UK To Be Stuck In Deflation? Don’t Listen To BNP Paribas

That is what I have decided to do today after reading this load of codswallop in the Telegraph. Apparently the UK is set for over 10% unemployment and to be stuck with deflation for nearly 2 years.

This is all based on RPI dropping fast and the point that it will be negative at the next update on Tuesday.

How can economists be so dim? (Yes, that is a rhetorical question).

BNP Paribas (BNP.PA) have clearly failed to notice that commodities, petrol, food and other energy costs have started to rise again. They have also failed to notice that interests rates cannot go any lower. There is no way down from here in deflationary terms, this is it. It may take a quarter or two to feed through to the official statistics, but we are here now.

Also BNP Pariabs make no mention of quantitative easing that the Bank of England is carrying out. This QE, 10x the size of the US version, has just started this week and will push inflation much higher as the value of money drops due to its over-creation.

There will be technical deflation this week and even this year for a short time, then the odds are inflation and interest rates will pick up quite quickly.

On the employment side, I think they may be close to the truth. The sad fact is we are in for 1970’s Stagflation - that is the real decline in incomes that hurts so much - and is that old stable of Labour Government disaster.

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