Tuesday, August 18, 2009

expecting the unexpected

This is how the BBC announced the most recent UK inflation data:

A key measure of inflation in the UK has unexpectedly remained at 1.8%. Economists had expected the Consumer Prices Index (CPI) to decline to 1.5% in July

It is hard to see how the stickiness in inflation should be unexpected. It is a stated aim of the Bank of England to increase the inflation rate. To achieve this despicable objective, it has created an unprecedented increase in the monetary base. There is no secret here, and its consequences on the price level is entirely predictable.

Perhaps the journalist is guilty of a typo.

3 comments:

  1. AC: "It is hard to see how the stickiness in inflation should be unexpected."

    Yes, the government is fighting deflation with all the printed money it can lay its hands on.

    Credit is still contracting.

    Deflation is still dominant.

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  2. It's like that wretched creep who used to be Jade Goody's husband: he is coping with the grief by fu@~ing the pain away. Gordon Brown is doing the same with the debt: he is using inflation to fu@# the pain away.

    Only problem is this: just like when el-Gordo renders some sad-sack British muslim to a central asian country for a little special treatment, we are going to get ass fu@~ed while Lady Ga Ga videos get played at top volume.

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  3. Inflation/deflation is still a hard call to make in the short term. The Government adding to the monetary base is not a sure recipe for inflation because the monetary base is so small (3%?) compared to the money supply (which is dominated by debt-money). The debt-money pool will shrink if the net flow of paying-back-existing-loans is greater than the net flow of taking-out-new-loans. If the government printed no money in this crisis there would certainly be a massive *deflation* - whether this is a good or bad thing to allow is another matter.

    You should watch "money as debt" on youtube - it has some errors which are fixed in "money as debt II" (not on youtube) but is still worth watching to get the gist of how it works.

    I have several entries in my mickanomics blog on this exact issue.

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