February 22, 2009

Inflation is coming

Liam Halligan has a nice article in the Telegraph as to why we face lots of inflation. This is the key paragraph:

But UK deflation simply doesn't exist. In December, annual CPI inflation fell to 3.1 per cent – way above the Bank's 2 per cent target. That number was used as "evidence" we're on "the brink of deflation". Anyone examining this data could see the lower inflation rate was driven by the one-off 2.5 point VAT cut. Adjusted for tax, the CPI actually rose – from 3.9 to 4.1 per cent. That's not surprising given that our ailing currency saw import prices rise a painful 14 per cent. CPI inflation fell to 3 per cent in January. Again, the detailed data is instructive. Food price inflation hit 10.3 per cent. Even "core inflation" – excluding food and fuel – rose, despite the screams of "deflation" from Whitehall and beyond.

February 19, 2009


I expect that Gordon Brown has high hopes for the G20. It is his set piece, a way of getting a week of uninterupted media coverage while rubbing himself up against 19 far better leaders than himself to try and deflect attention from the awful state of the economy and the debt horrors that are going to be announced in the budget. Unfortunately that 19 could be reduced to 18 with the undisputed star staying away. Maybe Obama fears that the power of The One will not be strong enough to escape the Brown Curse. Nor is he going to get any help from his union paymasters either with Unison planning a series of protests during the G20 just to make sure everybody remembers why they hate them as the country begins to sink into stagflation.

February 18, 2009

The road to Harare ...

... is paved with freshly printed bank notes.

Monetary growth is already at a scarily high 16% pa and they want to print money! Money is a store of value. Increase the number of crisp twenties floating around and the value that each represents has to fall, so stagflation here we come. Rather like the last Labour government.

Inflation is above target by the government's preferred measure (CPI) and the only reason that RPI isn't is the reduction in housing costs due to the slashing of interest rates that has happened, RPIX (which is RPI inflation without housing costs) is still up there. The independent consensus is that CPI inflation will probably drop below the bank of Englands 2% target, but it will not fall below 0%.

All of these forecasts are from before the Bank of England started dropping bundles of fivers from helicopters. OK actually it isn't dropping bundles of fivers from helicopters. If it did that some of this extra money might end up in the hands of somebody that isn't part of Labour's payroll vote. What they are actually going to do is buy up government bonds, nobody else is going to, with freshly printed money and make them disappear. That way the first people to get their hands on the cash, before the inflationary effects ripple through the economy, are the fat cat bureaucrats of the public sector. They may not add anything of value to the economy, but they do vote Labour and so have to be protected.

Deflation, which we get along quite happily with in many areas of the economy, is not a big risk. High inflation on the other hand is beginning to look inevitable. This inflation will act as yet another stealth tax on anybody silly enough to try to be self reliant under a Labour government as that government devalues the currency to write off the massive debts it has built up.

February 09, 2009

back to the nineteenth century ... yay

That's two polls now with Labour collapsing and there votes getting hoovered up by the Lib-Dems.

Of course this could simply be a rouge poll because you cannot got out in snow in sandals. So while Labour and Tory voters where pulling sickies and building snowmen the Lib-Dems where stuck inside trying to fight off a cold with Quorn based chicken soup.

However there is another option. Maybe people are actually waking up to the Lib-Dems and as Labour continue to slide, and they will, it will be the Lib-Dems that profit.

for exactly the same reason that they underperform so badly: third party squeeze.

One of the effects of the first past the post voting system is that it polarises things. There is only really room for two parties. People often vote for whomever is best to keep the other lot out rather than who actually best represents their views. People vote Conservative to keep Labour out. People vote Labour to keep the Conservatives out, and people generally do not vote for the Lib-Dems because they know that they will not have enough votes to keep out whomever it is they are most worried about. There are a lot of people that would vote Lib-Dem if they thought they could win. But since they can't, they don't. This is one of the reasons for the bar charts on Lib-Dem literature claiming that they really are the only people that can keep the others out.

The Lib-Dems would probably have been squeezed down to just another fringe party had they not occupied some strategically very ideological ground on the very centre of the political battleground.

Now what happens if the Lib-Dems poll better than Labour? Suddenly you have the classic Lib-Dem bar chart 'Only the Lib-Dems can keep the tories out,' and you have it across the entire country. Suddenly Labour are the third party. Suddenly it is Labour that is the wasted vote which could let the Tories in.

Not only that you have this fact broadcast into every home on prime time television because this would be a very big story. Millions of pounds of free advertising saying exactly the right thing just as people are beginning to see them as a viable place for their votes.

There will be a lot of people that are disgusted with Labour, but will still vote for them because they fear the Tories. Then suddenly they have a way out. As over the horizon appears a viable vaguely left wing party, untainted by all of Labour decade of authoritarianism and failure, which offers a better chance of keeping Labour out than Labour. A lot will rush to the banner and maybe, just maybe, a tipping point will be reached catapulting Nick Clegg into a position that no Liberal has held since Asquith.

February 01, 2009

Labour's comic anti-porn laws

However bad you thought Labour's latest anti-porn law is, it's worse.

Own a copy of Watchmen -> get labeled a sex offender and sent to jail.

Money, money, money, it's a poor man's world

The CPI the government's favoured inflation rate is currently 3.1%, and RPI is 0.9% but the reason why RPI is so low is almost entirely due to the massive reduction in interest rates making peoples mortgages cheaper. This can be seen by the fact that RPIX is still at 2.8%. Once the interest rate reductions feed through it will be back up with CPI. By the government's favourite indicator inflation is so high that Melvin King will be having to write a letter to the Chancellor explaining why. No indicator is negative, there is no deflation. Yet the government has told the Bank of England to start printing money.

Printing money might help to ward off deflation and so avoid debt deflation and a horrible grinding recession. It didn't help Japan during their lost decade, but still it might help. If we had any danger of debt deflation that is, but we don't we still have plenty of inflation and are just about to get a lot more of it. We could even get hyper-inflation.

Inflation is a bad thing. Hyperinflation is a very very bad thing. Astonishingly bad. Social apocalypse/rise of Hitler bad thing; and bad for everybody as any savings are wiped out or their weekly wage gets reduced to the value of toilet paper. The only people that it could conceivably be good for is those with massive debts and can either get as much money as they want through force, or are unlikely to be getting any money from anybody at all pretty soon. Like the government since its trillion pounds of sterling debt is reduced to the value of one civil service away day, and the Labour Party with its multi-million pound debts thanks to trying to sell seats in the legislature, and being found out.

World Social Forum

Nice report by Bruce Sterling of the results of the radical Left's great think tank jamboree in Brazil, which must have produced tons of carbon shipping in all the delegates. It appears that it could be summed up as an whole bunch of sandal wearing hippies shouting:

What do we what!
We have no idea!
When do we want it!

With the great line:

Sid Vicious had better political insight than this