The great inflation after covid lock down is often called the cost of living crisis. It occurred in the UK, the Eurozone and the US where prices peaked at around a 10% annual increase. It did not occur in Japan, in China or in Switzerland where inflation stayed around 2%. In the UK, the US, Germany and others experiencing the high inflation it led to the defeat of the ruling party or executive President. The Uk inflation rate hit 6% before Putin invaded Ukraine and put up energy prices.
The Bank of England, the US Fed and the European Central Bank are all responsible for controlling inflation, each with a 2% target. Each allowed or caused an inflation five times target. Each blamed Putin and the oil price for the overshoot. The fact that 3 big importing countries, Chiba, Japan and Switzerland saw no such effect shows the oil price explanation is wrong. The timing of the inflation rise with some of it before the invasion also pours doubt on their excuse.
The Conservative government that presided over the rise paid the price for the Bank’s mistakes, as it has to in a democracy. After all the government could have modified Bank independence to stop the mistake. The Chancellor could have refused to sign off the last £150 bn of money printing as I suggested at the time. Although it was a Bank decision to print such excessive amounts, from Chancellor Darling onwards the amounts to be printed always needed Chancellor approval and a full indemnity from taxpayers for losses on the bonds they bought.
Despite the obvious errors allowing too much money and credit to be created the Central Banks have largely deflected the blame and have kept support for continued Bank independence. We need to explain the independence only relates to setting the Base rate and making independent forecasts of inflation. Keeping this structure without allowing future errors on the scale of the Great Inflation requires the Bank of England to revise its economic model and forecasting methods to demonstrate it can in future foresee something like the Great inflation, which it failed to recognise until it was well advanced. That will require more diversity of thought on the Monetary Policy Committee, and the incorporation of money and credit more fully into the forecasting models. Those treating money and credit seriously did warn both the Fed and the Bank of England that they were about to allow a big inflation.
An incoming government must show it is on the side of tougher action against inflation, not weaker. It must signal that the Bank needs to take it s duty very seriously to keep inflation down , and needs to strengthen its forecasting and Policy formulation. The UK government itself should also adopt the inflation target of 2% and reflect it in its budgets, wage forecasts and controls over the public sector. Under this government much of the additional inflation is coming from public sector costs, wages and prices, and from Regulators allowing large rises in regulated prices.
Bad Bank and official policies are good at bringing governments down and damaging the economy. Their Exchange Rate Mechanism policy created a wild boom/bust to get rid of the 1992 Conservative government, and their QE debauched currency got rid of the last Conservative government.
June 8, 2026
“Putin invaded Ukraine and put up energy prices.”
I knew he invaded Ukraine, but didn’t realise he also instructed our leaders stop buying russian hydrocarbons.
June 8, 2026
The BoE committee is staffed by left wing group think individuals like most of the Quangos. We had Carney before a Canadian who had gone on to ruin Canadas economy.
There was no reason for the Bank to sell off bonds at a loss especially at the time when Liz Truss was PM. Deliberately undermining her because she wasn’t a WEF stodge.
The bank should have it’s independence removed as like the OBR it is consistently wrong.
June 8, 2026
A country that allows its manufacturing base to be dismantled, locks down its population under enforced idleness, daft initiatives ‘eat out to help out’. A country with a new government keen to spend money. Lack of genuine employment opportunities. Changing attitudes among part of the workforce to employment.
What could go wrong?
June 8, 2026
John, the BoEs part in the growth of inflation is valid up to point. I think you under allocate the energy policy failures part it what has gone on and continues to dog our economy.
Your adoption of monetary policies being the prime reason for the removal of the Major Conservative government and subsequently the May/Johnson et al Conservative administration in 2024 is also missing a significant influencing ingredient.
On both occasions the Conservatives were removed from office due to the Party’s policy towards ever closer control of our affairs by the EU.
In Major’s case the economy had virtually recovered from the EU push for ERM and the monetary crisis he championed, though he but was not forgiven, Chancellor Clark ( a rampant Europhile) presiding over a tough but effective monetary policy in the 1990s that gave Blair/Brown a golden economic opportunity which hhey threw away and trashed.
In the case of the Tory post Referendum behaviour, books written would fill a small library. Suffice it to say, the insane policy to remain controlled by the EU post referendum, even to the extent of continuing to give them ongoing rights io our fishing waters under their control, was why the election in 2024 was lost. Labour were not a popular option as shown by only 20.4% of the electorate voting for Starmer and Co. The electorate were saying clearly, the ongoing submission to the EU by Tory policy makers has to stop.
Whether there will be any chance of recovery via change in Tory EU submission policy, remains to be seen. At the present rate of reassimilation into EU control by Labour, 2029 may be too late to change anything,
I could speak about Sunak’s contribution to the inflation bubble. What ever the actual damage to society the Covid virus may have threatened, the time out, eat out and drop out, provided by Sunak as a riposte effectively destroyed commercial sanity at the most basic level, but you know the score.
June 8, 2026
‘The last piece of Denby pottery goes to the kiln after 217 years’
It struggled to cope with rising energy and employment costs. A country that allows something like this to happen has governments that don’t know or care what they are doing.
June 8, 2026
Covid is said to have cost £450bn. We could have bought ten mid-sized wars for that.
Putting the nation under doctor’s orders is about the most expensive thing government can do. It was unnecessary and horribly damaging, but to be fair that’s a judgement of hindsight, which is a luxury governments do not possess.
Net Zero is a similar folly which will produce another huge bill for nothing. Hindsight is not needed to see that, just common sense.
June 8, 2026
The UK’s debt as a share of GDP has tripled over the past 25 years, piling pressure on the Government’s finances, according to data from the International Monetary Fund (IMF).
Alas this was not spent on anything of much of any value – over £1 trillion of it was spent doing net harm on dangerous net harm covid vaccines mad Covid lockdowns and net zero rip off energy lunacy. Much of the rest on HS2, pointless misdirected Quangos or benefits to deter people from working. All this borrowing yet we have appalling defences, a second rate NHS, poor schools, no border controls and a doom loop economy!