Tuesday, January 19, 2010
Inflation Tax Kicks In
Remember when the massed ranks of the left and much of the economics commentariat told us that Britain was on the brink of a deflationary black hole, and that the only way of saving ourselves was to slam the printing presses into overdrive?
Hmm, yes, well, this morning we heard that CPI inflation has gapped up by the biggest monthly increase since records began (1996). RPI inflation has increased by the biggest monthly amount since 1979 - ie back amid the wreckage left by the last Labour government.
Since the collapse of Lehman's in September 2008, the UK price level as measured by the CPI has increased by 2.4%. It perhaps doesn't sound much, but it's happened during the deepest recession since the 30s, and the figures do not yet include this month's 2.5% increase in VAT.
So who are the victims?
Ultimately, all of us who depend on the long-term health and success of the British economy: banana republics have never been much good at delivering anything but bananas.
More immediately, anyone on a fixed income is squarely in the line of fire. And most of all, that means pensioners and savers.
As the Telegraph points out, a saver on the standard rate of income tax now needs to earn at least 3.63% on a deposit account, otherwise the net of tax return will be negative in real inflation adjusted terms. Yet currently, there isn't a single easy access account that pays that, and most pay well under 1%.
We're right back to the inflation tax: anyone with a bank or building society savings account, and anyone with a private pension is going to get seriously whacked.
Care? As we've blogged many times (eg here) socialists hate savers. Savers constitute the rentier class living off the backs of the workers. They deserve whatever they get, right up to and including being stood up against the wall and shot.
Of course, the Bank of England - the guys who've actually implemented this madness - they're supposed not to be socialists. In fact, if memory serves, there was once some vague idea that they'd be independent of government.