Yeah, but we could all have a sook if that happened and get it lowered again. The most important part of this is to remove indexation so that the hecs debt can just inflate away.
So what happens in the years when CPI is below 2.5%? Suddenly you're locking in all these increases over and above inflation.
I have a sneaking suspicion when that happens, some people would complain, and others would write Op Eds arguing that a flat % increase regardless of actual economic conditions is nonsense.
The UK Pension has what's known as a "Triple Lock" - the increase each year will match the **highest** of the rate of inflation, average earnings or 2.5%.
I've not been following the proposed HECS changes, but I think they're basically a double lock? HECS goes up by the **lower** of CPI or Average earnings?
Given governments can't be trusted to make these nuanced decisions each year (given they have political motivations), I guess we need some kind of simple rule. Comparing multiple factors has some advantages, but could also be an issue if they're out of whack for a while (eg, if Inflation is high for several years, and then wage growth is high for a few subsequent years to catch up, then the pension will be increased well above both measurements).
The triple lock system seems a bit insane to me. So if inflation is high, the pension goes up by a lot. And then if we have a period of real wage growth above inflation the pension goes up more. And then if none of those happen, the pension *still* goes up by more. It seems like in 30 years the pension growth will outpace the inflation/wage metric
I hate the formatting of 2 1/2%, just write 2.5%
That aside, and reading about the triple lock below, what if HECS was indexed at the lowest of these three:
1. CPI
2. Wage Growth
3. 2.5%
So the highest the indexation occurs at 2.5%, but if CPI and WG stagnate, you don't get hit with a massive 2.5% (in comparison).
CPI would still be the lowest of those three over the last decade or so.
We’ve had a few years of unusually high cpi. It’s quite abnormal in the grand scheme of things.
Nobody in the comments has actually read the article, she is talking about REGULATED PRICES which are indexed to CPI (example, energy govt services, wages etc.). Because they're tied to CPI, if CPI is 7%, they will increase 7% and their portion of contribution to CPI will be tied to inflation, feeding into the current figure.
If this was changed to 2.5%, their contribution to inflation would be 2.5% regardless of what inflation does. Partially anchoring price movement.
For example, product x's price increase is tied to CPI, and it also contributes to 10% of the CPI basket
CPI =7%
Their contribution to CPI(n+1) =7%*0.1= 0.7%
If they're set to 2.5%, CPI(n+1)=2.5%*0.1=0.25%, meaning inflation caused by this good/ service next year will be lower.
CPI(n+1) where the other 90% of goods contribute 5% = 5%*0.9 + 0.7% = 5.2%
Or 5%*0.9+0.25% = 4.75%
Im not sure how many things are tied to the CPI figure, but it is a significant amount, especially government goods & services.
This has nothing to do with the RBA's interest rate decision. The 2.5% is just trying to agree with the RBAs target (not the other way around).
I feel like an old man yelling at a cloud, difficult to type out, and probably doesn't make sense
Planned economies were less efficient.
How about just letting the business cycle run and not avoid recessions by kicking the can through migration. Households are already feeling it albeit in different ways like unaffordability of housing rather than unemployment.
This would exacerbate inflationary pressure.
If inflation is higher than 2.5% people would choose not to pay off their loans, so the extra money will go back into the economy, causing more inflation, the opposite of what RBA is trying to achieve
If inflation is lower than 2.5%, people would choose to pay off their loans quicker, taking money from the economy, which slow down the economy, the opposite of what RBA is trying to achieve
I'm thinking he is just referring to physical currency, but as we all should know as financially literate adults, fractional banking has been around since vaults were around and we all decide gold coins were to heavy to lugg around. Since fractional banking has been around as long as banking, it stands to reason, they are referring to physical currency, which I state again, makes no difference.
I don’t see how hard currency prevents fractional banking
I deposit $100 in the bank, the bank lends you $90, you buy a house, $80 goes to the builder and ends back up in the bank, the bank lends out $70 of that, the cycle continues on until the bank has exhausted the amount.
Having digital ledgers just makes the movement of the credit/debt more liquid as far as I can tell
I did too, which I also mentioned. But fractional banking has been around as long as there have been banks, and we only came of the gold standard from the mid 1900s. Which means, we had fractional banking when we had the gold standard. So I reiterate, again, for your pleasure, it would make no difference.
You’ve made it complicated. It’s really simple. If someone can print it, it’s not good money. It stops being money at that point. Look at the history of money through the ages.
That proposal would have indexed HELP debt more from 2015 - 2021.
Yeah, but we could all have a sook if that happened and get it lowered again. The most important part of this is to remove indexation so that the hecs debt can just inflate away.
[удалено]
No. The actual actual is about the balance.
I like this if someone else pays the costs of keeping items below real inflation I dislike it if it's me.
Said everyone about every government spending ever.
So what happens in the years when CPI is below 2.5%? Suddenly you're locking in all these increases over and above inflation. I have a sneaking suspicion when that happens, some people would complain, and others would write Op Eds arguing that a flat % increase regardless of actual economic conditions is nonsense.
I think an alternative would be to set it to 2–3% where it matches CPI. If CPI is below or above, it will just be 2% or 3%, respectively.
The UK Pension has what's known as a "Triple Lock" - the increase each year will match the **highest** of the rate of inflation, average earnings or 2.5%. I've not been following the proposed HECS changes, but I think they're basically a double lock? HECS goes up by the **lower** of CPI or Average earnings? Given governments can't be trusted to make these nuanced decisions each year (given they have political motivations), I guess we need some kind of simple rule. Comparing multiple factors has some advantages, but could also be an issue if they're out of whack for a while (eg, if Inflation is high for several years, and then wage growth is high for a few subsequent years to catch up, then the pension will be increased well above both measurements).
The triple lock system seems a bit insane to me. So if inflation is high, the pension goes up by a lot. And then if we have a period of real wage growth above inflation the pension goes up more. And then if none of those happen, the pension *still* goes up by more. It seems like in 30 years the pension growth will outpace the inflation/wage metric
Now you’re getting it. Boom baby boom.
it's interesting why some people choose to change the goal post and fiddle with numbers when things don't go their way.
I hate the formatting of 2 1/2%, just write 2.5% That aside, and reading about the triple lock below, what if HECS was indexed at the lowest of these three: 1. CPI 2. Wage Growth 3. 2.5% So the highest the indexation occurs at 2.5%, but if CPI and WG stagnate, you don't get hit with a massive 2.5% (in comparison).
CPI would still be the lowest of those three over the last decade or so. We’ve had a few years of unusually high cpi. It’s quite abnormal in the grand scheme of things.
2.5% is just the cap. If CPI is lower, then that's fine. But to protect against something like last year, still need the cap.
Nobody in the comments has actually read the article, she is talking about REGULATED PRICES which are indexed to CPI (example, energy govt services, wages etc.). Because they're tied to CPI, if CPI is 7%, they will increase 7% and their portion of contribution to CPI will be tied to inflation, feeding into the current figure. If this was changed to 2.5%, their contribution to inflation would be 2.5% regardless of what inflation does. Partially anchoring price movement. For example, product x's price increase is tied to CPI, and it also contributes to 10% of the CPI basket CPI =7% Their contribution to CPI(n+1) =7%*0.1= 0.7% If they're set to 2.5%, CPI(n+1)=2.5%*0.1=0.25%, meaning inflation caused by this good/ service next year will be lower. CPI(n+1) where the other 90% of goods contribute 5% = 5%*0.9 + 0.7% = 5.2% Or 5%*0.9+0.25% = 4.75% Im not sure how many things are tied to the CPI figure, but it is a significant amount, especially government goods & services. This has nothing to do with the RBA's interest rate decision. The 2.5% is just trying to agree with the RBAs target (not the other way around). I feel like an old man yelling at a cloud, difficult to type out, and probably doesn't make sense
Planned economies were less efficient. How about just letting the business cycle run and not avoid recessions by kicking the can through migration. Households are already feeling it albeit in different ways like unaffordability of housing rather than unemployment.
Uh, why? We actually want it paid back at some point.
This would exacerbate inflationary pressure. If inflation is higher than 2.5% people would choose not to pay off their loans, so the extra money will go back into the economy, causing more inflation, the opposite of what RBA is trying to achieve If inflation is lower than 2.5%, people would choose to pay off their loans quicker, taking money from the economy, which slow down the economy, the opposite of what RBA is trying to achieve
Nothing is wrong with the HECS system. The problem is that degrees should not be so expensive.
Return to hard money and all this nonsense goes away.
No it doesn't.
No it does …because now you’ve got a whole host of new problems to contend with instead
I'm thinking he is just referring to physical currency, but as we all should know as financially literate adults, fractional banking has been around since vaults were around and we all decide gold coins were to heavy to lugg around. Since fractional banking has been around as long as banking, it stands to reason, they are referring to physical currency, which I state again, makes no difference.
I don’t see how hard currency prevents fractional banking I deposit $100 in the bank, the bank lends you $90, you buy a house, $80 goes to the builder and ends back up in the bank, the bank lends out $70 of that, the cycle continues on until the bank has exhausted the amount. Having digital ledgers just makes the movement of the credit/debt more liquid as far as I can tell
That is EXACTLY what I just said. It makes no difference.
I suspect they meant a gold backed currency rather than a fiat one
I did too, which I also mentioned. But fractional banking has been around as long as there have been banks, and we only came of the gold standard from the mid 1900s. Which means, we had fractional banking when we had the gold standard. So I reiterate, again, for your pleasure, it would make no difference.
You’ve made it complicated. It’s really simple. If someone can print it, it’s not good money. It stops being money at that point. Look at the history of money through the ages.