Going up

As a blogger pointed out, the Input and Output price inflation is going up just as we feared. House prices are also on the rise.

The government may see this as a kind of success, with an election in the offing. The deflation they wrongly feared has not come to pass. Others see it as a sign of how weak the Uk economy has become, with rapid inflation in some assets and prices at a time when output is still very depressed, and when there are more than 5.5 million people of working age without a job.

The Chancellor and the Bank are silent on why this happening, just as the PM was when I asked him about inflation last year when it seemed likely it would go up. Could it be that their lop sided moneypolicy is to blame? Could it be that their policy of expanding the public sector and starving large parts of the private sector of cash is causing this poor performance?

Promoted by Christine Hill on behalf of John Redwood, b oth of 30 Rose Street Wokingham RG40 1XU

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12 Comments

  1. Lindsay McDougall
    Posted April 9, 2010 at 7:15 pm | Permalink

    You are making a number of very good points on the economy. Who is making these points officially on behalf of the Conservative Party during the campaign? If Messrs Osborne and Hammond are not doing so, perhaps you should call a press conference and go through them one by one yourself.

  2. Stuart Fairney
    Posted April 9, 2010 at 9:14 pm | Permalink

    Can anyone who reads this blog simply repeat this mantra when ever Labour talk about stimulus borrowing

    "The public sector does not create wealth, it consumes it, so it doesn't matter how many extra staff the local council employ, they don't create any wealth, they merely increase the burden of tax on the actual, wealth producing sector of the economy which is the only thing that will get us our of recession"

    • alan jutson
      Posted April 10, 2010 at 12:44 pm | Permalink

      Stuart

      Agreed, agreed agreed.

      Its so simple, I do not understand why this simple argument/statement is not issued time and time and time again.

      For every public sector job created, we require another private sector tax increase.

      Or

      For every public sector job removed, we can reduce the tax burden on the private sector.

      Its such a simple message and there are so many ways of saying it, you wonder if people are word blind or do not understand simple economics or the way the Public sector is funded.

      WE PAY THEIR WAGES, Their OVERHEADS and all they consume, They themselves contribute a little towards their own cost with the tax they pay.

  3. Steve Tierney
    Posted April 9, 2010 at 11:04 pm | Permalink

    All that printed money sloshing around the system probably isn’t helping much either…

  4. Brian Tomkinson
    Posted April 10, 2010 at 9:47 am | Permalink

    JR: "The Chancellor and the Bank are silent on why this is happening"

    Perhaps it is because this is the way they have planned to deal with the gigantic public debt with which they have burdened us all.

  5. Mike Stallard
    Posted April 10, 2010 at 10:36 am | Permalink

    I've been thinking about inflation which hurts me, a saver, a lot.
    I also have a house (almost) which is, I suppose, as ever, inflation proof.
    The major problem facing this country, to my mind, is the vast number of people either unemployed or living off the state. These range from quangocats, local government bigwigs, etc etc., down to the besuited man in the dole office, or the frantic little lady begging for funds. The surgical skill of preventing the "front line services" disappearing with them will be made much easier.
    Inflation will actually help this. As it rises, these parasitical people will slowly be forced into getting proper jobs "as the economy recovers". As the quangocats etc etc see that their time is up and their wages are slowly dwarfed by the people who are actually exporting their stuff, be it skills or things, they might – or their children might – move over into some kind of productivity instead of getting in the way of everyone else.
    So I am in two minds.
    Remember, I am a loser, not a winner out of this. If the economy really tanks, then, of course, my house will be worth nothing either.
    Tony Blair missed his opportunity for this reform by appointing Harriet Harman to oversee Frank Field in his reform of the Welfare State. It now looks as if the Conservatives are doing the same with Theresa May overseeing IDS.
    Shame.

  6. JohnRS
    Posted April 10, 2010 at 11:00 am | Permalink

    "The Chancellor and the Bank are silent on why this happening" – that is because they are both constitutionally incapable of grasping concepts that wouldnt look OK in a NuLieBore Party manifesto.

  7. Simon
    Posted April 10, 2010 at 2:19 pm | Permalink

    Reckless QE has had an effect, but no doubt it is the wholly inappropriate base rate we have which is the main problem. House prices were correcting nicely before the massive bailout and efforts to re-inflate the market.

    They always use the excuse that on the upside inflation is temporary, yet at the first hint of a drop in inflation they slashed rates to almost nil. Inflation remains well above target, house prices remain socially crippling and the economy has been stronger, there are no excuses left for 0.5% rates. There have been several letters written by the Governor of the BoE because inflation has overshot, yet none because it has undershot.

    I fear the rumours that inflation being used to wipe out peoples debts is actually true, and it is the prudent who will pay, especially those of us who don't have a house.

    • Simon
      Posted April 10, 2010 at 2:21 pm | Permalink

      We can't teach our kids to be careful with money and save when those who mortgage themselves to the eyeballs and live beyond their means get all the help.

  8. BillyB
    Posted April 10, 2010 at 3:35 pm | Permalink

    I've always been told that "printing money causes inflation" – so why hasn't it happened sooner?

  9. Mark
    Posted April 11, 2010 at 11:49 am | Permalink

    Ground floor:
    Perfumery, stationary, and leather goods, wigs and haberdashery, kitchenware and food. Going up…

    First floor:
    Telephones, gents ready made suits, shirts, suits, ties, hats, underwear, and shoes. Going up…

    Second floor:
    Carpets, travel goods, and bedding, materials, soft furnishings, restaurants, and ties. Going up…

    Are you free, Mr. Darling?

    Darling addresses the MPC: "You've all done very well!"

  10. Antisthenes
    Posted April 11, 2010 at 9:09 pm | Permalink

    If you have a government bent on implementing socialist policies a weak pound, negative balance of payments, raw material prices rising, low BoE interest rate and billions of unearned money floating about in the economy then the other side of the equation has to be inflation. Coupled with higher unemployment, drop in the standard of living and social unrest. If this Labour government retains power you will see all of that and if the Conservatives gain power and do not tackle the deficit and the bloated public sector ruthlessly and encourage the private sector they will not be able to avoid it either.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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