Published: 11:40 AM, Mar 25, 2022
A great deal of news has been written over the last few months about the cost of living crisis and how that is going to play out over the next few years.
For instance this article in the BBC...
The article quotes the ONS saying that inflation may hit 8.7% by the end of the year but I think the value of inflation may be higher and will undoubtedly last for a number of years.
The amount of money in the UK financial system, or money supply, has grown almost 40% in the last 6 years. With the monetary policy ratio between prices, produced goods and money we need to expect that prices must also increase that amount.
Inflation is going to remain high for years to come, caused mostly by the government and the BOE printing money to get out of a debt crisis.
I often hear that we are still in a 'market economy' but the reality is far away from that. The point of a monetary system is to balance the amount of money in the system to the quantity of goods being produced. In doing so the price of items is largely controlled by the market. The government being asked to stand as far back from the economy as possible.
But when the government increases the amount of money in the system by 40% in a few years we can no longer view the market as being the largest driver of our economy.
It is my belief that we now live in an economic system that is as controlled and manipulated as former communist countries when dictating to firms the quantity of goods to be produced.
This level of government intervention is now so massive and increasing with each year that there will be some event in the near future where the economy will try to find its natural level again, as it always does.
The financially wise are looking to move away from anything cash based. Property prices are rising not only because of the change in the value of money but as people know that property will always be property. An asset that’s value will unlikely devalue as the number of people increases in the west.
The rights and wrongs of printing money to get through the last few years is one point, the delusion that we could get away with it is another. We failed to tackle the last debt crisis, there should have been quantitative tightening, this was only really attepted by the Trump admiration which sailed their economy close to lower growth.
But tightening was the right thing to do. Our companies have been high from borrowing money at almost zero percent, the number of barely functioning business sustained by cheap credit will being the undoing of our system.
As we enter into a new dawn of government support and stimulus checks to live we can only dream of the days where we controlled our and our families economic fate ourselves.