Monday 29 September 2008

On the attack at last...

At long last, we have it - an open attack on Brown's running of the economy by Cameron.

I'd like to add (yet) another front. In short, we are were we are because too much money has been borrowed and not enough has been earned. After all, why work hard when your house appreciates enough to cover what you want to spend, interest rates are so low, and so many banks are willing to lend it to you?

It strikes me that house prices were being inflated because interest rates were so low. It doesn't take much knowledge to realise that if the stock of stuff for sale stays the same and the ability of the buyers to pay for it increases dramatically, the price will go up. So the root cause of the price inflation was the low rates, which Brown still sounded extremely pleased about last week.

And why are rates low? Because the Bank of England is keeping them there. Why? Because they act under instructions from Brown to keep inflation within certain limits.

And who defines inflation? Brown. As is now common knowledge, Brown's definition of inflation excludes such unnecesary items as fuel and Council Tax, which happen to be rising quite quickly, and grossly underestimates the price rises of "essential" items such as personal computers. It also automatically excludes anything whose price is rising inconveniently quickly. (As an aside, I'm tempted to experiment by explaining to my local Council that Mr Brown says that Council Tax is inessential, so I'm going to try going without it for a year or two...)

So the official CPI inflation rate consistently underestimates what is actually happening in the economy, and the Bank is required to track that. So, inevitably, its rates will be consistently too low.

All very good news for the headlines, which say that inflation is low and interest rates are low. Except that it's all lies.

And what single common thread runs through all of these mistakes and lies? Brown.

3 comments:

  1. Interestingly, the CPI has kept rising while the traditional RPI has stayed the same. The result is that CPI and RPI are now equal at 5%. All makes Ken Clarke's RPI 2.5% *or less* look rather more sensible!

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  2. Yes, as inflation begins to take hold the CPI is beginning to show the inevitable.

    My theory, though, is that there has been a long while during which the artificially low CPI has been very good news for the Labour spin machine but very bad news for the UK economy.

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  3. Oh yes I agree, the RPI has been way up before CPI caught up and that has done untold damage in the long-run.

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