Britannia Radio

A second article today from Liam Halligan.  He is worried about 
INflation and as it happens I issued a strong warning about the same 
thing on 11 March after talks in The City.  The paragraph in question 
said - - -
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After DEflation is INflation the real killer?
The suggestion is that Deflation will continue for about 21/2 years 
and during this period it is hoped that measures being taken will 
restore the economy because during this period as prices fall debts 
do not!

The follow-up to that is that with the economy awash with money from 
all these stimuli that inflation is not likely, -  IT IS CERTAIN!

Governments like inflation  because they can borrow today and pay 
back with devalued currency later.  They cheat the savers with what 
effectively is a "stealth" wealth tax.'
+++++++++++++++++++++++++
The only thing I would change in that is that Inflation will hit us 
sooner than anticipated.

This is far too important to mix up with more post-G20 comment.  Tied 
in with the figures he gives here is the nightmare for British 
budgets namely interest charges on Brown-Darling's vast borrowings.  
Even if we do not repay a penny of these borrowings we will be 
saddled with vast interest charges on the borrowings.  These have to 
be paid out of taxation because the ability to borrow more to pay 
them will vanish and simultaneously interest rates will rise. So 
Britain is now in the position  of improvident credit-card borrowers 
who "pay off" one debt by the use of a different credit card.   We're 
damned near broke - NOW.

xxxxxxxxx cs
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SUNDAY TELEGRAPH 5.4.09
Breaking the silence before the inflation tsunami

"You must be the only person worried about inflation, Liam". So I was 
told on Newsnight last week - by someone who's spent four of the last 
five years in the cabinet.

Almost lost for words, I blurted an answer before Mr Paxman intervened.

But I left the television studio shocked that the former minister, 
someone of genuine ability [why is he not IN the government then ? -
cs] , could be so ignorant of life beyond the Westminster village.

"Inflation, not deflation" is a recurrent theme of this column. 
That's because the Western world's response to the "credit crunch", 
this orgy of wildly expansive policy using "deflation is nigh" as an 
alibi, amounts to a repeated whacking of the self-destruct button.

Almost everyone outside the "political and media elite" knows this. 
Amidst "deflation is upon us" warnings from this elite, UK CPI 
inflation went up last month - to 3.2pc. CPI understates true 
inflation. But even CPI is above the Bank of England's target - and 
has been for 17 months.

So if I'm the only one worried, why is Mervyn King writing repeated 
letters acknowledging inflation is too high?

Sterling is down a third in 18 months. Import prices are soaring. The 
UK's monetary base is doubling.

"Broad" M4 money is expanding at 16pc a year. Food price inflation is 
8pc, with double-digit producer price inflation too - as the credit 
crunch destroys supply chains.

Warren Buffett, the most successful living investor, foresees an 
"inflation onslaught". Peter Brabeck, the Nestlé chairman and one of 
the world's top businessmen, says "Now the printing machine is 
starting, this is the start of inflation."

China and other major creditors are rightly concerned Western 
governments - particularly the US and UK - want to inflate away their 
sovereign debts.

That's why the "bond vigilantes" are stirring and we could very soon 
face a gilts strike.

If I'm the only one worried about inflation, why is the price of gold 
so high, with the price of commodities also up sharply - even though 
the global demand outlook is weak?

If I'm the only one worried about inflation, why does the latest 
report of the Bank of England's pension scheme show it recently 
changed its allocation of index-linked instruments - the ultimate 
anti-inflation hedge - from 25pc to more than 70pc of its portfolio?

Am I the only one worried? I so wish that was true. We face an 
inflation tsunami. And the longer politicians deny it, the worse the 
inevitable backlash will be.