Cynicus Economicus has written an important blog posting about inflation, deflation and the Bank of England.
In his own words:
Here is the central problem for the Bank of England. The only way to justify [printing money] is through the fear of deflation, but the only measure that is showing deflation is the RPI. The bank’s remit does not extend to RPI so that it can not use the RPI as an excuse to print money. As such, they subtly conflated the measures, planted the idea of deflation in the mind of the media, and ‘lo and behold’, deflation has appeared.
As readers of this blog will know, I have for some time been a deflation sceptic, so it should be no big surprise I tend to agree with Cynicus.
It is interesting if the Bank of England will manage to create deflation themselves while claiming they’re doing the opposite.