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.

I took part in a discussion yesterday on what might happen to left of centre politics if Labour does, as expected, win this year‘s general election. The assumption was that it would do so on the basis of a profoundly right wing platform, which it appears that it has every intention of delivering when in office. Firm conclusions were not reached, but I thought it worthwhile sharing some of those thoughts that I presented.

We will, of course, know more about the likelihood of Labour having a substantial majority in the Commons after this week’s local council election in some parts of the UK. If, as seems likely, a very large majority is in the offing, my suggestion was that a number of problems will have to be faced by Labour, almost immediately.

The first is that once any post-election euphoria is over and it becomes apparent that Labour has not only no plan, but also no intention, of changing the Tory approach to government, with austerity remaining a likehood, then significant buyers’ remorse will rapidly set in amongst the population in general. This will be fuelled by a mainstream media that will be all two willing to criticise every move that Labour makes. Keir Starmer’s honeymoon period with the British public might be very short.

If, at the same time, Labour has a substantial majority (by which I mean anything on the scale of 80 or more, with that figure being deliberately picked because it was the level that Boris Johnson achieved in 2019 that has not delivered the Conservatives a basis for continuing power) then Starmer will face a very particular problem. This will come from a multitude of existing and new back benchers who are not ultra-loyalist to him, but who nonetheless think that they might have a good prospect of retaining their seats in the future, and who will, therefore, have the confidence to challenge his leadership within the constraints of the party within Parliament. They will,of course, know that nothing they do will prevent him from getting his way, but they will also simultaneously be aware that they can present alternative thinking with relative impunity in this situation. In other words, Starmer is likely to have a considerable problem with party discipline if his majority is too large.

Thirdly, political instability in Scotland will not be the blessing that many think it might be for Labour. Governing Wales has not proved easy for Labour, and they have relied upon coalition agreements there. The same might be true in Scotland if the SNP leaves government. The potential for embarrassment that this might create - especially if Labour has, as a result, to govern with the support of the Tories - might be very significant, especially when the Labour front bench team in Scotland is particularly uninspiring.

Fourthly, there will always be what Harold McMillan was reputed to have described as “events“, which by definition have the capacity to undermine the best laid plans of any politician. The particular risk is that these events might require additional spending that will prove that Rachael Reeves supposed commitment to ironclad fiscal rules is skin deep, and probably non-existent. The whole promise for government that Labour has made might be shattered in that case.

Put these factors together and although right now the realistic prospect for getting almost any of the ideas that I am currently promoting into the Labour manifesto appears decidedly limited, in reality the demand for policy alternatives, with explanations being available on the way in which they might be funded, could be very high quite soon after the general election happens.

I am old enough to be aware the politics is not a short-term game. This year’s general election does not offer me any good reasons for significant hope. But, I seriously expect that change will follow thereafter, because I cannot imagine any way in which Starmer and Reeves can succeed with the policy proposals that they have made. In that case policy options for those anywhere on the left of the political spectrum must be available.

I am living in hope.

The Opposition’s shadow minister for home and foreign affairs, Barnaby Joyce, has put out a statement to reassure the Nation’s female folk that he is a lover not a fighter.

”It is a tough time for women right now,” said the member for New England. ”So, I want to assure them that if they need a shoulder to cry on, or just someone to sit and chew the fat with, I’m there for them.”

”Of course this offer extends to all women, even the uggo’s.”

When asked what the Government could be doing to help protect women, the member for New England said: ”Well, get rid of the bloody bonk ban for a start.”

”Sexual frustration can lead a man to do some dumb things.”

”Ministers and their staff should not be restricted by a pathetic Malcolm Turnbull instituted bonk ban.”

”So, come on Albo do the right thing and let Parliament house swing.”

Mark Williamson

@MWChatShow

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