OK, get ready, all of you (and I) with mortgages to see payments rise. Yes, inflation is back and we’ll see a rise or two in interest rates.
Now, the thing is, what’s causing it? Let’s put aside our monetarist hats for a moment and think like good little Keynesians. Yes, we should have deficit spending in slumps, but this should be offset over the cycle by government budget surpluses in booms in order to moderate those inflationary pressures.
We’ve been in a boom since roughly 1992, the longest economic expansion ever or so I’m led to believe. So, how are those surpluses?
Mr King was too polite to point out that the Bank of
England is rowing against a strong current, forced to tighten monetary
policy to offset the inflationary effect of Gordon Brown’s spending
policies.
Britain’s fiscal deficit of around 3pc of
GDP is arguably the worst in the developed world, given the late stage
of the economic cycle.
Well done Gordo, well done indeed!
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