S**t my economist says #4

Pedal to the metal

Mervyn King is in the news again. He has raised his prediction for inflation and lowered his prediction for growth.

This seems curious. King has been warning for months now that any rise in interest rates, such as would be needed to head off surging inflation, risks ‘derailing the recovery’. Yet the rail-worthiness of the recovery is clearly doubtful even with King’s ultra low interest rates.

At the very least this ought to throw more dirt on the coffin of the idea that printing money/lowering interest rates can pull you out of recession. It’s a bit like whipping the horses without them being tied to the buggy. Your inflationary nags will gallop into the distance but your real economy buggy will stay right where it is.

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