Why today's austerity could lead to tomorrow's inflation

The coalition's austerity programme is a good idea. But it's not a miracle cure. And as the economy weakens, spending cuts will get the blame. That could scare the government into restarting the printing presses. And then inflation could really take off, says John Stepek.

The FTSE 100 tanked again yesterday. It fell by more than 100 points. It's now at its lowest level since September.

As we noted yesterday, the basic problem for markets now is that the recovery is running out of steam. Without the government stimulus there to prop it up, data in sectors from manufacturing to housing is disappointing investors who'd hoped that the private sector could get up and stand on its own two feet.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.