Inflation: shame upon him who thinks evil of it

In a world where grown men, with Nobel prizes in economics no less, actually write that the way out of a debt problem is more debt:

The bottom line, then, is that the plausible-sounding argument that debt can’t cure debt is just wrong. On the contrary, it can – Paul Krugman

In a world where grown vice-presidents can get up in front of thousands and say:

we’re going bankrupt as a nation, now people say when i say that “what you talking about Joe – you’re telling me we gotta go spend money to stop ourselves from going bankrupt?” [sic] - the answer is YES that is what i’m telling you

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In a world where the grown head of the Euro Group of EU finance ministers, Jean-Claude Juncker, openly says that it’s ok to lie to European citizens as long as it serves their interests:

“when it becomes serious, you have to lie,” - Jean-Claude Juncker

The Most Noble Order of the Garter

It really shouldn’t come as any surprise that over the weekend it was announced that Mervyn King, the head of the Bank of England, is to be knighted. Interestingly the motto of those Knighted is “Honi soit qui mal y pense” – which translated means “shame upon him who thinks evil of it”.

He will now join that other serial bubble-blower, Alan Greenspan as another central banker who can claim to be a “Knight of the Realm”. You know, the guy who blew the biggest housing bubble in the history of the US and was chief architect of the economic collapse 2008.

When a country rewards abject failure it’s time to worry. As we covered in great detail in “Is there a point to the BoE inflation target” the BoE has a government mandated target of inflation of 2%. The UK has had inflation as measured by the CPI above this target for the past 18 months – and 100% over target for the past 6 months. On top of this according to the BoE own inflation report they are forecasting remaining above target until at least q1 2013.

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This would mean that the BoE would have failed to meet its government mandated target for over 3 years. Now imagine how you would have been treated in your job if you missed your business target, not by a little but by 100% for over 1 year – you’d be sacked.

But in a world that has clearly left logic, reasoning and sense somewhere in the distant past we obviously reward such terrible performance with the highest honor anyone in the UK can have bestowed upon them.

Which leads to an important question that we all must ask. If we are rewarding failure and rewarding high inflation should we be surprised if we see more of it?

The economic data out of the US, the UK as well as many other western economies are showing signs that all that artificial stimulus that has been pumped into the economy on an industrial scale, in a desperate bid to reflate those bubble years, is rapidly wearing off and we now face a real risk of negative growth as measured by GDP. What will Sir King do in reaction to such a contraction?

He will no doubt look at his Most Noble Order of the Garter that he received pursuing high inflation and act accordingly. He will reach for those printing press levers again and justify it to himself that the last time he did it the status-quo slapped him on the back for a job well done.

That’s what happens in a world that rewards failure – you get more of it. Sadly this means will we get more depreciating purchasing power of the pound in the future because that’s what this Knighthood tells us exactly what the powers-that-be want – government mandate or no government mandate.

And shame on you if you think evil of it.

Related posts:

1. UK Inflation – Is there a point to the Government’s inflation target?
2. BoE: Rates held at 0.5% – Inflation target be damed
3. Obama takes the ‘evil’ speculators meme to a new level
4. Inflation now running at double the BoE target
5. First blame the snow, then the ‘evil’ speculators

Link to this article: : http://www.goldmadesimplenews.com/gold/inflation-shame-upon-him-who-thinks-evil-of-it-4137/

Posted by Thomas Paterson on Jun 13 2011. Filed under Analysis, Gold News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry