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The Bank Of England's Solution To The Recession? Stagflation.

With the latest inflation figures showing yet again price rises are a continuing problem at a savings destroying 3.5%, in direct contradiction to all the deflation hysteria, it’s time to pause and take stock of the historical data.

It exposes so thoroughly the level of propaganda that masquerades as news in our mass media it’s quite frightening.

Mass media/Bank of England claim:

The credit crunch means falling prices are a greater possibility than rising prices. That could lead to a deflationary spiral so monetary policy must be extremely loose bla bla bla bullshit bullshit bla bla.

Really? Let’s have a look at the average inflation figures (Consumer Price Index) 1997 – 2009:

1997 1.8
1998 1.6
1999 1.3
2000 0.8
2001 1.2
2002 1.3
2003 1.4
2004 1.3
2005 2.1
2006 2.3
2007 2.3
2008 3.6
2009 2.2

If you had to play “spot the deflation”, what year would you pick?

Oh dear. Doesn’t the “deflationary” 2008 – 2009 period have inflation comfortably above the Bank of England’s 2% target? For that matter, also notice that post 2004 it looks suspiciously like the 2% target has become a floor, i.e. it looks like they are aiming for a minimum of 2% inflation after 2004. With an asset bubble booming out of control during that decade, to err on the upside of the inflation target is absolutely inexcusable. If the Bank of England had had any balls, it would have raised interest rates to reign in the property boom, and if that meant inflation falling well below 2%, so be it. After all, their only punishment for missing the CPI target is to write an explanatory letter, isn’t it? What a brilliant contract of employment!

Dear Chancellor of the Exchequer,

I didn’t do my job properly again this year, so as required, I am writing to tell you. Thanks and glad that’s all I need to do. Here’s to many more years of getting paid a fucking fortune to be shit.

Yours,

The Governor of the Bank of England.


But I digress.

Examining the monthly figures, which is what the monetary policy committee will take into consideration when deciding the level of interest rates (or now, god help us, also whether to print more money) at their monthly meetings:

2007 CPI at or above 2% target in 9 of the months
2008 CPI at or above 2% target in 12 of the months
2009 CPI at or above 2% target in 7 of the months

And for the 4 years 2006 – 2009:

CPI below 1% never

Where’s the fucking deflation?

Here you go, I’m getting my squeegee out and I’m rinsing my eyes real good, but every time I look I’m sorry, I just see plenty of inflation.

What fucking data are these supercilious Oxbridge cunts at the Bank of England looking at?? Have they got the right country?

Stop eroding my savings and stealing my wages you thieving fuckheads!

Why do they keep repeating the Keynesian lies?

I've dealt often enough on this blog with the deflation myth, mainly because that piece of blatant propaganda is getting repeated often enough in the mainstream media to merit repeated refutations. But another big fat lie I'd like to address is the so called "paradox of thrift". This is another Keynesian theory that, roughly speaking, states that it is bad for the economy if everybody simultaneously cuts back their spending and starts to save...which in an economic downturn is what tends to happen.

When times are bad, the last thing anybody should be doing is splashing out on big purchases, so a policy of save more, spend less, makes perfect sense. However, along comes Keynes and manages to cook up a load of bollocks theory that says this is bad for the economy. OK, fair enough, he can talk shite if he likes. Unfortunately, that is not where it ends - the government and the mainstream media act as if this theory is the gospel truth.

There are many examples, but check out this beauty that appeared in The Times recently. To quote the author,

"As John Maynard Keynes pointed out, excessive saving at a time of recession can do more harm than good, a phenomenon he called the paradox of thrift."

Note the phrase "As John Maynard Keynes pointed out". That's right folks, we're not dealing with a theory here. Keynes simply "pointed out" something, i. e. the paradox of thrift is not a theory it is a self evident fact! Well, it isn't. There are numerous demolitions on Mises.org, check out one here.

Why do the elites love the Paradox of Thrift so much? Because they are devastated at the possibility that a large number of people might escape from debt. People not in debt might even start to build up their own independent source of wealth. And that means they could even tell their employer to stick their shit job. That just won't do. The proles must continue to live in fear at the prospect of losing their jobs and the best way to achieve that is to promote debt as the solution to our problems and ensure as few people as possible own their own home outright.

Which is exactly the situation with have right now. Funny that, no?

Wishing you all the Very Best for the New Year 2010 (everyone except of course the governing elites, may I strongly suggest that you simply GET FUCKED, always)

The Governments Magic Money Tree

UK projected fiscal deficit for this year (the amount by which government spending exceeds collected revenues): £175 billion

Amount of “quantitative easing” sanctioned by the Bank of England so far: £175 billion

Now there’s a funny coincidence, eh?

If I started up my own printing press to churn out money and tried spending that money in the shops (even if my equipment produced notes that were indistinguishable from the “real thing”), I’d be liable to be arrested for the crime of counterfeiting.

Why is that?

The State would say, “Because your money isn’t real.”

I could retort, “My printing press produces currency that even your best experts cannot distinguish from that produced by the Royal Mint”.

The state responds, “It is not how accurate your copy of money is that gives it its value”.

Me, innocently, “Oh? So what is the problem with me printing money then?”

The state, “Ha! If you can just create money with a printing press at minimal cost, what value does it have? If everyone could do it, who would bother working? You would have obtained something for nothing! "

Me, “A good point. OK, so when the state creates money out of thin air, how does that add anything of value to the economy? Has not the state obtained something for nothing also?”

State, “Humph. Erm…”

Me, “I’m just a bit puzzled. Money creation by anyone is forbidden, because if it were permitted money would cease to have value. Yet when the state creates new money, it does have value? What’s so magic about your printing press?”

State, “Because we call ours QUANTITATIVE EASING”. Does that answer your question?

Me, “Not in the slightest.”

State, “QUANTITATIVE EASING!!! QUANTITATIVE EASING!!! TREMBLE BEFORE OUR INCOMPREHENSIBLE JARGON!!!”

Me. “Nope. I don’t think so. Just a thought – perhaps you know you cannot afford to borrow that £175 billion this year, so you’re simply printing off (electronically) the money you need, diluting the value of the pound in the pocket of every single person? In other words, a stealth tax levied on everybody regardless of ability to pay, because if you tried to raise £175 billion this year in an honest way, by raising taxes, you’d be lynched?

State, (muttering), “We’re sick of these questions. Let’s go and do a BBC interview. “

Me, “Good idea, mention some bollocks about falling prices being a terrible evil while you’re there, they love that one! Bye!”


Printing money does not add one penny of real wealth to the economy. There is no magic money tree. Quantitative easing is simply theft by the government of your hard earned cash to bail out themselves and their financial entourage who destroyed our economy with their reckless greed. FUCK THEM AND FUCK THE GOVERNMENT.

Turn those machines back on!

Randolph Duke: Now, some of our clients are speculating that the price of gold will rise in the future. And we have other clients who are speculating that the price of gold will fall. They place their orders with us, and we buy or sell their gold for them.

Mortimer Duke: Tell him the good part.

Randolph Duke: The good part, William, is that, no matter whether our clients make money or lose money, Duke & Duke get the commissions.

Mortimer Duke: Well? What do you think, Valentine?

Billy Ray: Sounds to me like you guys are a couple of bookies.

Randolph Duke: I told you he'd understand.

Trading Places, 1983

At the end of the glorious film Trading Places, Billy Ray Valentine and Winthorpe exact sweet revenge on the Duke Brothers by beating them at their own game on the Wall Street trading floor and taking them from fabulous wealth to ruin in a matter of minutes. After subjecting Billy Ray and Winthorpe to a ruthless “social experiment” for a bet worth just one dollar, it is a supremely satisfying conclusion. The greedy financiers who played fast and loose with a system they thought they owned were taught a hard lesson.

Ah, but.

It occurs to me a 21st century remake of Trading Places would be rather problematic, would it not? That satisfying ending might be somewhat ruined when the government decide Duke & Duke are “too big to fail” and provide them with a huge taxpayer funded “rescue”, resulting in Duke & Duke remaining in business and within months are gambling recklessly with investors money again and paying themselves huge bonuses. And laughing their tits off at the stupid pathetic proles paying for it all.

An ending that would, quite rightly, leave the audience furious, don’t you think?

Inflation targeting totally sucks balls, man

The more you think about what inflation targeting actually means as an economic policy, the more you realise how utterly absurd it.

Question: why is the price that we pay for all our goods and services, right now, so sacrosanct?

Let’s think about it. The remit of the Bank Of England is to set monetary policy so that the inflation rate, as measured by the Consumer Prices Index, is around 2%

The government likes to tell us that this is the level that achieves “stable prices”, which is odd because it actually means the value of money halves every generation. But hey, that’s another story. Anyway, the stats boffins go out there and measure prices in the shops of a basket of goods that the average consumer is deemed to buy (incidentally this basket of goods is forever changing, if nothing else because some things we can buy today didn’t even exist 50 years ago) then weighted (for example, a 100% increase in the price of a box of matches is treated as less important than a 100% increase in the price of petrol) and from this you get an index. There are various indices derived from this data, the present government has moved away from the Retail Prices Index (which rather oddly includes mortgage payments and so is ridiculously distorted by changes in interest rates) to the Consumer Prices Index (CPI).

So if you thought “2% inflation” means a straightforward 2% rise in prices, as you can see above it’s not as simple as that. It’s actually very difficult to determine what it means to talk about a “general price level” at all.

But no matter, let’s assume our inflation index is a worthwhile measure of price changes in our economy. OK, if the BoE has to target 2% CPI each year, what does that logically mean? Well, what they are saying is, today’s price level, whatever it is, is miraculously “correct” and next years price level, if 2% higher than this years (as they will do their level best to engineer with their monetary policy) will also be correct! And the year after, it will, oddly enough, be right for the price level to be another 2% higher. And so on. With the value of our money getting eroded all the while. On a fixed income? Oh look, in real terms you’re 10% worse off after 5 years! Brilliant!

It’s absurd to target the general price level and doing so is the cause of the current crisis.

Thanks to the Chinese industrial revolution, many of our goods have been falling in price in the past decade, and all other things being equal (i. e. without government interference), inflation should have been negative, but the BoE relaxed monetary policy to prevent the overall level of price rises ever falling below that sacred, mysteriously correct 2%.

The Bank deliberately engineered inflation in direct opposition to the economic fundamentals; in fact the government requires them to do this!

And so we ended up with a load of artificially cheap money with, to put it crudely, no where to go. Like squeezing on one end of a balloon, the funny money inflated into property and equities on a massive scale, balanced by the fall in consumer goods prices, so the Bank and the government could argue with a perfectly straight face inflation was “subdued” when house prices had tripled in just 10 years!

And notice how failure to hit the target in any year is “written off” in the targeting game. For example. the BoE has allowed inflation to exceed its 2% target for 20 months (and counting). And supposedly, we are going to see inflation below 2% in the next few years. But doesn’t that simply balance out the fact that it was above target previously? So it’s not a big deal? Well, they don’t seem to see it that way. Has to be 2% always, folks! Never, but never, let prices fall, even to correct a previous increase! See what I mean? As an economic policy it is literally nonsense. And there is absolutely no sign of them even thinking they need to look for an alternative.

Which means that to “cure” the credit crunch, they are repeating the idiotic monetary policy errors that got us into this mess in the first place. Which totally sucks balls.

You fucking liars

... our Great Depression is our lives. We've all been raised on television to believe that one day we'd all be millionaires, and movie gods, and rock stars. But we won't. And we're slowly learning that fact. And we're very, very pissed off.
- Tyler Durden, "Fight Club"

We have had to listen to so much continuous bullshit hand wringing about the looming “horror” of falling prices (I just hate it when things get more affordable, don’t you?) since the credit crisis hit, yet we are now into, wait for it, the 20th month of inflation being above the 2% target.

Can we hit a full two years of the Bank of England failing to do its job? It’s very possible.

It would seem, apparently, that they “overestimated” the deflation “threat”.

Yeah right.

Because they didn’t know that a 30% devaluation of the pound would be highly inflationary (don’t forget that while Britain is word class at churning out loads of chavs, estate agents and corrupt MPs it’s not so good at making useful stuff like tvs and washing machines which all need to be imported and a devaluation increases import prices).

They didn’t know that printing money raises prices higher than they otherwise would have been.

They didn’t know a massive fiscal deficit is inflationary.

OF COURSE THEY FUCKING WELL DID.

They are a bunch of lying cheating spivs who are fucking honest savers up the ass with their cheap credit money printing WANK economic policy. And I’m sick of the Keynesian liars in the press and on TV supporting this disastrous monetary policy that punishes the one single group who are blameless in this crisis: prudent savers.

They want inflation. They love it. They know our economy is just a weak, pathetic ponzi scheme that an extended period of zero inflation or even falling prices will expose for all to see. And then the game will be up, and too many ordinary people might start to wonder who is really benefitting in this country from our constant toil at shit jobs we don't even like.