Last week I hosted an Adam Smith-themed panel show at Edinburgh’s Fringe to which I invited many of MoneyWeek’s favourite economists, strategists and financial historians. Some of you came (thank you!) and will know that while it was a lot of fun (I include clever comedians in the line-up, just in case we all start to take ourselves too seriously) it was also a little depressing. Almost all our trusted sources reckon that equities have a nasty collapse ahead of them (they recommended we hold cash as a least bad option). They also were almost as one on inflation being both transitory and structural – the point being that even if Covid-induced money printing works its way through the system and even if energy prices stop rising, deglobalisation and the ongoing shift in power from capital to labour will mean that any return to the days of 2%-3% annual inflation is decades away. That means rising interest rates and probable recession. Miseries.
Will our experts get it right? Our experts might be wrong. Most of the numbers out this week appear to back up the inflation case. Italy’s inflation rate has reached 8.4% (a 37-year high), Poland’s prices are rising by 16% and in the UK the price of clothing (having reliably fallen for years) is up 7% in the last year. But things turn on a sixpence in our new age of uncertainty – and the consensus view is that inflation will be back to 3.5%-ish by next year.
However, it is worth noting an obvious but not always understood point made by David Smith in The Sunday Times this week: falling inflation does not mean falling prices, just prices that are rising less fast. Even if you expect inflation to fall next year, if you do not find a way to increase your income so that it keeps pace with your expenses, you will still be much poorer in 2023 than you were in 2021.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
We look at some of things you might do to mitigate the problem of rising prices (and falling markets) in the magazine this week. And on energy bills, we have done our best on this but it is, I am afraid, testament to how little anyone has to offer here that our columnist’s advice includes stocking up on large candles as they can “generate a surprising amount of heat.” Oh dear. Slightly more encouraging are the investment pages. That aside, there’s a reason that – according to research from Royal London – over 30% of over 55s are “changing their retirement plans”. The best way to keep your income up in a world in which power is shifting to labour is (unwelcome a thought as it might be) to stay in the labour market. The advice my panellists gave our worried (and mostly recently retired) audience? Get a job.
-
M&S and Tesco among those warning of a £7bn Budget hitSeventy-nine UK retailers have written to Chancellor Rachel Reeves about possible price rises and job cuts - here is what it means
-
How much does it cost to move home under the Labour government?Home-moving costs are rising and could get more expensive once stamp duty thresholds drop in April 2025
-
Do we need central banks, or is it time to privatise money?Analysis Free banking is one alternative to central banks, but would switching to a radical new system be worth the risk?
-
Will turmoil in the Middle East trigger inflation?The risk of an escalating Middle East crisis continues to rise. Markets appear to be dismissing the prospect. Here's how investors can protect themselves.
-
Inflation is tamed at last – when will interest rates fall?UK inflation may have hit the Bank of England target but it's unlikely to stay that way for long. What does that mean for interest rates?
-
Would a food price cap actually work?Analysis The government is discussing plans to cap the prices of essentials. But could this intervention do more harm than good?
-
UK inflation jumps to 10.4% in FebruaryNews The rate of inflation increased in February following two months of falls, increasing pressure on households and the Bank of England ahead of its interest rate meeting tomorrow.
-
When will UK inflation fall back to the BoE’s target?Advice Inflation has started to slow, but it could remain high for some time as underlying pressures build
-
UK inflation slows to 10.5%News Figures from the Office for National Statistics showed the decrease was largely due to falling fuel prices
-
UK inflation falls to 10.7% but cost of living pressures remainNews CPI is down to 10.7% from last month’s 41-year-high of 11.1%
