Getting to grips with inflation

Inflation might be confusing (Peter Lawlor, Perspective May 2022, p 37) because it is often presented as a quantity, when really it is a process, describing the reallocation of money. Prices go up 2%; that’s 2% off your money holdings and 2% less debt someone owes you.

At a constant 2% your savings fall in value by half (rule of 70=70/2%) every 35 years. If inflation spikes at 8% then returns to 2% prices are still 6% above where they would have been. 3 or 4 such spikes in your 45-year working life and your earliest savings have devalued by 75%. That’s before the tax you paid on them. Fiscal drag is another inflation bogeyman, because if tax bands aren’t adjusted upwards as prices and wages rise you suffer tax rises by stealth.

Homeowners are prone to this yet imagine they are better off, when their house valuation rises from 250k to 300k; the next house they buy will now rise from 300k to 360k, and they must find another 10k to make the same move. Not to mention the extra Stamp Duty and mortgage interest and estate agents’ fees they’ll pay. That’s fiscal drag too. Governments correctly fear deflation, because if prices are falling we all put off buying and the economy slows further still.

However they say they like 2% inflation, not 0% (stable prices) because that gradually shifts resources away from uneconomic uses to more productive ones. Under stable prices, the uneconomic uses, e.g. Betamax manufacturers, would hang on then suddenly go bust, with disruptive job losses. Or is it that government, being a debtor and a taxationer, likes to benefit from both fiscal drag and the slow but sure debt-eroding power of sustained low-level inflation?

Dr Hillary J Shaw
De Montfort University,
Leicester

“Batter” caught at mid-wicket

Like Nicholas Lezard (Perspective May 2022, p 88), I was startled to discover that “batter” predates “batsman” by 200 years. But instead of rolling the two sexes into one, can we not celebrate the difference by calling them batsmen and batswomen, at least until they stop playing in separate leagues?

Mike Petty
Murwillumbah, NSW

Real roots of Putin’s war

Unlike Bill Browder, (The Interview, Perspective May 2022, p 71) I believe that Putin’s war in Ukraine started in 1945 at the end of the Second World War when Churchill and Roosevelt made plans to invade Russia. It was believed at that time that Russia was weakened by the war and would be easy pickings. For some reason that I could never fathom, there was a visceral hatred in the West of the Russian people, especially by the many fascist regimes and by the churches, most of which abhorred communism. This then led to the Cold War, followed by NATO threatening Russia over the following decades. Every time Russian troops moved out of a country, NATO forces moved in, including in Germany, Poland, Hungary and the Baltic States.

Derek Turner, Online

Hard work on offer

I read Andrew Wilson’s article with interest (“Hard Work but Worth It”, Perspective May 2022, p 25). As a retired Coopers and Lybrand management consultant, over the past few years I have made suggestions to the Scottish Government surrounding a better approach to economic planning. I’ve been thanked, and told that these approaches have been welcomed, especially as I’ve offered to work on a volunteer basis. Since then, I have heard nothing. One can only construe from that there’s been no change. I have voted SNP in the past and on the basis that they are the “best of a bad lot” but I fear for our future in the absence of any intelligent strategy, and unwillingness to accept help from those willing to give it.

Rodger Lyall,
Online