It’s Stagflation Jim, but not as we know it
I was intrigued by Stephanie Flanders recent post on the UK Inflation figures.
The piece doesn’t really seem to be addressing the bigger picture on the recent dynamic in the UK economy. For at least a year, if not two, we have had the following situation occuring in UK household incomes & outgoings in price change terms:
- Interest rates on savings at 0.5%
- Wage increases at ~1%
- Headline inflation at ~3%
- Inflation on food, fuels and other essentials over 5%
- Credit card & other unsecured debt at 10-25%
So we have costs going up, but incomes stagnant. This looks a lot like the symptoms of stagflation, yet very few mainstream media outlets dare use this term.
My apologies to Peter Warburton for contorting the title of his prescient article from 2001:
“What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies.”