Entirely so Snippa, entirely so

“Interest rates have been steadily falling for 500 years” is a statement that requires a little more nuance.

During the 18th century, interest rates in the UK were stable, remaining at 4-5% regardless of the issue. The instability came about in the 19th century, where there was more volatility in the interest rates that saw it moving anywhere between 4 and 10%. The start of the 20th century was no different, with the same instability and constant flux between 5 and 10% instead.

Spud is at least consistent in that he never ever gets anything right. He cannot even quote accurately

I’m beginning to wonder where the inflation is, in the West at least. It seems pretty obvious that if you print (as in literally) lots of cash in relatively small and non-financialised economies (such as Zimbabwe or Venezuela) you get rampant inflation, indeed hyper inflation.

Yet governments have been printing money in the West for decades now and inflation comes there none. Why is this? Its no good just waving your hands and saying ‘Oh it will!’ or ‘Velocity of money, innit?’. You’ve got to explain why printing money hand over fist in Zimbabwe creates hyper inflation inside a few years and doing the same in the Japan, US or UK doesn’t.

My feeling is that in relatively poor countries the extra money is immediately spent on the necessities of life, food, heat etc. Classic too few goods, too much cash = inflation. Whereas in more wealthy countries if everyone gets more money they tend to spend it on assets, property mainly. So the additional cash gets soaked up in house price inflation, not goods and services on the High Street. Plus wealthy countries can continue to import cheap goods from abroad, so that keeps physical goods prices low.

Thus there appears to be far more elastic in printing money in the West before the system breaks. I’m not saying it won’t break, but one has to accept that despite all the money printed so far it hasn’t broken yet. So the ‘Print money, get inflation’ mantra has yet to be proved in the wealthier West.

The measures of inflation that we use don’t include assets, either real or financial. House prices have been rising fairly steadily and action is taken to ensure they do but that doesn’t show up in CPI. Stock markets and bond traders have been doing well, otherwise why would yields be so low. The inflation is there, just not reported. Well done Mark Carney, government stooge and total dick

“all the money printed so far it hasn’t broken yet”, unless of course you are a young family trying to buy a house and possibly pay off student loans. Arguably the young are rejecting capitalism because they don’t think they will ever acquire capital. On top of the high house prices goes stamp duty. The amount of cash you have to cough over makes it unlikely you will think about moving very often, so reducing the ability for people to move for work or up or down size as the changes in family life require. If some older person wishes to downsize from a £700k to £500k house, after looking at the legal fees, estate agents fees and stamp duty it hardly seems worth it. Asset price inflation is serious problem.

It leaks out of the banks and into house prices, because despite (or perhaps because) the experience of the early 90s house prices are the one thing government will never let fall. As most people don’t move house often the progress into the economy is rather slow.