But here’s the thing: despite cutting interest rates to record lows, the anticipated inflationary pressures have failed to materialise ” in fact, central banks have struggled to produce even the small amount of inflation they need to hit their targets.
That’s partly because they’re ignoring inflation in the places where it has appeared. Have you seen house prices recently?
You have to be careful with the link between money-printing and inflation anyway. The damage is done long before prices increase. If the government (or Bank of England) prints a load of money and gives it away, it is increasing its liabilities by as much as it is increasing the assets of the people who receive it. But the bank’s money would not be worth as much as it claims because you can’t honour £1 trillion of liabilities if you only have £900 billion of assets. Someone will eventually have to write off £100 billion of their apparent wealth. Price increases show up when people realise this and start spending before they’re the ones left with the worthless banknotes (or equivalent).
That’s partly because they’re ignoring inflation in the places where it has appeared. Have you seen house prices recently?
You have to be careful with the link between money-printing and inflation anyway. The damage is done long before prices increase. If the government (or Bank of England) prints a load of money and gives it away, it is increasing its liabilities by as much as it is increasing the assets of the people who receive it. But the bank’s money would not be worth as much as it claims because you can’t honour £1 trillion of liabilities if you only have £900 billion of assets. Someone will eventually have to write off £100 billion of their apparent wealth. Price increases show up when people realise this and start spending before they’re the ones left with the worthless banknotes (or equivalent).
The fundamental problem is one of insolvency.