I posted this video on YouTube this morning:

In case the link does not work, you can watch the video here.

This is the transcript:

Inflation always goes away. Now, that's an extraordinary claim to make, but I can show you it.

This chart, produced by an American central bank called the St. Louis Fed - which always produces amazing economic statistics for those who want to look at such things - is actually a reproduction of research undertaken by the Bank of England, which shows the inflation figures in the UK since before 1200. I don't mean before midday. I mean literally from 1200, 800 years ago.

What you see is that the chart shoots up and downwards in the early eras on the left hand side, and gradually it tapers down so that these days we have much smaller oscillations when it comes to inflation.

The peaks are smaller than they used to be, and there are almost no negative troughs, i.e. we don't have periods of deflation in this country now. But the critical point I want you to note is, that after any inflation spike, there's a downturn.

Now historically, that downturn was almost invariably a period of deflation. In other words, real prices fell.

Now that, in the last century or so, is not the case. After a period of inflation, real price. changes fall, but prices don't go back to where they were. So, over the last century or so, we've had a period of steadily rising prices. But it's still true that after any period of inflation, really quite quickly, excepting periods of world war, prices return to relatively low levels of inflation.

And the critical point to note is that all that happened when we didn't really have a central bank who did anything whatsoever to control inflation.

The Bank of England might have been created in 1694, but it didn't get a mandate to control inflation until 1998. So, for the vast majority of the time that that chart was being plotted, there was no central bank raising interest rates, trying to control inflation, setting a 2 percent target, or any of that other nonsense that Governors of the Bank of England now talk about.

And yet inflation went away, anyway. And that's because markets always correct for the panics that create inflation in the first place.

Inflation is almost always created by a panic. There's a shortage caused by plague, pestilence, war, you name it, something's gone on in the world. Trade has broken down, and therefore there's a shortage and prices go up.

Once we get over the panic, we realise that actually the world did not end as everybody thought it would.

Remember the toilet roll crisis of March 2020 everyone went out and bought toilet rolls as if there were never going to be any available ever again. Well, it's exactly that sort of panic multiplied by an enormous factor that creates the shortages in world markets when a big event like the outbreak of war happens and market traders panic and try to buy things as if there will never be wheat, oil, gas, fertilizer, or anything ever again.

There were toilet rolls after March 2020. There has been oil, gas, wheat, fertilizer, and everything else since March 2020. The prices, once the traders realised that they had simply panicked inappropriately, went back to normal. They didn't necessarily go back to the price that they were in March 2020, but they certainly returned to a very normal level.

Inflation went away.

We did not need interest rate rises.

We did not need austerity.

We did not need the Bank of England telling us that none of us would do a pay rise.

We did not need them to say to the government that they should not be spending because they had to pay interest - extra interest - instead.

No. We just needed to wait for the markets to stop panicking. But instead, we had the Bank of England doing something quite different. They put in place policies that were designed to exploit the situation where inflation had started so that the wealthy became wealthier because money was moved from most ordinary people who pay interest to those who have very large sums on deposit.

That, again, is something we do not need again. Inflation goes away. It's a lesson we have to learn. And until the bankers do that, frankly, we shouldn't be giving them any power over our economies at all. Because they use that power wholly inappropriately and against the public interest.