Inflation

The Daily Mail points out that food costs are rising by 15% while inflation is under 3%. This is happening all over Europe. The reason is that the inflation index includes lots of electronic products made in China which have fallen in price, keeping the average low, whilst the Chinese have to eat, pushing food process up.

I once wrote to the Telegraph suggesting they should publish, jointly with an accountancy firm, a number of inflation indices according to what different types of people spent their money on – middle class retired, young families on benefits etc. They talked the idea up for a while (claiming it as their own, natch) then did nothing. It would be interesting reading.

Unfortunately 3% inflation is already too high, and since Central Banks have to target headline rates, they raise (or don’t sufficiently lower) interest rates. Thus while the amount households have available to spend is falling (by £2,000 a year, some estimates say) governments impose a restrictive, deflationary regime on the economy, just when we don’t need it!

The solution? The Chinese should start growing food, and stop making plastic toys.