I’m promising that I’ll limit the amount of Spud’s cretinism that I’ll put on Substack. So, as I’ve already made fun of his views on oligopolies and wages this week I’ll put this one here instead.
Inflation, eh?
The peaks are smaller than they used to be, and there are almost no negative troughs, i.e. we don’t have periods of deflation in this country now. But the critical point I want you to note is, that after any inflation spike, there’s a downturn.
Now historically, that downturn was almost invariably a period of deflation. In other words, real prices fell.
Now that, in the last century or so, is not the case. After a period of inflation, real price. changes fall, but prices don’t go back to where they were. So, over the last century or so, we’ve had a period of steadily rising prices. But it’s still true that after any period of inflation, really quite quickly, excepting periods of world war, prices return to relatively low levels of inflation.
And the critical point to note is that all that happened when we didn’t really have a central bank who did anything whatsoever to control inflation.
The Bank of England might have been created in 1694, but it didn’t get a mandate to control inflation until 1998. So, for the vast majority of the time that that chart was being plotted, there was no central bank raising interest rates, trying to control inflation, setting a 2 percent target, or any of that other nonsense that Governors of the Bank of England now talk about.
And yet inflation went away, anyway. And that’s because markets always correct for the panics that create inflation in the first place.
Inflation is almost always created by a panic. There’s a shortage caused by plague, pestilence, war, you name it, something’s gone on in the world. Trade has broken down, and therefore there’s a shortage and prices go up.
Once we get over the panic, we realise that actually the world did not end as everybody thought it would.
Just the most abject twattery. Cretinism.
From 1200 or so, when that data set starts, money was on the silver standard. Henry VIII’s Great Debasement was about silver coinage, not gold. By the 19th century we were on the gold standard. True, off that from 1914 to 1925, then off again in, erm, 1932? After 1945, Bretton Woods which tried to do much the same thing.
The point about such varied fixed value standards for money being that they create that anti-inflationary pressure. Because you’ve got to change your interest rates, or at least damp down the inflation, in order to be able to maintain the gold standard.
So, up to about what, 1979 (?) we’ve got that process that kills inflation. In concert with this post-1945 we’ve got Chancellors deciding the bank rate and they do so by trying to mix and match growth and inflation. Not well, but they tried. So over that period we’ve also got a countervailing force against inflation. Well, some of the time.
But apparently inflation just goes away without anyone doing anything even under a silver, gold or Bretton Woods style monetary system.
Seriously, this is bad, bad, stuff from Spud, even by his standards. I mean, but, missing the sodding gold standard?
J. P. Morgan, 1912.
Is he not aware of the existence of countries where inflation continued to spiral upwards until their governments ended up issuing million dollar bank notes?
He’s suffering from something similar to those who suffer an evolutionary blind spot. They cannot get that the vast majority of species are no longer around.
He’s suffering from something similar to those who suffer an evolutionary blind spot. They cannot get that the vast majority of species are no longer around.
Kind of like his brain cells.
Hmm. what causes deflation? The price of things going down. Which is caused be efficiency, innovation, competition.
So what have we done to stifle those things over the last 30 years?
Got go to, today is the day for the Health & Safety review, the Electrical Safety testing, the Mechanical safety test, the Safe Working review, the building survey and the DEI seminars. After that I’ve got some forms for HMRC to submit. Busy Bust Busy.
The key sentence is this:
‘…the critical point I want you to note is, that after any inflation spike, there’s a downturn.’
A spike is, by definition, an increase followed by a decrease. If the increase isn’t followed by a decrease, it’s not a spike – it’s either a continued increase, or it’s a plateau.
So Murphy’s critical insight is essentially that, after something that must be followed by a downturn, there’s always a downturn.
He reinforces this by noting that:
‘…after any period of inflation, really quite quickly, excepting periods of world war, prices return to relatively low levels of inflation.’
Again, his insight is that when things stop being high, they invariably become low.
I’m fairly certain that after any hilltop there’s a downward slope, when the light goes out it invariably becomes dark, and that when things stop being hot they are always cold – but not having a mind of the calibre of Murphy’s, I hesitate to come out and publicly present these thoughts as significant insights.
“So, up to about what, 1979 (?) we’ve got that process that kills inflation.”
’71, surely?
The Bank of England might have been created in 1694, but it didn’t get a mandate to control inflation until 1998. So, for the vast majority of the time that that chart was being plotted, there was no central bank raising interest rates, trying to control inflation, setting a 2 percent target, or any of that other nonsense that Governors of the Bank of England now talk about.
So the BoE completely ignored inflation until 1998.
Right.
Didn’t they try varied things after that? The Snake or summat?
The 1998 thing, if memory serves, the BoE was concerned about asset prices up to around just before the ERM crisis, and had already began to switch to concentrate on inflation as it hit.
Independence from the Treasury just made it official, possibly at the cost of limiting the Bank’s flexibility to respond to events.
Of course, the Bank’s new independence coincides with the growth of the Amazon and China effects, so the lack of flexibility might have been a bit of a boo-boo.
‘…after any period of inflation, really quite quickly, excepting periods of world war, prices return to relatively low levels of inflation.’
Between 1970 and 1979, the average rate of inflation in the UK was 12.1% and for the quarter of a century between 1969 and 1994 it averaged 8%.
The Currency Snake. FX management after the Nixon Shock. Early version of the ERM, maybe. Worked about as well.
Having first paid attention to inflation in the 1970s, I have no difficulty in agreeing that Murphy is wrong. Not that it would be much of a challenge anyway.
‘Between 1970 and 1979, the average rate of inflation in the UK was 12.1% and for the quarter of a century between 1969 and 1994 it averaged 8%.’
That’s a period of inflation!
Candidly, you’re ignoring the fact that after that 25-year temporary spike, inflation did indeed come down.
(Just getting in with Murphy’s probable response, to save him having to write a blog on the subject)
Gawd, he’s enthusing about massed matching shirts now.
@jgh – the only surprise is that pilgrimslight retard hasn’t stuck his tongue up spuds arse by commenting how great the shirts are /where can i buy one/you look wonderful etc. I presume another sycophant will be along shortly to fill that gap
jgh said:
“Gawd, he’s enthusing about massed matching shirts now”
Black ones?
Just yesterday I read that when Hungary replaced the pengo with forint in the forties, hyperinflation meant that all the pengos in circulation were worth less than 1/100,000th of a forint. But no doubt they could just have waited for the spike to change direction.
The inflationary spike in Germany of 1921ish was brought down by Streseman refloating the economy with a complex series of loans and US and UK not forcing the payment of reparations.
The spike in Austria was brought down by Ignaz Seipel with a whole new currency and stringent spendin cuts with a credit negotiated from the League of Nations.
So doing stuff does work.
RichardT: They seem to have run out of black, Lord Spudcup has to make do with leading the Blueshirts.
Which were, in fact, the Irish equivalent back in the day…..
If would just leave aside for the moment a professor of economics not knowing the difference between a buyer and a seller (I know, you can’t do that. But could we just just play a game for a second): he says this about professional footballers:
“Their players are remunerated at extraordinary levels that would be exceptionally difficult to justify without this oligopoly power. In economic parlance, they earn rents on top of any reasonable level of reward they should enjoy”
Nothing makes me sicker than 70-year-old fat, affluent Europeans decrying young Africans and South Americans, from far humbler backgrounds than us, for having the temerity to utilise their talents as best they can.
It’s one thing when he doesn’t like middle aged millionaires and wants to outlaw and destroy what he personally doesn’t like. But to declare war on 20-something immigrants out of pure snobbery? Cunt, cunt , cunt.
Ironman
“affluent”
Did you mean effluent?
PF
Just full of shit