Douglas Carswell's Blog

Inflation up. MPC credibility down

Just about the only thing growing in the UK right now is inflation.  The Consumer Prices Index is up to 4.4 percent.

The only thing that surprises me about rising inflation is that those who preside over our corporatist-command economy are surprised about it.

Back in March Adam Posen, one of the economic planners on the Bank of England's Monetary Policy Committee, gave an extraordinary interview with the Guardian in which he seemed to suggest he'd quit if inflation wasn't down at 1.5 percent by the middle of next year.  

Apparently, the MPC experts believe that all those cuts in public spending would depress consumer spending - which would mean falling prices.   

The trouble is that public spending has not actually been cut - yet.  It is a mathematical fact - albeit one skated over by the commentariat - that the amount of money government spends has risen over the past year.  Coupled with poor tax receipts, it helps explain that growing question mark over the deficit reduction plan.

Even more important, government has printed vast amounts of new money via so-called quantitative easing.  The effect of printing off more pounds is to make the value of every existing pound shrink.  Hence the rising prices.

How high does inflation need to get before we recognise that the MPC are no better at economic planning than any other central committee.

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