Douglas Carswell's Blog

An inflationary blip?

Each time monthly inflation figures revealed a rise over the past few years, many pundits and experts liked to imply it was all just a blip.  Even when it became pretty clear that those warning of the dangers of deflation were wrong, there was a widespread reluctance to accept the opposite; that inflation is the problem.

So what should we make of the news that the Retail Price Index fell last month from 5.5% to 5.3%?  It is obviously a good thing (unless perhaps you are a large debtor, like the government, and need inflation to erode your debts).

But for the rest of us, stable prices help hard working families, pensioners on fixed income - and the more economically productive parts of the economy.  Inflation acts as a hidden tax, transferring wealth from private citizens to the state.  So the closer to zero inflation, the less wealth the government takes from us by debasing the currency. 

Perhaps printing money and holding interest rates down so low over the past four years has not really staved off the consequences of the credit bubble / crunch.  Could it be that it has merely postponed the problem?       

Other economists I speak to, whose views are not represented on the MPC, tell me that by their measures the money supply is falling sharply and dramatically.        

Despite today's welcome figures, the Bank of England's Monetary Policy Committee is still missing it's 2% inflation target by over 100%.  Government is no better at setting interest rates than at any other form of price fixing. 

Back to all posts