is the problem with price stability targeting, its harmful unless wage stability is also targeted.
It is not reasonable in my view for any government institution to run a policy aimed at protecting holders of nominal wealth against inflation unless a similar guarantee exists for wages features in the policy. After all the poor with basically no meaningful savings constitute the vast majority of voters.
In the days of the gold standard for example, holders of currency were not protected against inflation. Gold was gold and if grain prices rise, then tough. If grain prices fall, then happy days. Long run prices tended to be stable but not short term ones. We now have the opposite.
13 hours ago, A.steve said:You might have asked me to say if I'd prefer inflation or deflation. That is a difficult question... especially as I believe the figure one assumes for inflation depends, to a large extent, upon your strategy to measure it. I like deflation when it arises in the context of technological progress which results in abundance of supply of tangible goods. I dislike deflation when it arises as a consequence of poor governance artificially suppressing demand. If high inflation is coming down the track... one would be motived to buy-up and hoard tangible commodities and assets - using credit. This would, fairly obviously, be extremely socially damaging. The exact grounds on which Brown declared that 2% CPI should be a symmetric target remains a mystery to me. That said, "low and positive inflation" does make a lot of intuitive sense as being a sensible objective that a government might set for itself.
Again, I'm not sure I actually asked that question, but anyway:
...the problem with deflation is that the assumption that the nominal rate will be the real rate plus an inflation premium cannot hold in the presence of a zero lower bound on nominal rates.
If the real rate was say 1% and inflation was running at -2% the nominal rate would need to be -1%. However people say this is impossible. If that's true, it cannot also be the case that the nominal rate can be defined as the real rate plus an expected inflation premium can it? people who hold both positions are being logically inconsistent.
13 hours ago, A.steve said:While I'm not entirely convinced, the traditional economics argument is that inflation is the exact same concept as government over-spend...
I'm not convinced either. I certainly think its a factor, but there are plenty of others. Merely running a balanced budget will not protect consumers against supply/demand swings in commodity prices, technology shocks, demographic shocks, currency fluctuations etc. Certainly gold standard governments that ran balanced budgets did not and could not offer such guarantees. In fact I think short term (<10 years) price stability guarantees are not possible since the real world is too complex for that.
I also think that a government which wishes to operate a price stability regime cannot also run a balanced budget. If that's true then I would hold that the price of short term price stability guarantees is persistent nominal inflation. Maybe that is why the CPI inflation target isn't zero? It comes back to my point earlier that compensating nominal wealth holders for inflation via monetary policy leaves it up to fiscal policy to compensate wage earners for inflation to keep the effects of inflation fully socially neutral. Doing this requires the government to operate a deficit in order to provide inflation compensation to wage earners.
All of which adds up to persistent inflation, unless the lower bound of nominal rates is approached.
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10 hours ago, GregBowman said:
I would really be f**** off if any of the money I was paying as a Londoner was shovelled out to another city like some third world project, surely way out of his remit ?
The help Marv offered is just advice AFAIK.
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On 12/08/2021 at 11:22, GregBowman said:
I didn't realise the Newcastle tube was built so recently I have used it, it's great. I am a tube rat big fan of the underground. My point is in an age of austerity will there be the will to do it especially as we are approaching peak car ? Newcastle was completed in the last great age of joined up thinking at least in some areas of local and central government.
Apparently Kahn has offered to help Marv build his tube. Also seems to be the case that public transport spending per capita in the SW is 1/3 of London. Now central London is mostly empty of passer-by and commuters, what better time to level the public transport playing field. Simply reaching parity per capita with London in Bristol would pay for quite a bit of nifty public transport in my city.
Doesn't have to be underground either.
Of course Kahn says spending more on the regions doesn't have to mean spending less on London, but I humbly beg to differ.
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8 hours ago, GregBowman said:
I didn't realise the Newcastle tube was built so recently I have used it, it's great. I am a tube rat big fan of the underground. My point is in an age of austerity will there be the will to do it especially as we are approaching peak car ? Newcastle was completed in the last great age of joined up thinking at least in some areas of local and central government.
Something needs doing. The hills don't help of course - makes cycling hard work as well.
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7 hours ago, Big Orange said:
Bristol has lots of potential and things going for it, but is really hamstrung by its nightmarish hilly geography (that gets in the way of everything) leading to more intense overcrowding and mediocre public transport. And the bizarre local bureaucracy (with different councils running the same continuous urban and suburban sprawl) is really holding back the city by decades (with no proper stadiums and venues suitable for a city of its size, etc).
Yes that is all true.
7 hours ago, Big Orange said:It's a relatively nice city, but its central area has really gone downhill with crazy hobos , junkies, and mad vagrants that can't be controlled (the Bear Pit stalls all cleared out as a result, an art gallery party got gatecrashed by a psychotic, I got threatened by a rando loony for him being in my smartphone camera shot, etc).
Also true, but balanced by improvements in most areas adjoining the city centre. City centre decay is also hardly unique to Bristol.
7 hours ago, Big Orange said:There's also a permanent feud between hipster/student types and the more inbred city locals....
Also true of most university cities, but tends to be worse in Russell Group Unis that are not out-of-town campus sites I imagine.
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1 hour ago, Odysseus said:
In my view, It has a dangerous combination of high levels of wokery combined with a downtown Mogadishu vibe.
My friends lived in Easton (I think) and I went to the shops to get some beers in the evening and genuinely felt uneasy walking down the street, something that has never happened to me London and I’ve lived in Peckham/Elephant. I’m sure the local luvvies would call it “vibrant” but to me the whole area seemed run down, dirty and somewhat lawless.
Yes like any true 'city' Bristol has plenty of edgy areas where most people won't want to live. But so what, how is this different to Paris or London? I think I am right in saying that there is much less knife crime per capita in London than Bristol. In fact isn't that the case when considering London versus any other UK city?
Plenty of areas of Bristol have always been posh like Clifton, Redland, Syned Park, St. Andrews, and Henleaze (all of which are permeated by the very posh Bristol Uni) , plus middle class bastions such as Bishopston, Shirehampton and Stoke Bishop (also influenced by the universities). And plenty of dodgier parts have been massively gentrified in the last 20 years including Montpelier, Easton, St. George etc.
None of which is to justify any of the above, rather just to call B.S. on the notion that Bristol as a whole is a bad place to live, aside from the perennial question of affordability.
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9 hours ago, GregBowman said:
Talk about history repeating itself, Bristol, Bracknell, Reading, Basingstoke were all the promised land for tech and financial services 70's/80's/90/s but are now a shadow of their former selves.
The landscape has changed companies aren't international with big anywhere in the UK presence. They are global and will want to be in the capital.
https://www.wired.co.uk/article/london-tech-firms-return-office
Kings Cross particularly has a long way to run.
Its a provincial town calling itself a city. Population 500,000 its got a little way to go to be a 2nd city.
Rubbish, IMO. I've lived in and around Bristol for 25 years and the place has only gotten better. When I started out in my career I had offers based in Bracknell, Maidenhead and Kings Langley and Bristol. A quick visit to these places was more than sufficient to confirm what the right choice was, and I'm super happy with my choice.
I have to say the above sounds like a SE denizen hoping against hope London and S.E. will retain its dominance. We'll see what happens but I think there is little rational case to be made for London and the pricey S.E. at this point.
Bristol/S.W. may be pricey too, but not as pricey as London/S.E. Which in the end is the dog that will wag its tail.
When enough London/S.E. money and jobs come to Bristol and regions, Marvin will be able to build his planned Bristol underground service. God knows we need something like that because traffic problems in and and around Bristol are terrible.
My employer, which is Bristol HQ-d, decided to open an office in London recently. We may keep it - if it pays its way.
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10 hours ago, MonsieurCopperCrutch said:
Showing your age there Nuts. 😀
What's so bad? It's full of ex-Londoners innit. 😉
Well that is the logical consequence of levelling up and a move away from a London bias.
We can't have it both ways, that is a levelling of regional bias without a corresponding diaspora from the previously privileged regions. Long term though, this is a good thing. Bristol may be an initial target but after various folks have been proced out of Bristol, folks in the midlands and wales will be complaining of invading Bristolians and Bath-ians and Oxfordians.
Logic aside though, I have to say I agree emotionally with all the sentiments about invading Londoners. Not much to like there.
Then on the flip side I do have the vested interest of owning a property in a rural area on the immediate outskirts of Bristol.
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On 10/08/2021 at 19:56, Si1 said:
It would have been impossible to climb the greasy pole without some degree of cheating and lying.
That applies in all walks of life, not just careers at the BoE. For example it would be equally in evidence at a call centre in Solihull, I imagine.
We have known for 2000 years this also applies to politics.
Live off the interest: a Boomer myth or just financial illiteracy?
in House prices and the economy
Posted
The best productive asset one can have in a negative real interest rate situation is a job with an income whose wages outpaces inflation. That is, valuable knowledge. Which is in the end, is what makes the world go round, and hence will hold value versus other assets.
See constructor theory.