February 01, 2009

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.


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