Tautology and the bank

One of the major works of departing Bank of England Governor Mervyn King was the Inflation Report – a quarterly report on what inflation is and what caused it. It is here that economists earn their stereotype for obfuscation, blaming inflation on anything and everything, and occasionally, stupidly, itself.

Adam Posen, the former (thankfully) MPC member frequently called for more quantitative easing, claiming that it doesn’t affect inflation.

A recent statement from the Bank:

Inflation is likely to rise further in the near term and may remain above the 2 per cent target for the next two years, in part reflecting a persistent inflationary impact both from administered and regulated prices and the recent decline in sterling.

So, inflation is likely to rise because of the decline in sterling.

It is incredible that someone can get away with that statement, let’s just spell it out for good measure – the price of goods is going to go up relative to money, because the price of money relative to goods is going to go down.

They don’t cite why sterling has dropped but we hazard a guess that it may have something to do with printing £375 billion of it.

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