INFLATION OR DEVALUATION?
On the 10th.of July, the Bank of England again concluded its monthly struggle with the interest rate decision, trying once more to reconcile this government’s controversial early decree that it is they the Bank of England and not our elected government who will be best able to make this judgement. . After all the Bank have only the ’single lever’ of interest rates to control inflation for which they have now been charged since Gordon Brown abdicated his responsibility. . . The underlying principal of interest rate policy is that if you keep interest rates above inflation nobody can make money out of simple inflation, as many did back in the 1970s and have again in the past boom. . The value of money (our savings) and equity is then protected.
It could be argued that inflation is just the corrective market mechanism ensuring that those who turn any purely ‘inflationary’ gains into cash, do not retain them. . The big City bonuses could also be well described as ‘inflationary’. . Is that why Harold Wilson and his chancellor James Callaghan chose devaluation in 1967 in the face of wage inflation I wonder, or was it just simply our chronic balance of payments deficit?. . Of course it only delayed things for Callaghan’s successor Roy Jenkins, and handed an inflationary bombshell to Edward Heath’s chancellor Iain MacLeod in 1970. . . Maybe if house prices had long ago been included in that ‘basket of items’ used to calculate that oft disputed figure, we wouldn’t be in this mess now. . . My advice? . Invest in ‘real’ things. . . A bag of potatoes will always be worth ‘a bag of potatoes’.
In the event, if house prices had been included in that original ‘basket’, interest rates may well have been coming down again at this time; so more reflecting this country’s current needs in the face of spiralling food and energy costs. . . History will almost certainly record that Gordon Brown did in fact ‘hoist his own petard’.
Charles Henry
. . . she ses ees dissgustin’. . . .
I think we are talking at cross purposes ‘Errol’. . .
. . Charles Henry 1945-(diuturnity)



