a thread in which ilx interprets economics and finance, sometimes linen by linen*, and disagrees a lot (probably)

Someone in the NLR has written about inflation.

"the grammar of the new inflation is not confined to the conjunction of the pandemic, the material tensions arising from the green transition and the war in Ukraine". It is also "a slow-motion financial crisis" https://t.co/N2B7oUsb1W via @newleftreview

— Cédric Durand (@cedric_durand) December 22, 2022

It seems to me relatively sensible for government to meet unions' pay demands (nurses, ambulance drivers, rail workers etc).

I want that to happen anyway because I support trade unions and oppose the government. But I also think: given how much government has spent on other things (eg: wasted money on botched procurement during lockdowns), are these pay increases that much to them? The rhetoric of 'we can't afford these irresponsible rises' doesn't ring very true to me.

Meeting these pay demands would also end strikes and improve NHS function, which would be relatively popular with voters.

Further, giving people more money would presumably encourage spending, eg: on property or in services and shops, and this would be 'good for the economy', good for restaurant owners etc.

I find myself thus positing that government's reasons for not meeting the pay demands are more nefarious and connected to eg: trying to break up the NHS.

Or is it just that the kind of bad people in government hate the kind of good people in the NHS, and can't bear to give them anything?

yes/both also hanging all problems on organised labour ideally turning "the public" and other workers against industrial action in general and in future

cost, efficiency etc are things that can be invoked to justify whatever but the tories don't seem to care too much about them except for that purpose

Yes, I agree that the other reason for refusing these demands is to be involved in a fight with the labour movement for the sake of it, because they think this looks good.

I still think this is probably 'bad economics' even on their own terms, and 'bad society', even if it is 'good (that is, evil) politics'.

I suspect the government is also worried that if it “gives in” in one area - rail, the NHS - it will embolden the rest of the union movement. Which is probably true! And the reason the government thinks this would be bad is because it thinks it can’t “afford” the pay rises (clearly untrue, as the pinefox suggests) and is probably also still worried about a wage-price spiral. And finally of course is implacably opposed to the idea of worker control in general.

The wage-price spiral idea is one that I, predictably, don't understand.

If people are poor and their pay is falling behind the cost of living, how is paying them more going to make things cost more?

And things are already costing more anyway. So worrying that you're going to increase the price of things would seem, at best, to be worrying over the door of an empty stable.

No comments on the merits of settling strikes, but the Govt is brassic:

In November 2022, the public sector spent more than it received in taxes and other income, requiring it to borrow (public sector net borrowing excluding public sector banks (PSNB ex)) £22.0 billion, which was £13.9 billion more than in November 2021, and the highest November borrowing since monthly records began in 1993.

Well I have one main comment: it’s ludicrous that the Govt places such emphasis on “market forces” and yet the moment when they are presented with the evidence of thousands of vacancies across the public sector, people leaving and recruitment difficulties, and other evidence that pay is too low, they suddenly lose their market philosophy.

It’s the “skills gap”! Just can’t find qualified people willing to work for these wages! It is a mystery!

Luna I’m far from an expert but my understanding is that public debt in the UK is just not something worth worrying about rn

https://kotaku.com/victoria-3-communism-op-paradox-simulation-capitalism-1849832954

it was 90 something percent of gdp and that's quite standard, according to the bloke on the radio.

the nurses want 19% which seems high but is probably coming on the back of years of underpaying and 14% inflation. government is arguing that a (much lower) payrise had already been agreed, but that was before they themselves tanked the economy.

Yes and that pay recommendation came before this unprecedented inflation.

pf the wage-price spiral is supposed be that higher pay settlements force companies to charge higher prices, because their labour costs have risen. The higher prices then encourage unions to demand higher wages. And so on.

of course the gov are saying that the inflation will be taken into account next April, but that's months away and nurses are already using food banks.

if only the nurses could vote themselves a pay rise like the politicians do... (see also the cabinet expense claims that were just released)

maybe they can do the thing that other poorer European countries do and sell noble titles to rich foreigners ...

needs a catchier name and someone important to organise it...

https://www.theguardian.com/uk-news/2021/sep/19/prince-charles-cash-for-honours-scandal-grows-with-fresh-allegations

keep it in the british politics thread folks

we invented capitalism so it's relevant

prince-charles-cash-for-honours-scandal-grows-with-fresh-allegations

i'm FPing for this url

A little something: https://pudding.cool/2022/12/yard-sale/

But, Tracer, paying nurses more wouldn't mean that any company would need to charge higher prices for anything, that I could see.

Ditto firefighters and other public servants.

I think I see that if a hamburger restaurant starts paying its waiters 20% more, then they need to charge more for burgers.

But I don't see how that applies to public service workers.

I think you’re right pinefox, and I think that the fears of a spiral, such as they are, are misplaced at best and bad faith at worst.

This tweet addresses a question that has puzzled me.

I am bemused by claims that we cannot afford 10% pay rises for public sector workers when we have inflation of 10%. Do the politicians saying this not realise that this means we also have an increase of near enough 10% in tax revenues, or more than enough to cover the cost?

— Richard Murphy (@RichardJMurphy) January 7, 2023

Yeah, I think inflation is generally good for government cash flows. It increases tax revenues, while interest expense on outstanding government debt stays constant.

I think Richard Murphy generally answers a lot of economic questions in an accessible way, if you can handle his insane volume of tweets and tendency to catastrophise.

He often explains things from a 'modern monetary theory' perspective, which I find interesting, though don't think it's come up on this thread.

i didn't know people were still into modern monetary theory. it kind of went away the last couple years

the charitable take on MMT is that it's vacuous, the uncharitable take is that it is a scam

flopson, any thoughts on biden's ability to mint a trillion dollar platinum coin

the coin thing is funny b/c if he minted the coin and they dropped it and couldn't find it and a janitor picked it up and brought it to the bank the president would probably say "the coin isn't real do not give the janitor a trillion dollars" thus giving the lie to the whole coin thing potentially

the trillion dollar coin, as well as premium bonds and other related ideas (perpetual consols, premium bonds, having the fed "donate" treasuries) are all risky. there's the short-term risk of freaking the market out, and also the long-term risk of undermining fed-treasury independence and the delicate balancing act of norms around these things. but they're all infinitely better than defaulting. if it weren't for the debt ceiling there would be no reason to do them, but one of them will be done before default is ever allowed to happen. i don't think the coin would be the one they pick though, it just sounds too silly. my guess is they would do perpetual consols (bonds with no maturity) because they have existed in the past (the last ones were issued in the 1930s) and are extremely boring sounding

But is the government also a consumer and to what extent do market prices affect its purchasing power?

For example, what if Lockheed Martin claims inflation? I suppose this might be unlikely.

What about foreign debt and trade imbalances during inflation? Does that work out okay? Could someone explain this to me in a way I can remember?

But is the government also a consumer and to what extent do market prices affect its purchasing power?

― youn, Friday, January 13, 2023 10:54 AM (yesterday) bookmarkflaglink

inflation is generally good for the government. prices go up which increases the cost of expenditures, but remember that governments get tax money for every sale in the economy. so tax revenues . typically these two channels cancel each other out and the effect is neutral. inflation is good for the government finances of debtor countries because it erodes the real value of nominally denominated debt

don't really follow your other 2 questions, sorry

Lockheed Martin could charge a lot more for weapons where the US government spends a lot of its budget? Or is this kind of pricing stable? But when people say the dollar is strong what does that mean in the context of inflation of currency and what effect does it have in different possible combinations for inflation in the US and other countries?

Strong dollar is usually a reference to exchange rates. There is some connection between exchange rates and inflation but they are separate.

I wonder about exchange rates and the USD as a standard in the context of an increasingly global economy and foreign debt carried by nations. Isn't this why an international tax rate matters?

cf. the currency for interest on debt

seems to me you worry about a lot of things

turtle: what you are saying sounds like I shouldn't worry about a lot of things (because they are beyond me? I would probably agree/)

Before inflation took hold perhaps, I thought the dollar was strong, but inflation means it is weak at least in the US, but then central banks changed their interest rates perhaps in response to the Federal Reserve and not necessarily dependent upon whether or not inflation was happening internally, perhaps it was. Recent discussion around federal debt limit increases in the US and also memories of 2008 make me wonder whether the currency system as a system is too fragile.

(I was hoping to buy lots of nice jumpers from Margaret Howell)

fiat currency seems much less fragile than specie, the 19th century was full of currency crunches!

the whole silicon valley bank thing unfolding right now is a pretty good opportunity to learn in real-time about the perils of fractional reserve banking!

WSJ says it's the second biggest bank collapse in history, "rattling investors"

Good, let 'em rattle

However, this is my current favorite WSJ headline:

Led Zeppelin’s Jimmy Page Battles Neighbor Robbie Williams Over a Basement Man Cave

that battle's been going on for years iirc

i assume there's been a new development

a thread in which ilx interprets jimmy page's battle with neighbor robbie williams over a basement man cave, sometimes linen by linen

given that i have a hard time understanding how bond markets work i’m not sure why i think i would be able to understand this but it’s annoying to me that i don’t

The real unrecognized problem of the financial system is the mistaken belief that “atomic settlement” can somehow make things safer and more efficient without generating different types of risks. But instant “real time” settlement is a bit of a false friend. Why? Because it does… https://t.co/0opJbL3MzU

— Izabella Kaminska (@izakaminska) March 18, 2023

I tried reading that and I don’t understand it either. It seems to be about some kind of government mandated clearing system between large banks. These kinds of topics are notoriously technical and dry, though no doubt important, especially if you’re a bank regulator or run a bank.

I will take that bet.
You buy 1 BTC.
I will send $1M USD.
This is ~40:1 odds as 1 BTC is worth ~$26k.
The term is 90 days.
All we need is a mutually agreed custodian who will still be there to settle this in the event of digital dollar devaluation.
If someone knows how to do this… https://t.co/tcuBNd679T pic.twitter.com/6Aav9KeJpe

— Balaji (@balajis) March 17, 2023

lmfao

a magical story. this was me this weekend talking to my wife about it.

SO MEDLOCK WAS JUST MAKING A SHITPOST ABOUT A SELF-HEDGING BET BUT BALAJI HAS BEEN DOOMPOSTING ABOUT HYPERINFLATION FOR MONTHS SO HE TOOK HIM UP AT WILDLY UNFAVORABLE TERMS BUT MEDLOCK DIDNT HAVE A BITCOIN ON HAND SO THIS PRO POKER PLAYER CAME IN TO BANKROLL THE BET AND pic.twitter.com/7DrLBIKzgp

— Colin Fraser (@colin_fraser) March 18, 2023