Tuesday, March 24, 2009

Inflation in the U.K.

From what I have read, the U.K. has been as profligate with their money supply as the U.S. In this recent article from The Australian, one of their Bank of England Governors (Mervyn King)stated in reference to the money supply:

"There is no limit to how much we can do, which is why, in the end, this policy will work"

They are now considering to begin "printing money".

Then this article at Bloomberg today:

Consumer prices climbed 3.2 percent from a year earlier, the Office for National Statistics said today in London. The median forecast of 28 economists was for 2.6 percent. Bank of England Governor Mervyn King wrote in a letter to the Treasury explaining the increase from the 3 percent limit that a “sharp decline” in the inflation rate is likely to resume.
“It’s a big surprise,” said Stewart Robertson, an economist at Aviva Investors in London

How shocking, Mr. King, that you hold no upper bound on the money supply, yet your country experiences surprisingly higher inflation.

The article goes on to blame the drop in the value of the Pound as a reason for price hikes by foreign companies like Ford Motors. You print money and your currency loses value? What? That can't be right.

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