the wilted rose

Simon Heffer hits the nail on the head in his usual astute way in the Telegraph today, in reply to Darling’s lies (or economic illiteracy) about pay rises stoking inflation:

Let us be clear about what is really happening. There is not inflation because of rising prices, or rising wages. There is inflation because the Government has for years allowed the supply of money to be increased by far in excess of the combined rates of inflation and growth. Growth is at present about 2 per cent, and predicted to fall to about 1.4 per cent over the next year.

Inflation, on the bogus measure of Consumer Price Index, is more than 3.3 per cent. Even if we believe these two figures, their sum is about 5 per cent. How fast is the supply of money increasing in the M4 measure? More than 12 per cent. So why do we have inflation? Because we have too much money chasing too few goods. And who put all that money into circulation, not least by excessive borrowing? The Government.

Now, this is something no minister would want to own up to, even if he were sufficiently cerebral to grasp the point. It is much better to do the usual trick of the Prime Minister’s, and disclaim all responsibility for anything that goes wrong.

I tackled this subject yesterday but Mr Heffer has done it much more justice than I did.  The Government, not external factors or wage increases or whatever, are responsible for the mess we’re in.  So much for the “tripartite system”, Bank of England independence and the ‘Golden Chancellor.”