Brexit and the waning days of the United Kingdom

[Josquius]

From Huw Pill, of Bank of England (Chief Economist, I think?): People in UK 'need to accept' tey are poorer.

I'll resist the "tough pill to swallow" jokes and just say this is 9/10 on the "shut up already, peasants" scale.

I dunno about that. Rather more just telling people to accept reality and stop being deluded- thats the only way we have any chance of getting out of it.

[Tamas]

From Huw Pill, of Bank of England (Chief Economist, I think?): People in UK 'need to accept' tey are poorer.

I'll resist the "tough pill to swallow" jokes and just say this is 9/10 on the "shut up already, peasants" scale.

I dunno about that. Rather more just telling people to accept reality and stop being deluded- thats the only way we have any chance of getting out of it.

Maybe its a first language thing but for me accept sounds like resigning to it as the way things are (to be fair to me, e.g. you "accept" risks which you cannot remove). Which is not the right attitude, especially not after the current governing party actively working against people's economic chances since the Brexit referendum, knowingly or otherwise.

[garbon]

I'm with you, Tamas.

[Sheilbh]

It was on a podcast. You can listen to it at the end of the (lengthy) answer to the question at about 6.30 here:
https://open.spotify.com/episode/6rfXYRAR9ekjQBZRLaiLSd?si=WRqsrKnDSp25IPMQfQ-V6A&dd=1

He was basically asked transitory v persistent. After giving the case for transitory (which I still broadly back), plus admitting some mistakes from central banks, he then explains why it might be persistent and basically wage-price spirals and why they're raising rates.

Listen for yourself.

[Tamas]

It was on a podcast. You can listen to it at the end of the (lengthy) answer to the question at about 6.30 here:
https://open.spotify.com/episode/6rfXYRAR9ekjQBZRLaiLSd?si=WRqsrKnDSp25IPMQfQ-V6A&dd=1

He was basically asked transitory v persistent. After giving the case for transitory (which I still broadly back), plus admitting some mistakes from central banks, he then explains why it might be persistent and basically wage-price spirals and why they're raising rates.

Listen for yourself.

On transitory - from when to when? e.g. inflation numbers are bound to decrease because after a year they are now going to be compared against figures where it was already exploding a year ago. Does that mean all the central bankers / economists saying "yeah its fine its transitory we won't have to raise rates significantly" were right? I don't think so.

[Sheilbh]

On transitory - from when to when? e.g. inflation numbers are bound to decrease because after a year they are now going to be compared against figures where it was already exploding a year ago. Does that mean all the central bankers / economists saying "yeah its fine its transitory we won't have to raise rates significantly" were right? I don't think so.

I don't think that's what they were saying and I think they were right

In terms of timing I don't know. My view would be transitory = a period of high inflation preceded and followed by periods of low inflation. To limit that I would probably say if it's under 5 years it's transitory, if it's over 5 years then it's prolonged high inflation.

I think just because it's transitory doesn't mean it won't necessarily have a permanent effect on the price level, but that there probably aren't much in the way of structural drivers of inflation.

From a UK perspective although we've only had BofE independent rate setting since 1997 and I don't think governments ever adopted a formal price target when they were in charge of interest rates, I'd distinguish post-war inflation (which I think has a few echoes with now) as transitory followed by a broad period of stable, relatively low inflation through the 50s and 60s. While inflation rates from, say, the late 60s to the early 90s was rarely under 5% were, I think, prolonged high inflation with fundamental structural causes (plus a few shocks on the way).

[Admiral Yi]

From Huw Pill, of Bank of England (Chief Economist, I think?): People in UK 'need to accept' tey are poorer.

I'll resist the "tough pill to swallow" jokes and just say this is 9/10 on the "shut up already, peasants" scale.

I'm trying to come up with a framework that gets you from "people need to accept they are poorer" to "shut up already, peasants" and the only thing I can come up with is feudalism, in which the lord gets to decide who gets what.

To state the obvious, the chief economist of the Bank of England* doesn't get to decide who gets what.

*Interesting that the central bank of the UK never got renamed.  The Scots must be FURIOUS.

[Jacob]

While I don't have a strong opinion on the interpretation of that specific statement it's not that far a jump from "you need to accept..." to "suck it up", nor from there to "shut up." All are ways of saying that there's not much point in sharing your opinion on the topic as it's not going to change anything.

[Sheilbh]

Never comes up really. Probably helped by the fact that they don't print the notes in Scotland (Bank of Scotland, Royal Bank of Scotland and Clydesdale Bank do - similar in Northern Ireland). The complaints are more when English people/people working in England don't recognise Scottish notes

I think the SNP have evolved because Brexit but they planned to keep a currency union post-independence. The BofE were not keen (and it arguably would have meant Scotland couldn't join the EU), but I think they do now talk about a Scottish Reserve Bank and path to an independent currency.

[Sheilbh]

While I don't have a strong opinion on the interpretation of that specific statement it's not that far a jump from "you need to accept..." to "suck it up", nor from there to "shut up." All are ways of saying that there's not much point in sharing your opinion on the topic as it's not going to change anything.

Yes - although again I think the context is relevant. He was on a podcast and was asked about inflation. He ran through the shocks, then explained how central banks try to deal with inflation and then said:

In the end the UK - which is a big net importer of natural gas - is facing a situation where the price of what you're buying from the rest of the world has gone up a lot relative to the price of what you're selling, which is mainly services in the case of the UK. You don't need to be much of an economist to realise that if what you're buying has gone up relative to what you're selling, you're going to be worse off.

So somehow in the UK, someone needs to accept that they're worse off and stop trying to maintain their real spending power by bidding up prices, whether higher wages or passing the energy costs through onto customers.

And what we're facing now is that reluctance to accept that, yes, we're all worse off, and we all have to take our share.

[Instead, people] try and pass that cost on to one of our compatriots, and saying 'we'll be alright, but they will have to take our share too'.

That pass the parcel game that's going on here....that game is generating inflation, and that part of inflation can persist.

How much bargaining power, how much pricing power, exists for different actors in the value chain - on the corporate side or in the labour market. And at the moment: the relatively low level of unemployment, the strength of corporate pricing power and so forth - in the UK and the US I think - they're all running a little bit too strong.

That's why interest rates have gone up, that's trying to cool demand in the economy down, and that's ultimately trying to ensure that process of pass-the-parcel is consistent with the 2% target.

I'm not sure it really justifies the Mail front page:

Or the Guardian switching their business liveblog to focus on it yesterday:

Brits 'need to accept' they're worse off and stop pushing wages and prices higher, says BoE chief economist – as it happened

Edit: FWIW it's ultimately a question of politics which is why he can't really stray too much into it - but personally I think the answer in terms of who the "someone" is is profit margins which are running at record highs. It's more than just passing on the increased costs. But ultimately that's something you can't (and shouldn't) do through monetary policy. Who the "someone" is in that description is a political choice.

[Admiral Yi]

While I don't have a strong opinion on the interpretation of that specific statement it's not that far a jump from "you need to accept..." to "suck it up", nor from there to "shut up." All are ways of saying that there's not much point in sharing your opinion on the topic as it's not going to change anything.

I think you're missing one leg: the belief that the people bitching (or in this case the actors trying to maintain existing real incomes by passing along the cost) are right, and the BoE is wrong.

For example if a person says "climate change is a hoax," and someone responds that people need to accept that human generated emissions cause climate change, you or I would not characterize that as "shut up peasants."

[Jacob]

Yeah that's fair enough.

Still, it seems that's a framework for understanding the interpretation that's different from feudalism 

[Josquius]

Though I stand by saying people need to accept the country is poorer is a very true thing to say....

I did see some reporting of his comments as being that people asking for pay rises are the problem which definitely would be peasants shut up.

I think the BBC article has been updated since originally saying that.

BBC News - Bank of England economist says people need to accept they are poorer
https://www.bbc.co.uk/news/business-65308769

Now it says SOMEONE needs to take the hit. Which... Yes. Could be peasants know your place but equally could be a warning to companies to just pay their workers a living wage even if it eats into their profits.

[Richard Hakluyt]

I agree with the chief economist, leaving the EU and the energy cost increase has made us much poorer. He didn't express his preferences as to who should bear the brunt of that hit; that will be decided by government, the current government seems to think that the slightly less poor should take the hit (they did uprate benefits by 10% after all).

There is quite a lot of socialism as well as nationalism in the Daily Mail economic coverage these days. £190k is not that great a salary for the BoE chief economist imo. The DM increasingly seems to hate the poor as well as anyone with a successful career; everyone should earn £30k and live in a 3-bed-semi in bloody Wokingham or Guildford seems to be their mantra 

[Tamas]

Just to challenge the "well it's gas prices innit'" take - I guess if I were a BOE guy I'd also like to single that thing out, but natural gas prices reached their peak in August last year, have been in a freefall since December, and since beginning of March they have been lower than February 2021 levels.

I appreciate those March+ prices won't show up anywhere in the economy for a while, but extraordinary gas prices ended nearly a year ago, so mayhaps the BoE chief economist should have a more nuanced view and suggest a more proactive approach than "well gas prices were higher for a while so now people must accept they are poorer".

And I understand the uproar at his comment. It is not populism -and if it was Sheilbh should like it - to think and say that the system as in financial regulators and the government rallies to the support of big money when they get negatively affected by their own screwups, but always seem ready to channel Yi and resign to the un-influencable nature of the market when it hits only the unwashed masses.