Tuesday, 17 February 2009

The BBC still trying to scare the public about the perils of deflation

The BBC are so transparent, the news that "Consumer price inflation (CPI) fell in January to an annual rate of 3%, down from 3.1% in December" gives the BBC the chance to scaremonger thus:
"Others believe that core inflation could become negative this year, a situation known as deflation.

In the short term, this can provide a boost to the economy by increasing consumers' spending power, but in the longer term it can cause serious economic problems.

This is because consumers postpone spending as prices fall, which reduces companies' revenues. "

The BBC then finishes this report thus:
"With little scope for further rate cuts, the Bank is expected to pursue a policy of quantitative easing, where it increases the supply of money into the economy."

So what do we learn? Deflation "in the longer term ... can cause serious economic problems" but there are no downsides to quantitative easing! Hmm I wonder why the BBC might be pushing this idea?

No comments: