Interest rates became the way to control inflation in the ‘80s. They wouldn’t have worked before because a) far fewer people had mortgages and b) the unions were strong enough to push up wages. Maggie changed all that, persuading us that we all should all be homeowners and then killing off the unions. The Gov. of the Bank of England this morning said employer’s should ‘show restraint with pay rises’, echoing the words of John Major, when he was chancellor, ‘if it isn’t hurting, it isn’t working’. Trouble is, making it more difficult to afford food and fuel isn’t likely to make either cheaper. It will hurt like hell. But it won’t work.
“Cut interest rates to prevent recession, says Institute of Economic Affairs’ SMPC”
The ‘lag’, ‘trailing leg’ or ‘long wake’ of any economic measure means that its effects are often felt long after the problem it was supposed to solve has disappeared. 2010’s ‘balancing the books within the space of one parliament’ (that went well, didn’t it?), austerity to you and me, is one example.
