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Monday, July 23, 2007

Inflation Figures Fudged

Mervyn King, the Governor of the Bank of England, has finally has admitted (albeit in a coded manner) that the inflation figures on which UK economic policy is based are fudged.

King stated that he was "surprised" that rising house prices are not included in the official inflation figures.

Given that the house price figures are included in the Retail Price Index (RPI) but that Gordon Brown, during his heady days as Chancellor, changed the official inflation index on which policy is based to the Consumer Price Index (CPI) which excludes house price inflation, I am surprised at King's "surprise".

Since 1997 King and the Monetary Policy Committee at the Bank of England has had the task of keeping the CPI around a target of 2%.

Currently the CPI stands at 2.4%, but the RPI stands at 4.4%.

There you have it, interest rates are being set on the basis of erroneous figures. This fudge has caused the credit boom of the past decade, which has lead to the house price boom which in turn has lead to the debt crisis that is facing Britain today.

The architect?

None other than our new Prime Minister Gordown Brown.

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