Inflation

The news that the CPI rose to 3.5 percent doesn’t seem to have affected the markets, but the cost of living is soaring. Mervyn King has written to Alistair Darling predicting that inflation will fall back to the benchmark 2 percent over the course of the year, and that the current explosion is a result of short term factors such as the restored VAT rate, a 70 percent rise in oil prices and the depreciation of sterling. David Blanchflower is right: inflation may eat a little of Brown’s debt mountain and it will help those who now hold negative equities on houses. But it does precious little else that is

As Mark Bathgate and Fraser warned, the economic crisis now has an added dimension: inflation. The government’s preferred marker, the Consumer Prices Index (CPI) rose to 2.9 percent in December from 1.9 percent in November, which as Andrew Neil notes is the biggest monthly rise in the annual index since records began. And the Retail Prices Index (RPI), used to calculate welfare payments and wage re-negotiations, rose to 2.4 percent from 0.3 percent. The underlying RPI rate rose to 3.8 percent from 2.7 percent.  We are now seeing the long-term effects of Quantitative Easing and the use of debt to finance further government borrowing. A consequence of printing money is

Oops! Britain’s inflation is heading back to 4 per cent territory ­ as you’d expect with the Bank of England printing money and using the debt to finance government spending. If you create more money, you reduce the value of the money. Citi has done another brilliant research note, which it is putting online, laying out the implications. The punters are facing pay freezes, or settlements below 2 per cent. The cost of living is soaring. Result: misery. Here are the two graphs from Citi that spell it out. First, inflation (much affected by the VAT hike ­ in the same way that it was artificially reduced by the VAT

The inflation surge is now upon us. The CPI rate again “surprised” to the upside – Britain is the only major economy in the world to have inflation doing this. But given that the Bank of England’s printing presses have been working overtime to fund a fiscally irresponsible government then little wonder things are different here. To understand just how unusual the UK situation is, consider the below graph: despite suffering the longest recession in G20, we have one of highest rates of inflation in the developed world. The next few months will see this push higher, potentially reaching 4 percent in March and busting the 2 percent target. Without

What with his new column in the New Statesman and his articles for other outlets, David Blanchflower – a former member of the MPC – really does seem to enjoy laying into the Tories.  Problem is, much of what he says fails to convince – so much so, in fact, that I thought I’d bash out a quick fisk of his Guardian article from last Friday.  Here’s the full article with my comments in bold: We are in the midst of the worst recession most people alive have ever experienced, or will probably ever experience. It is already worse than the 1980s and it isn’t over yet. The only comparison