The second half of their argument I have a lot of time for: deflation is a danger to be avoided at just about all costs, in my opinion. That a fall in the value of the currency might destroy real opportunity in the economy is unforgivable in my opinion, and it’s right that the Bank should steer clear of it.
Deflation is a rise in the value of the currency…..
Would the world end if the target was 3%? Or 4%? Or even 5%? I’m not suggesting any more than that, and might only go for doubling to 4% to be honest. The obvious answer is it would not.
It’s true that those owing money would have that written off faster by inflation. But that would diffuse the debt crisis. And it would reduce inequality. Both of those should be key economic targets for any government.
That’s one that’s not going to work again. Nominal interest rates will rise to cover the inflation. It would also of course, entirely put paid to those bond linked pensions funds that Ritchie is so fond of.
Critically, this inflation target would also mean that interest rates need not rise – rate rises that will tip millions into unmanageable debt scenarios and which might precipitate a new banking crisis as a result.
We sure about that?
September 30 2017 at 8:04 pm
What about pension savings?
Richard Murphy says:
September 30 2017 at 10:49 pm
If you think pensions are paid out of savings you really do not understand pensions
He wants everyone to save for their pensions through bonds. Then advocates high inflation.