LETTER: Inflation is taxation by another name

In the past when I have given presentations to young adults I occasionally would place a £10 note on the table by way of offering it to anyone who could tell me the meaning of the “promise” printed on the front of the note. Needless to say I never lost £10.

We are now in a world currency war where nations are seeking to devalue in part to stimulate exports but also to default on their national debts. The late investor Sir John Templeton said: “Government deficits always end in inflation”. He was right. It is exceedingly difficult to measure the overall rate of price inflation in the economy.

Currently the recorded rates of inflation are around 2.5% to 3% but, as we know, the rate of price increases in food and fuel are far higher.

Inflation, which is taxation by another name, redistributes wealth from the poor and less well off to the rich, who by and large are protected by their ownership of hard assets and other investments. Some people assert that cash is safe. This is true in nominal terms, but not in relative terms after adjustment for inflation.

Since the start of the financial crisis in 2007 I estimate, albeit roughly, that the purchasing power of a pound has fallen by the best part of 20%.

Cash held on deposit in a savings account has lost purchasing power to the tune of nearly 10%.

These figures are shocking and scary. This is the road on which we are headed, with the Governor Designate of the Bank of England leaning towards allowing inflation to exceed the 2% target for some time to achieve economic growth.

As Mr Johnson suggests, this is a time for people to prepare for any eventuality. This requires keeping a firm bearing on “True North”, which is far easier to say than done.

KEVIN HEY

Castle Road, Colne