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September 16, 2012



Is there any evidence that rentiers are actually suffering much from QE?


The BoE says lower interest rates (the correlate of QE) have cost savers £70bn since 2008:
Also, to the extent that QE raises inflation it transfers resources from savers, and those on fixed-rate annuities, to borrowers, manmy of whom are companies.
These costs are offset by higher share prices, but I think it's fair to say that some rentiers (eg retired folk who#ve sold shares) are hurting.


Is this a new issue? The chamber of commerce, Directors Institute have long held contradictory wishes - low inflation for their workers, but high for their customers, low interest for their borrowings, but high for their workers, low exchange rates for exporters, combined with high exchange rates for importers...

I'm sure something similar applies to unions, though probably less obviously absurd.


Forgive me if I'm cynical about the BoE report, there's plenty of reason to believe interest rates would be low, given the UK and World economy - I'm not sure QE (and by extension, the BoE) can take the credit on that side.

Inflation - this is more plausible, but given that so much of the inflation has been food and energy import related (+ VAT) I have to wonder how much effect QE can claim.


This article raises two different issues, the constituencies of the main parties and the effects of ZIRP and infinite leverage.

In the UK (like also in Australia) the parties are ethnically based, more than class based. Labour is the party of the northern and scottish immigrants, Tories are the party of the southern inheritors, and the Liberals the party of the celtic fringe.

It is because of the UK history and politics that ethnicity and class overlap, and that ethnicity and class also overlap with location, and indeed the geographical distribution of the parties is striking.

Therefore the Tories have historically the party of vested interests in general, of people with inherited position and property, with some kind of rent, while Labour have been that of immigrants (or not) to the core regions around London.

Put another way, Tories are the party of insider interests, Labour the party of outsider interests; where for a very long time in the UK ethnicity and location was the biggest determinant of being an insider or an outsider.

In the same was as Republicans used to be the party of the anglo protestants, and the Democrats the party of the irish/jewish/italian immigrants.

However something momentous happened in the 60-70s: the previous wave of northern/scottish/irish immigrants made good and got some little measure of property (real or financial) and this created in the 80s and 90s a new class of petty rentiers, who fancied themselves to be the new insiders, the most recent batch of would-be lords of the manor.

Tony Blair was the herald of this new class of very small proprietors who saw their interests as rentiers aligned with those of the big rentiers, and wanted two things: higher asset prices and lower wages, at any cost.

Here the property of the rentiers can be a house, or twenty, an Oxbridge degree, a share pension account, a portfolio of family connections, a supposedly safe job in the public (or private) sector, and most of the aspirational rentiers being female voters without party loyalty.

Thus New Labour, which was a party designed to get the vote of "aspirational voter" rentiers and boost asset prices and drive down wages, while using being in power to still support a bit the traditional Labour voters. This has been mirrored commercially by the The Coöperative, with their new stylish food shops.

The Tories with Cameron have decided to appeal to the same petty rentier constituency, and this is in some ways a better fit, because of tradition.

But Tories and Labour, fighting over the (deluded) aspirational rentiers, implement largely the same policies, infinite leverage and weaker labour rights, only in different degrees.

All while the UK has become the country with the highest debt/GDP ratio, probably the highest average house/wage ratio, and is becoming a massive oil importer, which means that the good times have ended.

BT London

QE does not cause inflation in the current environment.

QE just swaps bonds for reserves. It's effect, if any, is through expectations only.

Keeping interest rates low does help encourage borrowers and thus new credit creation. But QE does not strongly affect interest rates precisely because it is quantitative and not qualitative easing.


This is sub-JCR twaddle, Chris. Take off the Labour propaganda, and the left-wing view of the Tories as the wicked party of the rich. Workers rights aren't free. True, they aren't as expensive as many on the right alledge, but at the margin, too much worker protection has a chilling effect on employment, especially by small businesses. These small business people are plumbers and electricians, not experts in employment law and they are ABSOLUTELY TERRIFIED of being taken to a tribunal, and all the cost and time it would entail.

The best protection for the worker is a labour market where it's easy to get another job.

The idea that Job protection is free is the most pernicious lie the left tells itself and it's beneath you, chris to repeat it without thought.

Bernie G.

I guess both of the principal party support bases are shrinking because the electorate is more fragmented, and it is a question of diluting your argument to attract more of the periphery without losing too many of the rank and file. You suck in the Blair voters but hemorrhage support to UKIP. It’s a fine line these days.


"The best protection for the worker is a labour market where it's easy to get another job"

Right, because obviously unemployment is at the moment is at an all time low and you can leave one job on a friday afternoon and walk into a new one at the same high rate of pay on the following monday morning.

If only planet jackart was even remotely like planet earth. It isn't and it never will be.


@ Jackart - according to one survey, only 12% of small businesses worry about the cost of sacking a new employee, suggesting that employment protection isn't very costly.
And it might even be free. Imagine we did have your ideal labour market. Knowing that they could be fired at will, employees will be less keen to invest in job-specific skills, preferring to invest in portable ones. That could worsen productivity. Also, workers will want to jump before they are pushed and so will be more likely to quit. This would increase firms' turnover costs, and might bid up wages as firms try to retain staff. In these ways, scrapping job protection might add to costs.
This might explain why research suggests little cross-country link between job protection and employment:



"These small business people are plumbers and electricians, not experts in employment law and they are ABSOLUTELY TERRIFIED of being taken to a tribunal"

And most have ABSOLUTELY NO REASON TO BE. You might want to ask the authors of Britannia Unchained why they're spreading misinformation on this topic, and unnecessarily TERRIFYING small business.



The problem with this argument is that it applies just as much to Labour and the liberals.

A political party is a machine for garnering votes to win elections. Millions of them. It is always the case in fact that some of the voters who back party x will find party x disappoints them. People tend to vote for x as they identify with it maybe for irrational reasons but eventually some proportion of them find that x does not advance the interests they thought it did and they abandon x. That is one reason why parties fall from power. The idea that all of the millions of people who put party x into power have the same interests and will like what x does is proven to be untrue repeatedly. Labour are supposed to be the peoples party yet keep selling out the unions who pay them and adopting "welfare reform" policies i.e. cuts. They loved the ERM in 1992 etc. If the tories sell out home owners near the airport then the home owners should vote Labour next time and Labour should promise to stop the run way building as they want to win seats in the south. A willing buyer meets a willing seller and a bargain results.

Account Deleted

Defining rentier to include recent buyers of annuities is questionable, let alone claiming that "QE is the euthanasia of the rentiers". The real rentiers are those who live off shares and property, both of which have been boosted mightily by QE, as the BoE confirmed.

The change in pension provision over the last 30 years has obliged many low-income people to buy annuities who would previously have relied on final-salary schemes. I think these are accidental rentiers at best, and I doubt the Tories are too worried about representing them. Their main appeal to the elderly is targeted on the subset of homeowners, i.e. those with property values to defend.


I would use a more narrower view of rentiers being people in the finance system living off fees for looking after other people's money, rather than folks getting a return on their own cash. That is, the shadow banking system such as hedgers and private equity execs. And they benefit from QE (unlike savers).

Which also ties in with the article because the shadow bankers are overwhelmingly funding Romney and make up half of the Tories' funding (IIRC).

Britannia Unchained is more an expression of a united attack, lower living standards for the masses (more work, less pay) in order to distribute more wealth upwards in higher profits, privatise more welfare so as to open up areas of accumulation.

It's a pretty much a constant theme in IMF/OECD documents.


I'm not sure if the labour is fragnmenting, but one thing is clear that there is incresing forces and oposition against labour.

Fabric banners

I'm not entirely if they are actually trying to do the right of just doing that might benefit them in the future. It's really amazing how much people would do for their own gain.

Mike Cornelia

I know that QE does not cause inflation in the current environment. QE simply swaps bonds for reserves. It's effect are through expectations only. In terms of this issue, selling your structured annuity might be the best option if you are looking for more money.

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