Stark Warnings
Looks like more bad news is coming Gordon’s way in the not too distant future, as the so-called miracle economy continues to unravel. Mervyn King (governor of the Bank of England, and chair of the Monetary Policy Committee) has come out warning that inflation could go up above 3% in the next 6 months - 50% over the target set by Gordon Brown for the Bank of England of 2%! Apparently this shocking turn of events, should it occur, would trigger King into the action of writing a letter to Gordon, explaining himself and his team and why they had failed to control inflation. A bit like writing a letter to Tescos to apologize that you’ve let the food you bought go past its sell by date, and how surprised you are that this caused the food to go mouldy. The reality is that Gordon already knows why CPI is going up up and away, and the desperate measures taken to cover up wider inflation have really started to bite back.
For a message such as this to come out of the Bank of England signals a certain sense of inevitability that the teeth shown by the MPC one week ago will be bared a few times more in the near future - if inflation is about to hit 3% surely more base rate hikes are on the way, and King and co. are doing their best to prepare us for this highly likely scenario. Still, Brown has a few months to sort out this little toothache with similar tactics that have been employed in the past and have been detailed in earlier articles. Spookily, the list of these tactics from the Wikipedia article on Hyperinflation does seem to line up in some ways with what we have become used to under the present incumbent of Number 11:
- Outright lying as to official statistics such as money supply, inflation or reserves.
- Suppression of publication of money supply statistics, or inflation indices.
- Price and wage controls.
- Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pensions schemes, emergency funds, war funds, or similar.
- Adjusting the components of the Consumer Price Index, to remove those items whose prices are rising the fastest.
The question is, will that be enough? We have the apparent spectres of items such as university top-up fees on the horizon, although it seems that their weighting within the CPI may be yet to be determined, that may add another 0.25% to inflation. All rather worrying for the man upstairs, who had no doubt hoped that the perception of economic stability and healthy growth could have been perpetuated a while longer, just long enough to make the switch nextdoor. It may be that the truth behind the myth will become apparent a little sooner than expected.
