Tuesday, 18 May 2010

Dear Chancellor...inflation is at 17months high in the UK...

Quantitative Easing is not making it easier for the Bank of England as I mentioned it back in April:


Inflation hit 3.7%

3% in March
3.5% in April reading
3.7% now...

Is the UK drifting to a 70s style Stagflation?

It all sounds like a remake. Hang parliament in 1974, IMF bailout in 1976...

This means, as I said before, tightening at some point is on the agenda in the near future, which increases severly the risks for a double dip recession in the UK.

Also please note the following, taking into account the old inflation methodology, which was the RPI, the real measure of inflation would be now at 5.3%, not the highest in 17 months but the highest in nearly 20 years...

Don't believe the hype.

You can as well look at the link to the website Shadowstats:

Inflation is higher than what it seems. Pure and simple.

The story is still very clear to me, deflation now then inflation. It was already highlighted in an article in Seeking Alpha in October 2008.


Deflation then inflation as illustrated by The Market Oracle:

QE is not working, because the money is not redirected to the real economy by helping banks to rebuild their balance sheets by locking in a nice spread, borrowing near zero and being net buyers of Government debt. This is the game being played.

The effect of QE is that the currency is being debased, therefore mechanically Gold prices are going up against various currencies (GBP, USD, EUR, all having adopted the nuclear option of QE).

This is the main reason why I recently said that Gold can only go up. QE is not going to end, at least in the UK for the moment, the budget deficit is just too big to stop the printing press.

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