The mugger's accomplice

19 July 2008

The Spectator on the return of inflation

These are not easy questions. As for culpability, there is an extended line-up of suspects. If we accept Milton Friedman’s view that inflation is ‘always and everywhere’ a monetary phenomenon, then first in line are the central bankers, led by Alan Greenspan, the former US Federal Reserve chairman who stands accused of pumping out too much cheap money to avert crises during his tenure, and encouraging others to do likewise. The same has happened, under Greenspan’s successors, in reaction to the credit crunch: central banks had to choose between inflationary monetary actions and systemic financial collapse. Not surprisingly, they chose the former, and one result is higher prices.

Next in the parade are the speculators. Behind the inflationary spike is a bubble in commodity prices — in oil, metals, grain and dairy produce. Arguments are advanced that prices are driven by real-world imbalances: in particular, by the appetites of China and India to fuel rapidly growing industries and feed increasingly affluent populations, set against the failure of oil producers to increase supply and the failure of global harvests to yield sufficient basic food. Thus a sliced loaf in Tesco costs more not only because British farmers’ fuel and fertiliser costs have risen and weather has been bad, but because global grain stocks are being diverted to fatten beef for Chinese diners. That may be true, but its effect is hugely exaggerated by hedge funds and others betting with the trend. Opec’s president Chakib Khelil said recently that the last $40 of the $140-plus oil-price spike should be blamed not on his members but on financial speculation — which translates directly into painful extra pence per litre at the pump. This form of inflationary mugging is the opposite of Robin Hood’s mission: robbing the poor to pay the hedge-fund rich.

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EyeSee

July 17th, 2008 7:43pm Report this comment

Naturally you have to factor in Brown's phenomenal stupidity. Forget all these 'ooh I've met him and his is a great intellect', we have seen what he has actually done at the Treasury and it is this; he never made any statement beyond those he had to. He never supported nor opposed anything. What he signed up for was power ('I want to be PM and tell everyone what to do') and money. He didn't sign up to do any work. If you and he were amongst a group of plane crash survivors, you'd do for him, not to eat him, but because he was there.

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