O/T. The Government's handling of Covid

[Andy_Faber]

The magic money tree again

I'm actuallyamazed this one hasn't been trotted out ad nauseum by the media, especially as HMG policy does actually look like it depends on it at the mo

[swaledale]

I'm actuallyamazed this one hasn't been trotted out ad nauseum by the media, especially as HMG policy does actually look like it depends on it at the mo

Because most of the media are Tory supporting and wouldn't want to be implying the Tory party are fiscally irresponsible!

[ramAnag]

Inflation of any form makes people feel poorer but still have the same, or maybe more, disposable income if they have a tax cut. Thus they will spend more. They will change what they spend it on - the second car may go, the private education go, or they just wont eat but from a macro economic perspective, the consistent spending (coupled with withdrawals from savings) should stimulate the economy as the circulation of money does that (and also creates more inflation)

I hear what you say about "feeling poorer" but people dont cut spending in these circumstances, they actually increase it if they can, or they redirect it

I’m honestly at a loss to understand where you’re coming from on this one, GP.

You’re the expert, but to me it’s as simple as this...if, not entirely hypothetically in the current circumstances, tax cuts make some one £1200 pounds per year better off but their mortgage payments increase by £200 per month then ultimately, and which ever way you dress it up, they are £100 per month worse off and they will not just ‘feel’ poorer but will actually be poorer and will have to cut their spending, on everything other than their mortgage, accordingly.

They can’t, in your words, ‘still have the same, or maybe more disposable income’ if the extra amount they’re expected to spend on mortgage repayments and other cost of living increases exceeds the amount they gain via tax cuts and frankly I’m astonished you’re attempting to argue otherwise.

[MadAmster]

Savings? What the hell are you on GP? Those in public service roles have seen the fruits of their toil diminish, in real terms over the past 12 years. Wage rises varying between 0% and nowhere near the going rate of inflation.

Your "withdrawals from savings" is about as unpalatable as Rees-Mogg's "sell stocks and shares" comment. That eejit is simply out of touch with reality. I never expected anything that crass from you.

[SithHappens]

Its simple isn't it, if you want more money just get a better job, or a second job.

Now where did i hear that before?

Seriously though the mortgage increases is a huge worry, that coupled with people will be hitting the 5 year mark where the extra tens of thousands they borrowed on the help to buy is suddenly due, or as more likely, getting lumped on their mortgages.

I wonder how many young people opted but the help to buy to buy a home of more value thinking 'yeah ill save that in 5 years', but haven't done? Lets face it when you are young 5 years seems like an eternity.

My finances are pretty well managed but even i am at a loss to understand how i wont be poorer. That said there is no way we were going through 2 years of covid, added on a war which is of course affecting things, without it having an impact.

There was always going to be an impact regardless of who was in power, but as i have said before the lack of action over the summer months has cost us, along with the lack of confidence we have now which is affecting markets.

If there is a u-turn today as rumoured i almost think thats worse, if you are confident in your policies stand by them, dont keep flip flopping, no one will ever have confidence in someone who cant stand up for their decisions.

[Geoff Parkstone]

I’m honestly at a loss to understand where you’re coming from on this one, GP.

You’re the expert, but to me it’s as simple as this...if, not entirely hypothetically in the current circumstances, tax cuts make some one £1200 pounds per year better off but their mortgage payments increase by £200 per month then ultimately, and which ever way you dress it up, they are £100 per month worse off and they will not just ‘feel’ poorer but will actually be poorer and will have to cut their spending, on everything other than their mortgage, accordingly.

They can’t, in your words, ‘still have the same, or maybe more disposable income’ if the extra amount they’re expected to spend on mortgage repayments and other cost of living increases exceeds the amount they gain via tax cuts and frankly I’m astonished you’re attempting to argue otherwise.

You're right, you don't get it. I don't know how better to explain it. If you earn 1000 and spend 200 on mortgage and 800 on other stuff, you spend 1000 into the economy. After the tax break maybe you earn 1050,spend 300 on mortgage and so 750 on other stuff but you now spend 1050 into the economy. So regardless of mortgage rise you still spend more in total due to tax cut. Please don't argue about figures used in example, they are just illustrative

[Geoff Parkstone]

Savings? What the hell are you on GP? Those in public service roles have seen the fruits of their toil diminish, in real terms over the past 12 years. Wage rises varying between 0% and nowhere near the going rate of inflation.

Your "withdrawals from savings" is about as unpalatable as Rees-Mogg's "sell stocks and shares" comment. That eejit is simply out of touch with reality. I never expected anything that crass from you.

I was talking in economic theory MA as the flows of money in and out of savings impact the efficacy of the stimulation model. It may be that there is minimal impact from the savings multiplier as you say, but it still exists even if you know noone who has saved.

[MadAmster]

I was talking in economic theory MA as the flows of money in and out of savings impact the efficacy of the stimulation model. It may be that there is minimal impact from the savings multiplier as you say, but it still exists even if you know noone who has saved.

Doesn't help those without savings for a start.

Also, If I have £1000 a month to spend and months ago that was £200 mortgage, £200 energy, £50 council rates, £350 food and £50 at the pub, that would now be (figures for illustration) £300 mortgage, £400 energy £50 council rates which is £750. That leaves £250 for food. OK, so I can shop at Lidl or Aldi as they tend to be cheaper which will help a bit. We also eat less and less well and might just about survive. However, the shop is getting £100 a month less from me and probably a similar amount per month less from most of their other customers as well. Big drop in shop takings will lead to job losses. Same at the pub. I now have no money to spend there so I don't go and others are in the same boat so less bar staff are needed. Less shop staff and barstaff and they are now on the dole paying less tax......

[Geoff Parkstone]

Doesn't help those without savings for a start.

Also, If I have £1000 a month to spend and months ago that was £200 mortgage, £200 energy, £50 council rates, £350 food and £50 at the pub, that would now be (figures for illustration) £300 mortgage, £400 energy £50 council rates which is £750. That leaves £250 for food. OK, so I can shop at Lidl or Aldi as they tend to be cheaper which will help a bit. We also eat less and less well and might just about survive. However, the shop is getting £100 a month less from me and probably a similar amount per month less from most of their other customers as well. Big drop in shop takings will lead to job losses. Same at the pub. I now have no money to spend there so I don't go and others are in the same boat so less bar staff are needed. Less shop staff and barstaff and they are now on the dole paying less tax......

From the big economy point of view you're still spending more - which is why you will feel poor. The money still circulates and so stimulates. At a micro level you are right and certain sectors will shrink, which are those that the consumer reduces spending in.

I'm not suggesting that this strategy will work, or even that I think it's right, just how it's supposed to work. It's more appropriate for a stagnant economy with unemployment, and our current economy seems to feature businesses struggling to find staff. The pandemic has changed a lot of the dynamics of the economy and I suspect the experts are maybe backing the wrong horse...but only time will tell.

rA I've just thought of another way of putting it. People feel poor because the spend more.

[ramAnag]

You're right, you don't get it. I don't know how better to explain it. If you earn 1000 and spend 200 on mortgage and 800 on other stuff, you spend 1000 into the economy. After the tax break maybe you earn 1050,spend 300 on mortgage and so 750 on other stuff but you now spend 1050 into the economy. So regardless of mortgage rise you still spend more in total due to tax cut. Please don't argue about figures used in example, they are just illustrative

What I ‘get’ GP is that you’re talking ‘economic theory’ while most of us are concerned with what is happening in the real world.

I wasn’t going to ‘argue about figures’...you know me better than that...but so far you’ve argued there won’t be any ‘U’ turns, there have been...you’ve suggested there won’t be anymore, and unless I’m very much mistaken there almost certainly will be as the Chancellor returns prematurely from Washington...and you’re arguing that people aren’t poorer as a result of the ‘mini budget’...they are.

This is your area of expertise but, untypically where finance is concerned, you’ve been repeatedly wrong. Maybe that’s part of the problem...too many ‘bean counters’...not enough ‘doers’.

One of the most sensible, and apolitical, comments has, imo, come from Sith when he says, ‘there is no way we were going through 2 years of Covid, added on a war which is of course affecting things, without it having an impact’.

That at least is fair and has to be taken into account as the ONLY defence the Tories have against their trashing of the economy over the last
twelve years, but there is no way that the current ‘dynamic duo’ can be seen as anything other than reducing our country to the level of embarrassing laughing stock.