Inflation Report: A forty-year high
| By Gary Mead | 0 Comments
In September, the UK’s annualized rate of inflation reached the shocking rate of 10.1%, says the Office of National Statistics (ONS). That’s five times greater than the ‘target’ set by the Bank of England (BoE), and is the highest since 1982. Food and drink costs went up at an annual rate of nearly 15%, the fastest since April 1980. Electricity prices rose by 54% and gas prices by 95.7% in the year to September.
This is a disaster for everyone saving and spending in fiat money. Paper money’s spending power is being reduced by 10% a year, banks’ savings rates are far below 10%; it will become extremely difficult for people to maintain their living standards. The September inflation figure is important; it’s used by government to uprate pensions and benefits for the following April. But there have been suggestions that the new Chancellor, Jeremy Hunt, will break the promise made by the governing Conservative Party in 2019 of the ‘triple lock’ – the guarantee that state pensions rise each year in line with inflation, average wage growth, or 2.5%, whichever is highest. There is speculation that Hunt will limit the rise in pensions and state benefits to 5.5%, thus saving about £8 billon, but condemning millions to a cut in real income. Hunt has said decisions of “eye-watering difficulty” were needed to balance the books.
If the triple lock is suspended it will be the second year in a row. Last year’s suspension saw an increase in pensions and benefits of 3.1%, meaning that pensioners and those dependent on benefits have already experienced a drop in real incomes given the rate of inflation this year.
Controlling price rises will become more difficult for the government, as workers push harder for inflation-matching (or beating) pay increases. Railway and postal workers intend more strikes to push for pay rises. Given the recent turmoil in the UK economy, the government needs to crush inflation asap if it is to stand a chance in the next general election. According to the economic commentator Will Hutton (no friend of the Conservative government), this “economic conjuncture is the bleakest I have witnessed in 50 years of observing and commenting on the economy”.
But the BoE has few tools to do the crushing, except to put up interest rates to cool demand – and Britain is already entering recession. The same dilemma faces the Federal Reserve in its battle to quash inflation, now running at 8.5% on an annualized basis. Forecasts for October suggest that the rate will drop only marginally and remain above 8%. The Fed will need to push interest rates higher when it next meets in November.
There is an alternative to fiat money. Gold is security. Glint its key.
At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.