We are not free: rotten money, rotten democracy

We’re told to expect inflation to rise to around 4% later this year but it should then drop to the Bank of England’s target of 2% per year. https://www.standard.co.uk/business/uk-inflation-tumbles-giving-bank-of-england-room-on-rates-b951139.htmlMy question – and I expect there will be clever people to answer me – is why is there any such target, other than zero?

My bank currently offers 0.01% interest on my balance with them. That is to say, if my bank borrows £10,000 off me then in return I get £1 interest at the end of the year. Does this even cover the default risk? (Yes, there is the FSCS, and thereby hangs a tale https://www.fscs.org.uk/globalassets/press-releases/20170908-fscs-northern-rock-release_final3.pdf.) In the meantime, the price of £10,000-worth of goods and services is expected – is targeted – to increase by £200 ! Where is my incentive to save?

Ah, says Mr Worldly Wiseman, you should be investing, instead. Oh, yes? In Enron shares https://en.wikipedia.org/wiki/Enron, perhaps? Or should I have placed my portfolio with Bernie Madoff https://en.wikipedia.org/wiki/Bernie_Madoff, who ‘made off’ with enormous sums of his clients’ money?

Today our financial house of cards seems to be sustained by Modern Monetary Theory https://www.investopedia.com/modern-monetary-theory-mmt-4588060. Under this scheme, governments can forge as much cash as they like to pump into the economy, and will of course know exactly when and how to suck it back in interest rates and taxes. This power will never be abused, or misused by some incompetent Sorcerer’s Apprentice. Nothing can go wrong… go wrong… go wrong.

There was a time when forgery was high treason and forgers were hanged, and even also drawn and quartered; female coiners, slightly less dreadfully, burned at the stake (the last in 1789 https://en.wikipedia.org/wiki/Catherine_Murphy_(counterfeiter).) Now, the State can do as it wishes with ‘the pound in your pocket’ (to quote the condescending Harold Wilson.)

If what I have said so far sounds slightly hysterical, consider the implications for the citizen’s freedom. We like to talk of being free (especially in these jab-and mask days) but we are not free without personal property. The ‘fact-checkers’ at Reuters have determined that it is not the WEF’s goal that ‘you will own nothing and be happy’ https://www.reuters.com/article/uk-factcheck-wef-idUSKBN2AP2T0; how very helpful of them. However, an article written for the 2016 World Economic Forum sub-titled ‘I Own Nothing, Have No Privacy And Life Has Never Been Better’, since taken down https://www.weforum.org/agenda/2016/11/how-life-could-change-2030/, is still available on Forbes: https://www.forbes.com/sites/worldeconomicforum/2016/11/10/shopping-i-cant-really-remember-what-that-is-or-how-differently-well-live-in-2030/.

There was a time when Parliaments had power, because the monarch needed the people’s money for wars and other expensive diversions. The request had its risks: calling the assembly ultimately cost Louis XVI his head. Now, it magics up whatever it requires; who needs the people? And why should the people need money, independently of the State? ‘You will own nothing and be happy’ – though I think that when that happens, it will be only half right.

For if we live at the pleasure of the State we are like household pets; and like them, perhaps, may one day be euthanised when inconvenient to our masters (what else are DNR notices, like the ones given during the Covid epidemic to British patients with learning difficulties https://www.theguardian.com/world/2021/feb/13/new-do-not-resuscitate-orders-imposed-on-covid-19-patients-with-learning-difficulties?). If we are not employed by some agency working on behalf of the government, many of us survive on allowances and income top-ups, unfunded final salary pensions, and the State Pension Scheme (at whatever receding qualifying age.) We are not free, because we are not independent.

No, surely the ‘saviour State’ https://www.businessinsider.com.au/the-great-reset-2011-7 will see us right, won’t it? If we depend on State income, that will be protected against inflation, won’t it? I for one am grateful for the Conservatives’ ‘triple lock’ manifesto commitment https://www.instituteforgovernment.org.uk/sites/default/files/publications/taking-stock-conservative-manifesto.pdf- but ‘events, my dear boy, events’; they may have to renege https://www.thetimes.co.uk/article/covid-19-bill-casts-doubt-on-triple-lock-pension-vow-ddl2lbm6t. Besides, it’s a squalid vote-purchase only undertaken because of disparities in voter participation; we oldies make sure our gapes are widest and get the mummy-bird’s attention first. The democratic system is rotten. Still, this egregious favouritism can’t last forever.

By the way, technically, even if your income was boosted every year exactly in line with a single measure of inflation, you would lose out. This is because the revisions come once a year and are then fixed, whereas prices continue to go up in the interim. The faster inflation goes, the greater the cumulative loss – for those who are interested I attach a spreadsheet to show how.

Also, the inflation index you use is so important in determining whether and how badly you are being bilked. You may remember that almost the first act of the incoming 2010 Government was to stop issuing NS&I Index-Linked Savings Certificates. For existing certificate-holders, NS&I have changed the index used from RPI to CPI, in the expectation that savers’ returns will drop by 0.6% per annum. https://www.hl.co.uk/news/articles/archive/ns-and-i-index-linked-savings-certificates-should-you-renew-them

There was a time when money was gold and silver – indeed, to some extent it is a requirement of the US Constitution https://constitution.congress.gov/browse/essay/artI_S10_C1_2_2_1/. It kept governments in check and safeguarded the people’s freedom. What you saved was yours, taxation apart; and you resisted taxation, and they had to ask nicely for your money, via your representatives; but now the money system is rotten.

The disease of inflation is not the norm but largely a twentieth century phenomenon. Discounting the effects of wars and poor harvests, overall prices in England were stable until the sixteenth-century enthusiasm for empire and the importation of New World gold https://users.pop.umn.edu/~ruggles/hist5011/phelps-brown%20and%20hopkins.pdf. From 1266 and for centuries after, a loaf of bread cost an old penny. https://en.wikipedia.org/wiki/Penny_bun

The money system stabilised again by the late 17th century. The Bank of England’s website used to have a page that let you calculate cumulative inflation for any period from 1750 onwards. According to them, a basket of goods and services costing £1 in 1750 would have cost (the equivalent of) £1.80 in 1900 – an average annual inflation rate of 0.3%. That period covers the tremendous increase in productivity introduced by the Industrial Revolution and further late-nineteenth-century scientific and technological developments, so inflation is not needed for business and prosperity.

An 80% increase in prices took 150 years to develop.

Yet the same database showed that a very similar increase (£1 to £1.81) occurred in the space of four years in the 20th century between 1974 and 1978. And since 1900, we have seen an overall increase of over 10,000%. That’s not a typing mistake: £1 in 1900 was worth the same as £104.08 in 2012.

All caused by a seemingly gentle average inflation rate of 4.2% per year. The Bank of England’s “target” for annual inflation is now 2%, which means that it is now official policy for us to suffer an 80% increase in prices over 30 years instead of 150 years – in one generation, instead of five or six.

Liberty depends on private property, and sound money. Rattle your chains, pocketless serfs.