Monday, May 23, 2022
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Is this the beginning of the end for the £?

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SO THE energy price cap is to increase by £693 pa (55 per cent) The government is responding by lending everyone a rebate of £200 via their energy billing company and generously granting £150 council tax rebates on properties in bands A-D. 

Last year council tax rose by 4.4 per cent on average, resulting in average bill increase of £85, so half of the rebate will simply cancel out probable increases in April. The whole policy is predicated on the fallacy that energy prices will return to their 2020 level. They won’t. Currencies such as the £ are losing value rapidly as their issuing governments and banks continue to abuse them. Currencies will deflate and prices continue to inflate so long as governments continue to respond to any problem by issuing more currency. Precisely today’s response.

The fundamental problem? The state has no money. The media aren’t even falling back on the nonsensical formula of taxpayer bailouts this time because everyone knows that no tax will be raised to pay for these loans and rebates. The money will be printed.

The Covid response has cost the UK government to date around £410billion. That money has been created to pay for Test and Trace, furlough and lost tax receipts, and in return we are getting runaway inflation. The money is either created directly by the Bank of England which loans it to the state or indirectly by the private banking system which uses it to buy gilts. Interest rates are suppressed by the creation of artificial demand for government debt and the excessive public sector continues to expand.

What happens next? We can’t say for certain but the best guess is that the state manages to exert a modicum of control over gas and electricity prices at the cost of igniting catastrophic inflation elsewhere in the economy. Food prices, petrol, construction costs? Who knows? But fertiliser prices are well worth watching over the next few weeks.  Will the state then print yet more money to compensate people for their food bills or farmers for their fertiliser costs? We are in an era of peak moral hazard where every problem is a problem for the state.

All fiat currencies are ultimately a confidence trick, and once the confidence is lost the currency reverts to its intrinsic value of zero. We are getting ever closer to that point and last week’s announcements can only accelerate that process. When the currency loses its value the government will lose its power, and that is the point of both maximum danger and maximum opportunity for the people.

Freedom Alliance alone amongst the active political parties are consistently calling out the insanity of the current economic and fiscal model which is based on an ever-growing mountain of debt. Ultimately, we need a stable and secure monetary system that rewards saving and productive investment and not speculation and excessive government.

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Jonathan Tilt
Jonathan Tilt
Jonathan Tilt is leader of Freedom Alliance

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