Inflation will return to 2 per cent, says Bank of England Governor – Business News – Business – The Independent

25 Jan

Inflation will return to 2 per cent, says Bank of England Governor – Business News – Business – The Independent.

i can remember a time when inflation was taught to us as a bad thing. now we have the governor of the bank of england no less wanting it to rise to 2% from what it is now .5%.

for savers, inflation is a bad thing as it erodes the value of their savings, but for spenders and for govt, inflation is good. not for itself but for what it implies, that there is a lot of economic activity, with people buying and selling , it is a self propagating cycle, with money getting less in value it discourages those who want to hoard it, and also when prices of goods keep going up people will buy now rather than wait, that keeps the money circulating, and generating profit along the way.

the converse being if inflation is low, everyone will not spend, businesses as well as ordinary people, businesses will shelf plans for expansion, people will wait to buy as they know prices will drop still more  so there is just no economic activity. without it, there is no profit for the govt to tax.

you can see how intricate it all is, and how perversive its influence and its feedback.

i can remember a time when govts are scolded for printing money, but that is exactly what the EU is doing now…  germany did it, and it led to high inflation and making the currency worthless. but now it is used to pump up the EU economy.

added. i wondered how it would work. today i read this in the sunday times to explain it.

the eurozones’ central banks buy their own govt bonds from pension funds, banks and other financial institutions. then they will invest it in businesses and lend to households to provide a boost to economic growth. i dont see the connection… do you? what is to prevent someone borrowing this money and go to uk or other parts of the world and buy up property? or even buy up british businesses, in uk or elsewhere? that is not going to help europe would it?

it seems to me that there is a race amongst the big currencies to the bottom. all trying to devalue and make theirs lower than the others. i think it is because if u have a low rate, ur goods and services are cheaper than the others . that is why the US and UK have boomed, they got in first by huge QE, printing money, so their currency is relatively cheap compared to the euro. the euro has come late to the party by devalueing now.

added 11.11am i am at the library now and read in the sunday times that diesel is now the bad boy. wtf as they say.  it seems then labour govt tried to reduce co2  emissions by introducing the  vehicle tax rate  in 2001 that penalise petrol cars. not realising that diesel churns out 4x more NO2 and 22x more particulates. oh haha. as they say. then they introduce another which abolish the vehicle tax for diesel cars entirely. so that make diesel even more attractive. in fact, i remember diesel petrol is cheaper too. now they are all making a u-turn.

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