Inflation
Not too long ago I was writing about deflation hitting the UK economy.
Well, I may have been too quick. More recent reports and the markets seem to now expect inflation - and I mean serious inflation.
A businessman I was discussing with yesterday was worried. He noted that all governments had printed money too fast to get us out of the recession, and suggested this had happenned more than publicised. If all this money is around, it will surely lose its value.
This was a businessman from overseas, who was keen to buy real assets with his cash and was shopping around for land, property, gold and oil. And his only worry was that commodities and property are sold in local currency which means they are exposed as well.
The problem of course is not monetary. When you have a country that doesn't produce anything, printing money will just be translated into inflation in the long term. This is known. The challenge here is for all this trickery to create some business growth quickly before markets realise that cooking the numbers doesn't make a country stronger financially.
I wonder if Adam Smith (featuring on the £20 notes) had thought about all this government intervention in his free market theories. I somehow doubt so.
August 23rd, 2009 - 07:03
Adam Smith does talk about government intervention, but in the context of making a labourer’s life better. As far as free markets go, he genuinely thought that, in the interest of private enterprise to perform at their best (obviously opposed to monopolies) also lies the interest of general good.