Europe's Economic Outlook Worsens as High Prices Plague Consumer Spending (apnews.com) 105
The European Union has lowered its forecast for economic growth this year and next, saying inflation is taking a heavy toll on people's willingness to spend in shops -- while higher interest rates are sharply restricting the credit needed for investment and purchases. From a report: The revised forecast Monday from the European Commission, the EU's executive arm, comes as fears of recession grow and as the European Central Bank faces a key decision this week on whether to keep raising rates, which are aimed at getting inflation under control. The 20 countries that use the euro currency are expected to see growth of 0.8% this year instead of 1.1% projected in the spring forecast, the commission said. For next year, growth expectations were lowered to 1.3% from 1.6%. For the broader 27-country EU, the forecast also was lowered to 0.8% from 1% this year and to 1.4% from 1.7% next year.
"Weakness in domestic demand, in particular consumption, shows that high and still increasing consumer prices for most goods and services are taking a heavier toll than expected," a commission statement said. EU Economy Commissioner Paolo Gentiloni said at a news conference that "further weakening in the coming months" was foreseen as the economy faces "multiple headwinds." One source of uncertainty is how far the ECB will go on interest rates -- more expensive credit restrains economic growth in some areas such as real estate, but if higher rates succeed in lowering inflation, that would boost consumer spending power.
"Weakness in domestic demand, in particular consumption, shows that high and still increasing consumer prices for most goods and services are taking a heavier toll than expected," a commission statement said. EU Economy Commissioner Paolo Gentiloni said at a news conference that "further weakening in the coming months" was foreseen as the economy faces "multiple headwinds." One source of uncertainty is how far the ECB will go on interest rates -- more expensive credit restrains economic growth in some areas such as real estate, but if higher rates succeed in lowering inflation, that would boost consumer spending power.
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The policy you refer to is that markets work best with little to no government intervention.
They work best for the sellers in those conditions, but not so well for the customers.
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"Low cost (read fossil fuel) energy development isn't considered."
Levelized, the costs aren't that low, and the effects from continued development is going to wreck more than the credit markets...
Re:Isn't it great (Score:4, Informative)
Low cost energy development?
What low cost? Fuel costs about twice as much as 2020, power costs tripled and so did heating. What about this is "low cost" for fuck's sake?
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What low cost? Fuel costs about twice as much as 2020,
Yeah, that happens when you cut all domestic oil. Look, I'm all for electric cars and nuclear, wind and solar. But you don't fuck the economy, well, just because.
Like it or not, there's a specific amount of oil that is going to be needed each year. That amount is coming out of the ground no matter what. It can come out of countries who support terrorism, have extremely lax pollution laws, or just be dirty and dangerous as hell to get. But it will be pumped out of the ground.
So you can pump it from easy sou
Re: Isn't it great (Score:3)
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"Yeah, that happens when you cut all domestic oil." But there doesn't seem to be much cutting going on (at least in the in USA) if you look at the numbers.
Headline from a story earlier this year at Forbes, "2022 Saw The Second Highest Oil Production In U.S. History" (https://www.forbes.com/sites/rrapier/2023/01/06/2022-saw-the-second-highest-oil-production-in-us-history/?sh=2b084f7e11d7)
and from "https://yearbook.enerdata.net/crude-oil/world-production-statistics.html" it shows that the US in 2022 was the
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Saudi Arabia production in 2022 was 601 million metric tons, left off a word in that last sentence.
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Biden just cut off drilling in parts of Alaska this past week or so.
Re:Isn't it great (Score:4, Insightful)
That amount is coming out of the ground no matter what.
Ah, the famous illusion of infinite cheap supply.
It's a multifaceted issue and really needs a lot more thought than the average person wants to put into it, let alone a politician or anyone with an agenda.
I kinda agree with the rest of your post to be honest. However, seeing that fossil fuels (including oil) are in finite supply, and that the more we burn the harsher the climate change impacts, maybe we should start to restrict it to what is really needed? Of course, then we would have to think really hard about what means "really needed". Is a Jetski really needed? Is a new smartphone every year really needed? Is a "powerful" smartphone really needed actually"? Is the possibility to take a plane for a week-end trip really needed? Is meat every day really needed?
The problem is that fossil fuels usage (direct or indirect) is very addictive. And as with every hard drug addiction, most people don't have the will to cut off the supply. Even if it means fucking over the next generations, which won't have the same luxury, and will actually have even less because their parents/grandparents basically used what could have allowed a smoother transition to a world with less fossil fuels.
Re: Isn't it great (Score:4, Interesting)
There is no evidence that fossil fuels have a limited supply in a practical sense
There's ample evidence that Earth's atmosphere and oceans have a finite capacity to absorb carbon emissions without deleterious effects on human civilization and the biosphere that exists today.
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Re: Isn't it great (Score:2, Insightful)
"just because" is an explanation for children.
We are not children here, sir. You will have to do better.
If preserving the economy destroys the biosphere then the cost is TOO DAMN HIGH.
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"Yeah, that happens when you cut all domestic oil. Look, I'm all for electric cars and nuclear, wind and solar. But you don't fuck the economy, well, just because."
As pointed out, "just because" isn't an argument. And you're setting up a straw man when you jump to "when you cut ALL domestic oil".
I don't think anyone actually said that. Burning oil and gas needs to be cut to a minimum, but that doesn't mean you still can't extract the old needed to make plastics, fertilizer, etc..
"...currently a barrel of cr
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But, the wise folks wouldn't push and mandate this UNTIL the infrastructure and technology for replacement were in place.
Right now governments are cutting us off from oil before we're actually ready to do so as a society.
Re:Isn't it great (Score:4, Insightful)
But, the wise folks wouldn't push and mandate this UNTIL the infrastructure and technology for replacement were in place.
The problem is that most people in the past 50 years ignored the problem and/or actively prevented infrastructure and technology to be put in place. There are several reasons for that:
- humans are inherently animals. We react to immediate threats. It is not natural for us to think about long-term threats, even though we think are so smart.
- people just want shiny things, and immediate rewards, for the cheapest cost possible. Which means investing in long-term infrastructure (nuclear, solar, wind) when existing infrastructure (coal, gas, oil) is cheap was never going to happen
- people like to fight moral crusades, like "nuclear plants are bad, because... nuclear weapons!". Even though a nuclear plant can never explode like a nuclear weapon, but usually this type of persons is not interested in actual facts anyway.
All those reasons are actually related to the fact that humans are real bad at planning long-term, so we always think we will have time to fix the issue later. Except once CO2 is emitted, it has several decades of inertia in the atmosphere. Which means if we were to stop all emissions today, climate would still get worse for the next 20-30 years. This is why every IPCC scenario (+1.5 up to +4.5) is the same for the next 20 years. This is akin to being in a car, hitting the brake pedal, and having the car start to slow down in 20 years. Most people choose to either keep driving at the same speed, or actually hit the accelerator, and let the next generations hit the wall.
Right now governments are cutting us off from oil before we're actually ready to do so as a society.
Here is another way to see it: governments are cutting us off from oil so that society keeps existing in the future. Society might not include some people though. Maybe you, maybe me, surely a lot of people currently living around the equator...
The fact that YOU are not ready does not mean society is not ready. You had time to get yourself ready. You still have some time left, but the effort will be more and more. Any whining you do will not change that.
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In the past 50 years (I've lived in the past 50 years)...we've had everything from absolutely NO problems thought....to scientific consensus that the earth was not getting warmer, but was getting colder....to now where they say we're getting warmer.
If you're basing your comment over the last 50years of people ignoring things, the story of what they have been "ignoring" has been changing drastically over these years.
No one really hear
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In the past 50 years (I've lived in the past 50 years)...we've had everything from absolutely NO problems thought....to scientific consensus that the earth was not getting warmer, but was getting colder....to now where they say we're getting warmer.
CO2 emissions impacting climate (call it climate change or global warming, only climate change deniers fight over this semantic) have been a consensus for the past 50 years. For you it started after the Clinton/Gore years, but this is because you are american. You need to wake up, and understand there is a whole world beyond the US, and the rest of US have been aware of it for far longer than you. Hell, until a few years, I didn't even know who Al Gore was. Funny how americans think the world revolves aroun
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The fuel costs issue was due to having to transition quickly. If anything, that's an argument FOR addressing climate change and reducing dependence on oil, because if we don't do it on our own timetable now, we will be forced to later at much higher cost.
Much of Europe was able to buy cheap gas during the summer, and store it. A few countries, like the UK, didn't have the storage and get screwed.
The UK does have its own gas and oil production, but of course it was sold at international market rate. The gove
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Fuel, if you mean gasoline, was not in much demand in 2020 during the height of the pandemic, and, yes, it has about doubled since then.
Power, if you mean electricity, is about 20% higher around here than in 2020.
Heating, if you mean natural gas, was at a low point in 2020, went way up and then back down to be just above the 2020 low point now.
Re:Isn't it great (Score:4, Interesting)
Prices are governed by the law of supply and demand. Increased interest rates is a sledge hammer on demand.
The real solution is to increase supply by eliminating tariffs, establish price controls on commodities to cap profits, streamlining distribution, adding production capacity, or subsidizing increased production of goods.
Raising interest rates is easy and can be done quickly, but it has the adverse effect of inhibiting increasing supply.
Examples: Trump created a bunch of tariffs and started trade wars and Biden has kept them on to make unions happy; this is inflationary. Oil companies could have their leases revoked if they intentionally lower production to enhance profits. There is a huge backlog of container ships in US ports; the US military, experts at shipping and logistics, could be tasked with clearing the logjam. A common sense guest worker program so people can pick our food crops would lower food costs. The US could simply flood manufacturers with money in exchange for lowered prices and increased supply.
The root cause of this is our broken campaign finance laws. Our politicians are paid through campaign donations by the people who like the existing system. They have so much money, they don't need to borrow and are happy that would be competitors cannot get financing.
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the US military, experts at shipping and logistics, could be tasked with clearing the logjam
The US military outsources much of its logistical apparatus to the private sector. One of the many reasons is a lack of manpower. It seems like a stretch to imagine they could Save The Day in our nation's ports.
If you want very specialized skills, you can hire a Navy vet who graduated the Nuclear Power School to work in your power plant, or a pilot from any of the branches to work for your airline, but the issue in the ports is a labor shortage, not a knowledge shortage. You can't fix this with a few lo
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The real issue is supply and demand in the labor market. A leftist would say the ports need to pay better to attract more workers. A rightist would blame the social safety net and say it's too easy not to work in our country. My sympathies lean closer to the former group but there are serious thinkers across the political spectrum (sadly, not that many in elective office) and no one person or "side" has all the answers, IMHO.
As someone from Australia, who hears a very similar sort of rhetoric, the latter argument just doesn't really get blamed, even though Australia probably has a somewhat more lucrative benefits system. Australia has had a very long bipartisan policy, going for about 20 years now, surviving numerous governments, of relatively high immigration intake, and keeping the unemployment level sufficiently high. During the pandemic, closing the borders actually meant that many immigrants left, and very little new ones
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The real solution is to increase supply by eliminating tariffs, establish price controls on commodities to cap profits, streamlining distribution, adding production capacity, or subsidizing increased production of goods.
You're talking policy over politics. I think that died sometime around 1972.
The root cause of this is our broken campaign finance laws. Our politicians are paid through campaign donations by the people who like the existing system. They have so much money, they don't need to borrow and are happy that would be competitors cannot get financing.
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Just wanted to point out that:
establish price controls on commodities to cap profits,
...price controls subverts the supply/demand mechanism, causing less supply. See literally every single instance of this being implemented for proof. (If you were a manufacturer of goods, would you invest more in production if the government demanded you sell at an artificially low price?) If you want rationing, waiting lists, and bread lines, price controls are the way to go.
Then there's this:
Trump created a bunch of tariffs and started trade wars and Biden has kept them on to make unions happy; this is inflationary.
No. Increased prices != inflation.
Inflation means the inflation of the money supply,
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If you consider at my example you will see that I only suggest price controls as a way to punish bad behavior of oil companies that reaped record profits on the back of the consumer. My bad, instead of saying price controls I probably should have said capping profits during a price spike for things like gasoline.
>No. Increased prices != inflation.
I guess I can shake my head and disagree with you. The government literally measures inflation by
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>No. Increased prices != inflation.
I guess I can shake my head and disagree with you.
You can, if you want to appear economically illiterate.
The literal definition of monetary inflation is an increase in the money supply. Period. You can measure the effects of inflation by monitoring prices.
I guess it suits the government to cloud the issue by conflating rising prices and inflation, because that obscures the real cause of the rising prices: Monetary policy, so-called "quantitative easing" (=inflating the money supply). Which is entirely controlled by the government, which means it is solely
Re: Isn't it great (Score:2)
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What is hilarious is that you say "this" but the OP lists 3 things, one of which won't address the source of inflation and the two others which are active and widely implemented government policies already. You then proceed to list other things such as price controls (which the EU is already doing on the biggest inflation driver in the bloc) along with discussions about subsidy and adding capacity (which the EU is already doing on the biggest inflation driver in the bloc).
Raising interest rates is just one
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'eliminating tariffs'
That doesn't increase supply - though it does reduce prices.
'establish price controls on commodities to cap profits'
Really bad idea. If you impose those profit caps in the US, then possible investors in mines will choose to go elsewhere where their upside is less constrained. And if there is no domestic supply, when the international price exceeds your price cap, what happens then?
'streamlining distribution'
Seriously? Do you think distributors aren't trying to do that? Why do you think
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Price controls don't work, they have never worked. Every time they have been used they have made things much worse. They are a thoughtless attempt at treating the symptom instead of the root cause, and they only ever cause harm.
This theme of needing to somehow reduce the cost of farming keeps coming up, and it is utterly misguided. At the moment, the US government is paying farmers to NOT grow food. We are literally spending money to prop up the price of food. Related link [thecounter.org]. The government does this be
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I see someone gave this post a troll mod. Whoever you are: you are abusing your power.
This post doesn't insult anyone, doesn't sling racism or sexism or any other kind of hatred, doesn't even use any profanity. The post is clearly on-topic and relevant.
So, why the troll mod? Is it because the issue of fossil fuel is politically charged? Well, feel free to reply and disagree! Political discussions of such issues are ok to have here on Slashdot, and trying to silence those who disagree with your own posi
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The fossil fuel jab was clearly a troll, investing in fossil fuel would take years to come online.
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In EU you must have high taxes to pay for all the government benefits that have been created by endless parliaments and legislatures that believed "bread & circuses" would keep the proles happy.
Cutting back Government spending would be a wise thing to do but it would come at the expense of cutting back on all of the societal benefits that European Socialists have fought so long and so hard to obtain.
And governments in the EU are not so dumb that they would cut back on the public benefits because the gov
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https://www.statista.com/stati... [statista.com]
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Everything is considered. The difference is that those things you list have been discounted by economists as being unable to solve the problem due to the source of inflation. Cooling the demand side is one of the widest reaching and most general methods of addressing inflation, while several of your examples can only address singular sources of inflation which may not be at play, actually would do nothing to address it at all, and even worse the fact you think they aren't happening in Europe is laughably ig
You don't say? (Score:5, Insightful)
Really? High inflation and no compensation in wages to speak of makes people spend just enough money to get by because they can't afford jack shit anymore?
And high interest rates tell them they shouldn't spend more than they have to?
Boy, who could have predicted that?
Seriously, folks, in what semester in that Business Administration course is the mandatory lobotomy? The question really is no longer if it happens, only when.
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More specifically, how to have low interest rates and low inflation, both, at the same time, sustainably. Having either / or is easy.
How is 2023 different from 2019. Therein lies your answer.
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Tax cuts and spending sprees by both parties having their effect after the easing of the pandemic along with supply shortages and opportunistic record profit-taking.
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Not enough of a thing to buy? Barring RasPis and some other electronic gadgets, what exactly seems to be in short supply?
Around here, two large chains just shut down because they couldn't get their crap sold. They were literally sitting on piles of unsold and unsellable merchandise.
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You seriously believe 5% is above the current inflation rate?
If you factor in consumer electronics and other crap we get cheaply from abroad in a ridiculously overblown way, this may actually be correct. Unfortunately I don't need a new TV every day. I do need food, though.
Care to take a look at the food price change in the past, say, 12 months?
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Re: You don't say? (Score:2)
What fucking wage growth for poor people lok
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In my business I use what amounts to bulk food commodities, with minimal middlemen.
In the past year my costs have gone up 35%. Real numbers: base purchased unit went from $39/cwt to $63/cwt.
I haven't seen that kind of upward lurch since the Carter administration.
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Not to be fearmongering, but in my country, we haven't seen that kind of upward lurch since before WW2. And that was one of the reason the goose-stepping assholes took over.
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Barring RasPis and some other electronic gadgets, what exactly seems to be in short supply?
Ferraris.
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So solve inflation by raising the prices on everything...
I hope you donated all your money to Trump. That way you can increase demand and prices for lawyers, and lower demand and prices on whatever you usually spent your money on.
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Really? High inflation and no compensation in wages to speak of makes people spend just enough money to get by because they can't afford jack shit anymore? Boy, who could have predicted that? Seriously, folks, in what semester in that Business Administration course is the mandatory lobotomy?
Any idiot can make qualitative predictions, as you seem to have done in your words "high inflation... makes people spend just enough money to get by".
But it takes serious legwork to make a quantitative prediction, in the words of TFS "the 20 countries that use the euro currency are expected to see growth of 0.8% this year instead of 1.1% projected in the spring forecast". Indeed it'd be grossly irresponsible for governing bodies NOT to make quantitative predictions.
The question really is no longer if it happens, only when.
So now you are interested in the qualitati
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Actually, honestly, this is the best way because the economic recovery basically happ
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The economy boomed? Where would that be, I'd like to move there.
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That wretched hive of scum and villany is located on the wasteland surface above the Bakken Formation in western North Dakota.
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Are you suggesting to combat inflation you need to raise wages so people can spend more?
Do you even understand how supply and demand works in setting prices? Not being able to afford something is irrelevant when you have easy access to capital, that is why interest rates have such a strong impact in the first place.
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Yes. I do. And I also understand that a higher demand only has an effect on price if it outstrips supply. And we're far from this.
Answer me this: You have a restaurant. And you have about 30% of your tables filled. Why? Because people don't have money to spend. Now you increase the money people have to spend and suddenly instead of 30% of your tables, 60% are busy.
Question: Do you raise the prices of your food?
You would of course if your restaurant is already full and you have a queue out around the corner.
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IRL the answer seems to be "yes", because most restaurants have raised their prices by about 20%, twice the inflation rate.
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The reason for this is not that their restaurants are packed but rather that their own cost went up and they couldn't compensate any other way anymore, with the only alternative to sell below cost, i.e. eventually shutting down.
Supply (Score:2)
Really? High inflation and no compensation in wages to speak of makes people spend just enough money to get by because they can't afford jack shit anymore?
And high interest rates tell them they shouldn't spend more than they have to?
Yep, dumping tons of money into an economy isn't a great way to stimulate it, as you have to claw that money back later to combat inflation, which can be equally as painful. You learn about this in Macro 101. But, politicians love handing out free money.
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You can't have compensation in wages if nobody is buying anything. Inflation is always circular. What causes it is some entity distorting the market and that can happen anywhere along the circle. For example: government decides with a stroke of a pen to raise taxes or restrict access to raw materials or add a lot of new regulation that requires manpower to comply with. Producers don't raise prices for fun because a competitor won't. The entities affected by that need more money just to maintain things whic
Dear politicians (Score:3)
Attention stupid US government people, especially elected ones.
A normal omlet at a greasy spoon with a side of bacon and cup of coffee is pushing $20. No, this isn't some snotty NYC burough.
Thus was about $10 before COVID.
Thanks! I hope your fortunes went up instead of down like everybody else!
They thought they were doing good (Score:3)
I mean it was a slam dunk. Ship out tons of money and ride the coattails of that into re-election. Apparently, memories of the Carter administration were growing dim. Volcker could have told them they were wrong and would pay a high price, but he died just before the pandemic measures went into place.
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The $4 box of cereal is now $6. The $1 lb of margarine is now $1.50, the $1.80 loaf of bread is now $3.50.
And gas is over $5 a gallon here in WA state, thanks Governor Inslee.
Wasn't the Arab Spring started by a sudden spike in food prices? You would think they could take a hint, but no, all that matters is some squabble half way around the world.
Rumor has it that the Social Security COLA next month will be about 3%. That will not be very popular.
Re: Dear politicians (Score:3)
Maybe the old farts will finally vote less Reich wing when they see that only the leftists want to increase their social security.
Nah, never happen. They will keep voting themselves into poverty to fight abortion.
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Maybe the old farts will finally vote less Reich wing when they see that only the leftists want to increase their social security.
Nah, never happen. They will keep voting themselves into poverty to fight abortion.
Huh? It was Trump, a republican, that set the stage for Roe v Wade to be overturned, via his SCOTUS appointments. Abortion is a state's issue at this point, as it should have been all along. It's angry Leftist women that fight to kill the unborn now.
A lot of those old farts also became a lot richer under Trump.
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A lot of those old farts also became a lot richer under Trump.
No, that's completely false. A very small percentage of those old farts became richer under Trump — ones who were already rich, specifically. The poor became poorer, and most of the elderly are poor. But because they're dumb enough to vote for fascism, they got poorer still.
Abortion is a human rights issue, it has to do with whether you control your body or not. You cannot take an organ from a corpse without the person's permission in their lifetime, but you can force a woman to carry a child of rape
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Attention stupid US government people, especially elected ones.
A normal omlet at a greasy spoon with a side of bacon and cup of coffee is pushing $20. No, this isn't some snotty NYC burough.
Thus was about $10 before COVID.
Thanks! I hope your fortunes went up instead of down like everybody else!
As a formerly semi-frequent visitor to the US before COVID, this was happening way before COVID. The US used to be an affordable place to visit for other western nations (UK, Australia, Canada, Japan, Germany, et al.) and even affordable to many developing nations as a "once in a decade" trip. However since about 2015 prices have been going up across the board, accommodation, food, attractions and entertainment. It's not quite as bad as Australia, but you're getting there.
The EU (and UK) are suffering i
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Energy = money (Score:5, Insightful)
This is all about energy. The countries which are suffering the most are closely tied to fossil fuels to power their industrial economy, supplies of which have been disrupted due to the Ukraine war. Both German and Italian manufacturing industry and their economies in general have been smashed by high energy prices. What is not commonly understood is that every MW of renewables brought online, 1.2 MW of gas generation is require to back it. So countries with high renewable penetration are over a barrel and are having to embrace heavily polluting power sources such as coal to lower their gas bill.
It's interesting to contrast these economies with the French economy which has significantly greater energy security due to their use of nuclear, while the German economy shrank the French economy grew. This was while a number of their reactors were off-line due to maintenance, so over the next year this difference will become even more apparent.
Ironically the wind turbine manufacturers in Europe whose products are in high demand are in crisis, Siemens lost nearly $1 billion on wind last year; pure-play Vestas saw an operating profit decline of 369%. GE Renewable Energy posted a loss of $2.24 billion so something is clearly broken. Costs of wind turbines will clearly have to rise if this industry is to grow which will be a blow to those predicting every reducing costs for wind.
What is clear is that across the board countries using nuclear are doing better economically are those with a significant amount of nuclear power. The only outliers are countries which export fossil fuels.
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In other words: we demonstrated so far that deploying renewables was cost-efficient when using cheap fossil fuels (manufacturing done in countries which use fossil fuels, to bring costs down, and a lot of cheap gas needed for backup).
The fact that it is simple maths, and was predicted decades ago, is what is really depressing. That, and seeing Germany actively trying to undermine nuclear, while being the 2nd worst CO2 emitter in EU. And the country whose economy is actually in really bad shape, with industr
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What is not commonly understood is that every MW of renewables brought online, 1.2 MW of gas generation is require to back it.
I agree with you that renewables currently need to be backed up by gas, but I hadn't seen the 1MW/1.2MW figure before. Do you have a link?
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This is nonsense.
Germany, for example, is not reliant on Russian gas: https://www.bbc.com/news/busin... [bbc.com]
In fact Germany hasn't had a delivery of Russian gas for a year now.
Also, renewables don't require 1.2x as much standby gas generation to back them up. If you look at a graph of Germany's energy mix (https://www.cleanenergywire.org/factsheets/germanys-energy-consumption-and-power-mix-charts) you can clearly see that it has about half as much gas generation as it has renewable. What's more, renewable growth
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Germany, for example, is not reliant on Russian gas
It is a musical chair game though. Gas deliveries worldwide are the same than before the Russia--Ukraine war. Which means that Germany just tossed the burden of buying russian gas to someone else. And instead, they are buying liquefied NG from the US, which is less efficient energy-wise (you need energy to put it in liquid form, and energy again to put it back into gas; and you also need a lot more energy/fossil fuels for the tankers that have to cross the ocean).
Germany is effectively the cause of even mor
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Correct me if I'm wrong, but 12 is not 1.2x131. So the claim that "renewables require 1.2x as much gas to back them up" is obviously bollocks.
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Not in all of Europe... (Score:3)
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As a fellow Belgian, i have to say you're just plain wrong.
By far most wages have some automatic indexing system. I have a hard time finding out how much exactly, but just google it. There are some exceptions, but automatic wage indexation is very common.
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I still have family in Belgium and while indexation is a reality for salaries, various allocations including pensions and even rents, they are calculated on a global index so the low or medium income people who spend most of their money on rent, food and energy see their cost of living going up starkly. Food has gone up more than the index for example.
blunt instrument (Score:3)
Interest rates are a blunt instrument which doesn't precisely target the parts of the economy which need to be "checked" and instead focus on people, especially the lower socio-economic. Targetted taxation would be a much better tool, not the hands which control the casino which is the banking sector.
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Higher interest rates only hurt if you need to borrow money. If you have been in your car loan/house loan for a few years, none of this is hurting you, so long as you know how to live within your means. If you have no house or car loan, it also is not hurting you. People taking out new loans are of course going to feel it the most but that's not necessarily the poorest people in the stack. Many poor people can't afford a car anyway and won't be taking out those loans.
As always, the middle class is likely ta
Re:blunt instrument (Score:4, Insightful)
Yes interest rates are a blunt instrument however they target risk. When you borrow you are making a risk based decision based upon the information at hand feeding the economy. Unfortunately some of these decisions will turn out to be poor ones if low interest rates have been baked in which creates financial stress.
There is a greater structural issue where debt has been used to inflate housing prices in some countries, effectively transferring wealth to the elderly and indirectly taxing the young. Debt should be financing industry not housing however it has been becoming politically more difficult to tax the elderly as they grow in numbers and have become a significant voting block.
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I'm not totally against the use of blunt instruments, but we should choose the people they're being used on more wisely.
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Some collateral damage is to be expected and acceptable for the greater good.
What is wrong with this? (Score:2)
It is interesting how the rich love inflation... (Score:1)
It is interesting how the rich love inflation. Because their money isn't tied up in currency, it means that they just sit there and gain money by doing nothing, while people whose main value is savings or a paycheck, have the value of their assets shrink.
Compare that to China where they are having a deflationary recession, which means that the average prole there, their money actually is more usable.
Deflationary recessions are a lot easier to get out of than inflationary, because the value with inflation i