Realist, not conformist analysis of the latest financial, business and political news


So it turns out that we don’t have as much price inflation as we should.

I mean, I know we have a LOT – my Mars bar costs 70p now and it has to be eaten with tweezers.

But given we’ve humped £375bn into circulation, my Mars bar should cost £30 and be detectable only with an electron-tunnelling microscope.

So what’s happened?

Well, the £375bn isn’t in circulation very much.

In a textbook example of something called The Cantillon Effect, the new money went into stuff that the people with early access to it like to spend money on.

In Cantillon’s day (1730 or so) that presumably meant rich people buying wigs.

So the price of wigs went up before anything else.

And then the people who worked in wig shops took their tips and bought potatoes and the price of them went up a bit later.

Wigs first, then potatoes.

In our day, wigs are no longer de rigeur for the wealthy – they like to buy stocks.

And art.

And real estate and companies and stuff.

So the price of all that s**t has gone MENTAL.

The stock market is way high, real estate in San Francisco (the bits that aren’t covered in poo) is at record prices, paintings of incomprehensible nonsense have doubled and the P/E ratios (whatever THEY are) of the top companies are in triple digits.

So what?

Well, it proves that inflating the money supply caused plenty of price inflation.

Just not in the stuff the rest of us buy.


The price inflation has been sequestered away in these plaything markets.

At some point presumably the wealthy will get bored and sell their playthings (assuming they can find a greater fool to buy them) and then they will start spending all the cash on steaks and Ferraris and colonic irrigation, and those of us that work in steak restaurants, car sales and arse-cleaning emporia will suddenly find ourselves with a bit more money currency and then we’ll buy normal stuff like coffins and sackcloth and ashes and the price of that stuff will go up and the government will suddenly report the price inflation.

Just kidding – they’ll remove coffins from the basket of goods at that point and replace them with stuff that just halved in price (copies of Hillary’s book?) to keep the average inflation rate down so they don’t have to give pay rises to nurses and council workers.

And then your Mars bar will cost £99.99 and be entirely theoretical.

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