Friday, 15 February 2013

Events, dear boy, events


Regular readers might be interested to know that I have contributed one of my now semi-regular blogs to the online site of The Independent (above), that model of tough-minded centrism in an extermist world.

My argument? That we shouldn't worry too much about inflation. And yes, I do know that world food and commodity prices are high, and likely to remain so. I do know that increased Indian and Chinese prosperity, along with a relatively high world birth-rate, are likely to keep those costs up for some time to come.

But I also know that there's a crater where effective demand should be in the UK economy. Recovery is coming - there are glimmers of light on the horizon. But we're by no means out of the woods yet, as today's consumer spending figures illustrate. We're likely to crawl out of recession, very slowly, and there's going to be a squeeze on real wages and spending for some years to come. I know that government spending is going to stabilise. There'll be no more Keynesian stimulus for some time to come.

And if you still think inflation's going to be a real and present danger, I would invite you to look at the likely future trends in energy policy. The United States is about to have a big old party with lots of very cheap oil and gas - a problem, of course, if your main worry is greenhouse gas emissions and climate change, but not so much if you're worried about rising prices.

The most exciting thing about writing the article wasn't coming to these rather obvious conclusions. Oh no. It was the announcement on Wednesday, just after I'd filed, that the Bank of England's Governor was apparently saying the opposite to what I'd written: that inflation would remain high for some time to come. Okay, what he really said was that it would remain above the Bank's target of two per cent, and might rise to three per cent and stay there for a while. Excuse me while I don't shake in my boots. But it still made the story look strange.

So I had to amend. I had to rewrite, in a hurry. The article now had to say that 'while there'll be some inflation', and 'while there'll be some prices rising', that wasn't our real problem. Three per cent isn't the five per cent of the late 1960s, or the terrifying 26 per cent of the mid-1970s, or even the near-double figures of the late 1980s.

It's interesting, this exposing our workings. It doesn't change for a moment our principles, intellectual superstructure or (I hope) our credibility. But it does show us trying to adapt our views in rapidly-changing times, and during a sometimes-chaotic news cycle. I hope this is honesty enough!

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