torsdag 10 april 2008

Stand-by for a wave of inflation

The Monetary Policy Committee's decision to drop the interest rate to 5% will give another shove to inflation, as the £ drops further in the foreign exchange markets. The £ stood at over €1.40 less than a year ago. Now it is down to €1.25 in a slide which has mostly occurred in the past four months and looks set to continue.

It is a desperate attempt to keep the property bubble inflated, in order to keep the credit-fuelled consumer boom running. As the most, it will put off the collapse for a little while, but the decision means that the UK will probably suffer 1970s levels in addition to the inevitable recession. The immorality of the policy is that the burden will now be pushed onto the thrifty and prudent people who had no part in bringing about this state of affairs and gained nothing from it.

A few firms will benefit from the export opportunities but the main effect will be inflationary, so expect industrial trouble as people find the real value of their pay packets shrinking.

It is interesting that the Daily Express has just noticed in its headlines today that the fall in the £ will push up the price of foreign holidays. Strange they did not pick it up months ago.

The inflation policy, for that is what we are being given, will only delay the inevitable recession, but will just push the burden on to those who built up savings.

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