( Five minute read)
To know truly is to know by causes. — Francis Bacon
How to stop inflation? Remove the cause!
Interestingly, all schemes or nostrums which ignore the cause, if and when adopted, sink us ever deeper into the mire.
As if inflation weren’t bad enough, most proffered “cures” would worsen the situation!
Inflation occurs when the money in circulation exceeds the production of commodities and services. Consequently, in an inflationary environment, the purchasing power of money falls and the prices of commodities and services rise. It is nothing more nor less than the printing of what the government has declared to be legal tender, that is, printing ever-increasing quantities of fiat money into the brutal economic reality.
The biggest misunderstanding is that people do not realize that monetary policy is a major cause of the increase in inflation.
Chancellors tweak their parameters to suit their aims and ideology of their political parties.
All of the above contribute to Inflation, but the real reason is that’s Economies are put in front of the needs of people.
WHEN IT COMES TO ENGLAND IT IS A SELF INFLICTED WOUND.
Inflation hit 11.1% in the year to October, the highest for 41 years. It took over 12 years, not just a year, for inflation to rise by large amounts.
QUATIVE EASING TO SAVE THE BANKS. LEAVING THE EU – DUMPING THE SINGLE MARKET IN FAVOR OF FANTISTY TRADE DEALS. PLOUGING TAX PAYERS MONEY INTO WHITE ELEPHENT – WORTHLESS/ OUT OF DATE PROJECTS – HIGHT SPEED RAIL (HS2) – (The cost to taxpayers could rise from £17.1 billion to a massive £45.5 billion) – Out of date nuclear power stations. £700 million investment into Sizewell C, operated by France’s EDF in the east of England when tide generated power technology can do the job at half the cost.
Financial statements are prepared on historical costs on the assumption that the unit of account (e.g., the pound) has a static value.
In reality, however, the value of money changes over time.
Fiscal rules seem to change almost annually these days, as new Sunak says he is on track to hit the new rules, which appears to be hardly surprising given that he has just devised them for himself.
Fixed assets are stated at historical costs in the balance sheet; they do not show the true current worth and are often unrealistically low.
In the context of rising prices, there is a significant overstatement of profits since the cost of goods sold is calculated on a historical cost basis and no allowance is made for the reduction in the purchasing power of money.
Also it is worth adding that an overstatement of profits results in heavy financial strain for a company in terms of heavy dividends, heavy taxation, and so on.
As inflation rates vary from year to year, an element of uncertainty characterizes the activities of the business. In order to incorporate realism into financial statements they should be adjusting so as to reflect, in a true and fair manner, the financial performance and the position of any enterprise over a particular period.
The inflation rate, as measured by the percentage change in the consumer price index.
Yes, there are international factors, such as the global supply chain and the Russian invasion of Ukraine, the Pandemic etc.
However, inflation started rising before these international factors appeared, because interest rate were too low and the QUATIVE Easing increases money growth too rapidly.
When the costs of government rise beyond the point where it is no longer politically expedient to defray the costs by direct tax levies, governments all over the world resort to an expansion of paper money — inflation — as a means of making up the difference.
Out of the inflation of prices grew a speculating class; and, in the complete uncertainty as to the future, all business became a game of chance, and all businessmen, gamblers. The quick growth of stockjobbers and speculators. Instead of satisfaction with legitimate profits, came a passion for inordinate gains.
Inflation is not questioned, farmers want to be paid for not farming, other to receive benefits for not working, to have their medical care and children’s education subsidized, to be protected against competition. The list is endless creating millions upon millions identifying self-interest with legal plunder!
The more political largess they can get — regardless of the force used as values became more and more uncertain, there was no longer any motive for care or economy, but every motive for immediate expenditure and present enjoyment. —the better.
We can’t compel all business ventures to adopt a “profit-sharing” procedure — employees as well as entrepreneurs sharing in the gains, because they would have to share in the losses also.
The cures are strictly a matter of inspired and intelligent leadership.
- In 2021, the expenditure of the United Kingdom government is expected to be over one trillion British pounds, with the highest spending function being the 302 billion pounds expected to be spent on social protection, which includes pensions and other welfare benefits.
The UK government is hiking a windfall tax on oil and gas companies and extending the levy to electricity generators, as it scrambles to balance its budget amid an economic downturn. It is also investing in nuclear power for the first time in decades. Beginning January 1, the Energy Profits Levy on oil and gas companies will increase from 25% to 35% and remain in place until the end of March 2028. That takes the total tax on the sector to 75%, according to the Treasury.. together, these measures will raise £14 billion next year and more than £55 billion between 2022 and 2028.
SO HERE IS THE SOLUTION TO INFLATION:
So lets say that over this period they were to destructing the benefit state and replacing it with look after yourselves state, funded by these the saving on benefits and a tax on profit for profit sake and replace the Basic Living ( The Basic living wage does not alleviate poverty (it only increases the gap between the poor and the rich) while with a Basic Income, equipping people to look after themselves -level up would not be just good for the economy but it would get rid of foodbanks, strikes. etc. – restoring price stability to the market place.
In doing so, it might just stave off a future where unemployment surges, wages stagnate, retirement funds bleed value, and vast numbers of people are made even more economically insecure in order to satisfy economic orthodoxies that are indifferent to people lives.
The thesis today is that inflation must be brought down is the culmination of almost a century of central bank orthodoxies. But that leaves one rather crucial question: is it true?
Past mistakes can’t be undone, but future ones can be avoided.
The sense that inflation destroys wealth and creates the conditions for political instability has deep roots but all production creates its own purchasing power!
All in all, this UK budget ducked the opportunity to make serious reforms to the way wealth is taxed.
All human comments apricated. All like clicks and abuse chucked in the bin.