February 15th, 2011

+ + + CPI 4% Inflation – Double Bank of England Target + + +
+ + + RPI 5.1% Shoppers Feel the Squeeze + + +

So have you stocked up on beans or gold yet?  Have you taken Guido’s advice?

Inflation is always and everywhere a monetary phenomenon, if we don’t figure out a way to exit QE we will inevitably suffer double digit inflation. This is not an accident, it is, as the Chinese have pointed out, the deliberate intention of policymakers in Washington and London to inflate away their debts. The cost of that policy will fall hardest on savers and pensioners who will be the collateral damage of this policy. It is entirely cynical of Mervyn King and Ben Bernanke to scaremonger by talking of a bogus threat of deflation…


  1. 1
    Mike Hunt says:

    What do you expect when you print money.


    • 4
      Gordon Brown (Retd.) says:



      • 7
        Mike Hunt says:

        Didn’t work did it.


      • 49
        Anonymous says:

        Some outlets of morrisons due a large family size bucket of beans, which comes with a screw top lid. This is probably a better investment than normal tins due to
        it’s relative rarity.


      • 67
        Worthless Lib Dem Pledge says:

        It really is a sad state of affairs that those who acted properly with prudence are being penalised while those who scrounge from the state have not suffered any consequences or welfare cuts. Clegg will look after them and make sure they have an unfair advantage to attend the best universities.

        I don’t suppose MPs have suffered either, it was them who let the banks get us in this debt/mess. Should have stuck to Roosevelt’s plan of separating investment from commercial and retail banking; they could then take as much risk as they want. if they take too many risks they would go broke without hurting ordinary businesses and people. Who changed this? Blair, Brown and Clinton…..

        We will have controlled inflation to reduce the debt. As we are all going to end up in the same care homes, we might as well spend everything we have and go on welfare. Why let the local authority have the equity in your home!


    • 6
      So what? says:

      But this was expected. It is only up from 3.7% to 4% and given that commodity prices are soaring and VAT has increased then there is little the BOE can do about it.


      • 56
        Rip van Winkle says:

        But printing money is what is causing it!! Forget this c**p about ‘odd weather’. ‘emerging market demand’. – it’s bulls**t.

        ALL commodity prices are going through the roof – wheat, corn, soybeans, rice, rubber, sugar, coffee, platinum, palladium, silver. ALL OF THEM.

        And the main culprit is Bernanke in the States. He keeps printing – commodity prices keep rising. But, in some respects they’re not. The value of your money is being devalued – in time, to scrap paper.


      • 65

        The Bank of England was happy enough to benefit from a fall in our exchange rate when it was trying to boost the economy but now does not want to face the consequences of its actions…As I wrote today

        “Apologists for the Bank of England argue that there is nothing it can do about inflation which is “imported”. This is an odd argument which is not far short of economic illiteracy. For raising interest-rates is usually associated with a rising exchange rate which does help with imported inflation,particularly if the rise is against the US dollar. Indeed it used to be one of the arguments of the Bank of England! I doubt they have forgotten. Please do not misunderstand me you can of course argue that you think that this would be the wrong policy my point is against those who are arguing it is not a policy option.”

        Also as input prices are rising strongly there is more yet to come…



    • 9
      Platinum says:

      One would expect the sensible to buy precious metals instead.
      Gold and silver are too manipulated. Platinum and Palladium is where it’s at.
      (The Chinese are stocking up on those)


      • 46
        Goldbug says:

        Platinum and Palladium may be where it’s at but should the fertilizer collide with the air conditioning and banks take a “holiday” as has happened before how easy will it be to use them as money? If fiat currencies really go into hyperinflation governments will be in no position to manipulate gold and silver, they’ll be too busy feathering their own bunker. Remember gold and silver have been real money for as long as there has been money.


        • 58
          Platinum says:

          Difference is that there is only ever about a year’s industrial supply of Platinum and Palladium above ground whereas Gold and Silver are as common as muck.
          IOW, Gold and silver are almost as fiat as paper.


          • Gold appreciated against a depreciating dollar but it never got to the $3,000 levels that were being bandied about a few years ago. In that time, I have actually doubled my money on property, but the right property.


    • 36
      Anonymous says:

      If I printed money Mike I would expect to end up in prison.


      • 59
        Albert Hall says:

        A couple of hundred years ago you’d have been hanged at Tyburn. The ideal venue for Brown and Millipede and Balls who got us into this mess in the first place.


    • 48
      Anonymous says:

      Lol, probably to subtle for some on here.


  2. 2
    Governor of the Bank of England says:

    We will inflate our way out of this mess

    All that debt is devalued

    It’s called a sophisticated renege…


  3. 3
    the last quango in paris says:

    Ed Balls says ‘D’oh’


  4. 5
    Anonymous says:

    Before you start, interest rates will not be raised significantly.


    • 11
      Spank Sinatra says:

      Sorry, but you’re wrong. Have you seen what is happening to 10 year gilts? Unless I am mistaken, they have increased by one full percentage point since last September which is what is commonly understood as ‘a fuck of a lot’ in a very short period of time. The cost of servicing our deficit and debt has just shot-up. Not much reporting of that unsurprisingly enough………


    • 13
      Grumpy Old Man says:



  5. 10
    Popeye says:

    Politicos make me sick. As a pensioner, the interest n my savings help me to make ends meet.
    Right now with that idiot King, inflation is higher than my interest, so my capital is wasting away sitting in the bank. Justice??


  6. 12
    Taxfodder says:

    State theft is a shining example for all..

    Don’t save

    Don’t bother about pension arrangements

    Piss everything you have away and enjoy it before the state pisses it away on your behalf.

    Oh yes I forgot, die quietly before you are eligible for a state pension.


    • 19
      Grumpy Old Man says:

      And if you forget to die, the NHS will help you along.
      I wonder how the statistics for dying of neglect or incompetence in an NHS Hospital stack up against dying while on operations in Afghanistan?


  7. 14
    Gordon Brown says:

    They’ve ruined my golden economic legacy.


  8. 15
    NotaSheep says:

    And why would quantatative easing have resulted in anything other than inflation?


    • 23
      Grumpy Old Man says:

      Add on all the money printed from 2004 onwards (M0 grew at annnualised rate of 17%pa before the crash ) and Labour have done again what they did in the 70’s. Stagflation is a Labour Core Value.


  9. 16
    Why not tell Gordon Brown what you think of him in person this Thursday? says:



  10. 17
    Yvette's Greasy Minge says:

    Ed Balls is a wankstain,

    Ed Balls is a wankstain,

    Na na na na (ooh),

    Na na na na.

    Repeat ad nauseam, or alternatively just put the obnoxious fat c u n t in fucking jail where he belongs.


  11. 20
    Stupid Snapes says:

    Can someone please explain how Mervyn King has kept his job for so long.

    He was Governor when the Banks were behaving like Jeremy’s

    He also didn’t spot the impending recession, or housing bubble, and now his next failure will be to preside as the governor as inflation rockets, and the recovery falters.


  12. 27

    Guido can someone at Sunlight contact the CPS about Brown fraudulently claiming his pay as a full time MP
    when he does not attended parliament
    and goes on a mission of self promotion in full view of the law ?


  13. 28
    Chief Economist says:


    Some of us have said for years now that our Mervyn should have been fired

    It was quite obvious well before the Crash that the bank regulatory system
    had broken down…

    “Soft touch regulation” (the expression was actually invented and ascribed to…. Gordon Brown FFS) was at the very heart of this appalling mess we are in..because if caused the Crash

    And because QE was the only way to stop the Crash becoming a Depression – even if some like to think we could have avoided a Depression if the banks throughout the US and Europe had just gone down like ninepins without intervention…..

    So we no have spiralling inflation, necessary spending cuts (to avoid a Greek style run on Gilts etc) and we are back to the 1970s…Stagflation but on a more vicious scale…

    And no way out sadly..until real spending declines sharply to return to some sort of equilibrium…


    • 30
      Anonymous says:

      Labour. F*cking Labour.

      When will people learn ???


      • 35
        Jack says:

        Of course

        But this time they have created a MASSIVE problem that can only be solved by YEARS of belt tightening…

        And little frauds like E Milliband who was a party to this giant Ponzi scheme DARE to criticise the Coalition ?

        He should be told every time he stands up in the House of Commons or on TV that this WHOLE PROBLEM is the result of their Ponzi scheme

        Where are the Coalition attack dogs FFS ?


    • 31
      Chief Economist says:


      On the equilibrium question

      Two quick points

      1) Without government spending cuts on a large scale we will be severely punished by the markets

      2) Without cuts in consumer spending the external balances will never be in equilbrium either…and the currency will thus just depreciate causing further inflation…

      Thus the UK is grossly overspending at the government AND consumer levels…


      • 33
        Anonymous says:

        Large scale cuts in either govt or consumer spending simply will not happen. Whether they are necessary or not.


        • 38
          Chief Economist says:

          So inflation will soar

          Interest rates will explode…

          And cuts will be forced on the economy by the markets

          It’s called being between a rock and a hard place or somthing like that


    • 32
      Grumpy Old Man says:

      Do you agree that part of the realignment will be a collapse in house prices as retail money becomes harder to find?


      • 71
        Kiss my hoop says:

        How can house price realigment happen quickly? Things would kick off if it did. Even though I’ve saved like a bastard and almost paid off my mortgage I think it needs / want it to happen. People are deluding themselves and letting ourselves and our kids be ripped off by prices as they are.


  14. 37
    Grumpy Old Man says:

    Just to cheer everyone up: this time it’s really starting in America.



    • 41
      Jack says:

      The Fed has been doing QE on a massive scale as well

      Plus the TARP funding etc

      We have been saying here foe years, starting with Guido, that inflation will explode

      There is mechanical cause and effect…and everyone has known this since at least the time of MLlton Friedman…


  15. 42
    George says:

    Where’s the snow when you need it?


  16. 43
    Bert Pierrepoint says:

    Will that twat King have to write one of his letters? That should sort everything out.


  17. 44
    I hate Blue Labour says:

    Bet some rich muppet calls for interest rates to go up…

    “Quick, inflation is rising, lets force people to spend more and f*ck consumer confidence even more, that’ll fix it.”


    • 72
      I hate Blue Labour says:

      I was right, rich moron Howard Archer, UK economist at IHS Global Insight said:
      “It maintains pressure on the Bank to retaliate by raising interest rates sooner rather than later.”

      That’s right you f*cking idiot, when consumer confidence is on the floor, hit people with higher bills. How detached from reality are these people.

      Gideon was warned this would happen with the VAT rise, he didn’t listen then, I doubt he’ll listen now.

      The tories are really making a mess of things. 13 years they waited and it’ll be longer next time if they don’t raise their game.


      • 78
        Pabulum says:

        They waited 13 years for a chance to replace the pilots who had set us on a collision course with penury? The Opposition cannot affect the Government’s economic policy, other than by calling out tame mobs to press for change.

        Conservatives don’t mob, they sit and plot and feud.


  18. 57
    Urban Tory says:

    feeling strangely smug after reading that. Thank god the pantry is chocked full of bouillon and bullion!!


  19. 61
    the money shot says:

    mervs letter to chancelor—he beleives inflation will come down again



  20. 62
    On Harman Pride's Dossier says:

    Don’t earn enough to either save or afford a pension. So the policy’s fine by me.

    Only problem is the wage deflation, but since I’m self-employed I should be able to justify putting prices up soon.


  21. 63
    John Ward says:

    Great summary piece that Guido.

    Have you seen the new MIT report on US inflation?
    Ben’s been telling whoppers again….the headline rate is 17.3%….



  22. 68
    tory boys never grow up says:

    “Inflation is always and everywhere a monetary phenomenon”

    I am not sure why you keep stating this as though it is some kind of a religous belief. The last time you raised this point you acknowledged in the comments that “always” was not correct, and “eventually” might be a better way of describing your position.

    But perhaps this whole debate would be better informed if you had a look at what has actually happened to money supply, even after taking account of QE to date.


    Perhaps given that the current inflation is not explained by the money supply growth (including QE) then you might want to start looking around for some further explanations – clue look at all the speculative money going into commodities.

    Of course the easy way to exit QE is to stop doing it once the downward pressure on bank lending stops (not much sign of that at present however) – and then not to let the banks to use the new found liquidity provided by QE to go for a hell for leather (or should we say bankers bonuses for pensioners savings) expansion of bank lending. But then of course the omens for this government standing up to the bankers (or my lot previously for that matter) are not rosy – particularly when they want to try and boost the economy before the next election.


    • 82
      JBT says:

      Exactly. But what causes speculative money to go into commodities?

      Answer: cash is being devalued so people look for a safe home. Who can blame them!

      So let’s send the market a signal and shove interest rates up and burn the speculators. Otherwise everyone will start piling their cash into physical items – and that’s the tipping point when suddenly everyone realises that the currency is worthless.

      Breakdown of society is a step on from there (as per the 1920’s in Germany).


  23. 70
    billy the bum biter says:

    when in doubt, suck it and see


  24. 73
    Ed Butt says:

    Inflation is a cunning tax as it take money rom savers and those with pension funds on order to lower the governments debt. Interest rates must be raise from current insane levels. Labour’s loony free money policy has not helped the economy at all so let’s ditch it and return to sanity leaving the Obama administration alone on the road to ruin.


  25. 75
    Osama the Nazarene says:

    Updated misery index please, on ticker tape.


  26. 79
    sandown says:

    People who say they don’t believe in monetarism are like people who say they don’t believe in winter.


  27. 80
    Gooey Blob says:

    Mervyn cannot see the wood for the trees, and I am beginning to suspect that he does not wish to do so. The MPC needs to act quickly, as confidence is draining away with the release of each new set of figures.

    A quarter point rise is all that is needed, for now. It won’t damage the economy, but sends the signal that the bank is on top of things. Leave it a few more months and it will be too late, rates will have to rise much more sharply, and put the economy at serious risk.

    We’ll have to start thinking about calling for Merv’s head if the MPC does not act soon.


  28. 81
    Comparethemeerkatsarse says:

    Still, at least Gordon abolished boom & bust. That’s got to be a good thing?


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