Cover of MoneyWeek magazine issue no 522

Beware inflation

28 January 2011 / Issue 522

22 stocks for uncertain times

PLUS:

  • Invest in this little-known emerging market
  • How to be a contrarian investor
  • Arianna Huffington's $350m empire

Excerpt

There really is no Plan B

Do we need a plan B? Pretty much as soon as the most recent GDP results were released, Ed Balls announced that we did. Given the economy might have shrunk by 0.5% (it is unreliable data at this point, so we don’t really know), his advice to George Osborne was predictably firm: “Get a policy for jobs and growth and do it quickly”.

But what would this policy be? If you were to ask anyone in the corporate sector what they need to help them grow, they will tell you it is low interest rates, relatively low corporation tax rates, a competitive currency, low inflation, cash-rich customers and, finally, a commitment to slash a bit of red tape.

The thing is that they’ve already got most of these – which is probably why the manufacturing sector is doing so well. And what they haven’t got isn’t really in poor Osborne’s gift to give. He can’t do anything about Ben Bernanke’s addiction to quantitative easing and hence global commodity prices, for example. He also can’t do much to deal with the crunch on the living standards of the average Briton. Both inflation and real wages in the private sector (which have fallen over the last six years) are out of his control. And it is hardly his fault that so many of us have such huge debts that we are being forced to cut back to survive.

So what are his options for ‘a policy for jobs and growth?’

• Read the full editor’s letter here:
There really is no Plan B

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