Is low inflation a good thing? – alittleecon

Today (December 16) it was announced that the CPI measure of inflation had fallen to 1%, a 12 tear low and also well below the Bank of England’s 2% target, writes Alex Little.

Lib Dem dogsbody Danny Alexander welcomed the news, saying “This is a welcome early Christmas present to millions of families across the country.” Thanks Santa! The thinking in Government seems to be the lower the better, because they are desperate to negate Labour’s ‘cost of living crisis’ attack, but is low inflation really a good thing? Helpfully, FT columnist Tim Harford wrote a short piece on this in February, some of which I will reproduce here.

That’s right, it’s on alittleecon – give it a visit. The gist is that lower inflation makes bankruptcies more likely, and there’s no latitude for a cut in rates that would encourage spending in order to help the economy pick up speed. Most interesting for this writer is the following quote from the Financial Times:

“If nobody buys anything there will be a recession and more deflation – a vicious spiral.”

Look out – because that’s exactly what George Osborne seems to be engineering by sucking money out of the poor – the people who spend money – and giving it to the rich – the people who hoard it.

Follow me on Twitter: @MidWalesMike

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1 thought on “Is low inflation a good thing? – alittleecon

  1. Keith Jackson

    I dont know whether its a good thing or bad and I dont confess to really know the ins and outs of economics, but what I do know is the latest decrease in inflation is in spite of the tories and not because of them. No doubt they will claim the credit but as far as I can see it is only because Oil prices are falling and not because of anything the Tories have done, what if you havent got a car, how is inflation then?

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