Have we overlooked inflation?

bubblesmoney

mewbie wrote: »

Inflation is the elephant in the room. We don't notice it growing, but every now and then a visitor will say "that elephants grown since I last came round".

thats why the govt prefers quantitative easing because increased money supply available for the same products invariably (long term) leads to inflation and when disproportionate to income it leads to less in your pocket and devalues all your assets when compared to constant pounds for the year before the quantitative easing. effectively it is a hidden method of increasing taxation to fund unsustainable policies since the general public find it difficult to notice the elephant in the room getting bigger and even if they notice it, then the politicians have an excuse by saying it is a global problem rather than face the facts that it was their crap financial policies that leads to the mess.

Arcaine

bubblesmoney wrote: »

thats why the govt prefers quantitative easing because increased money supply available for the same products invariably (long term) leads to inflation and when disproportionate to income it leads to less in your pocket and devalues all your assets when compared to constant pounds for the year before the quantitative easing. effectively it is a hidden method of increasing taxation to fund unsustainable policies since the general public find it difficult to notice the elephant in the room getting bigger and even if they notice it, then the politicians have an excuse by saying it is a global problem rather than face the facts that it was their crap financial policies that leads to the mess..

An increase in the money supply is inflation, price rises are a product of inflation not the cause of it. The printing is only going to scratch the surface of the credit that has and is being destroyed, unless it comes into the general economy it will not cause prices to rise. A way of looking at it is, if I have a machine that makes perfect £20 notes and I then print 1 trillion and bury it in the garden is that inflationary? No, it has to enter the economy. All of the billions the governement has given to prop the banking system up is going into plugging all the credit holes the banks have, prices are going nowhere. I agree that too much and we will tip that scales as the banks become flush with money and start to reduce lending requirements again, but that will not be until all of the bad debts have been liquidated and assets the banks have on their books have stopped falling in value.