How is this for a headline to go with Mark Carney’s morning cup of tea:
The Bank of England will lose control of inflation and 1980s mass unemployment will return
It’s from Andrew Lilico who is the Chairman of Europe Economics and says the Bank of England has no credibility predicts an inflationary storm:
The huge six- or seven-fold increase we have seen in the monetary base should translate into rapid broad money growth and thus inflation down the line. Anticipating that inflation, investors and companies will exit from cash and financial assets into real assets in a distinct spike in business investment. That spike in business investment will be associated with a rapid pick-up in GDP growth over a few quarters. That in turn will make the balance sheets of banks appear (temporarily) much improved. That will facilitate a rapid pick-up in lending. (In the economic jargon, the “velocity of circulation” will rise.) Once this scenario is in play, the Bank of England will have neither the will nor the tools to control it fully.
Lilico says that will then spillover into wage inflation and onward with the cycle.
I disagree almost entirely but he paints a detailed picture that’s worth a read.
