The mugger's accomplice

19 July 2008

The Spectator on the return of inflation

‘Inflation,’ Ronald Reagan declared, ‘is as violent as a mugger.’ In response, the world pursued zero-tolerance policies for two decades, to the point at which politicians and central bankers began to believe they had actually eradicated the menace. When Gordon Brown used to boast that there would be ‘no more boom and bust’, he was relying in large part on a belief that inflation had been permanently defeated by monetary and fiscal prudence combined with globalised trade.

But now we know that inflation is on the loose again, and all the more frightening for being unfamiliar. The Consumer Price Index (CPI) stands at 3.8 per cent, a 16-year high and almost double the Bank of England’s target. And the CPI itself (which excludes housing costs, and includes in its basket a selection of consumer goods that no one needs to buy every week) is now exposed as a wholly inadequate indicator of the real rate at which household bills are rising. One former chancellor, Sir John Major, said this week that ‘inflation is probably between 8 and 10 per cent’. The British Retail Consortium puts food price inflation at 7 per cent, while a survey of supermarket products this week put the figure as high as 21 per cent. Fuel costs are up by more than 30 per cent, and sure to rise further.

Until recently, it was the middle classes who complained, across lavish dinner tables, that service-sector inflation was hitting them far harder than general inflation for the mass of shoppers. That situation has reversed: the poorer the household, the higher the proportion of income that is spent on expensive necessities, and the smaller the balance left for discretionary bargains: the poorer you are, the higher your personal rate of inflation. So the mugger is back, his victims are those least able to defend themselves, and voters who see their spending power and the value of their savings rapidly eroded will demand to know who let him out.

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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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