London Prices Falling Down, Falling Down: What Inflation?

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London Prices Falling Down, Falling Down: What Inflation?
EWI's European Financial Forecast has a mountain of evidence proving that the looming threat in Europe is not inflation.

By Nico Isaac
Tue, 17 Apr 2012 15:15:00 ET

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Despite what you may have heard about ever-higher prices on High Street -- London's equivalent of the shopping nexus Rodeo Drive -- the real numbers do NOT lie:

Since topping in late 2011, Britain's Retail Price Index has since fallen to its lowest level in two years.
AND -- Since peaking at 5.2% in September 2011, Britain's Consumer Price Index has dropped to a 14-month low of 3.5%.

Yet, the growing legion of Europe's die-hard inflationists remains undeterred -- if not reinvigorated -- in their claim for long-term RISING prices. On this, the following slew of news items from recent weeks captures the unwavering commitment to the inflation camp:

"Bank of England Warns Of Higher Inflation" (TVNZ)

"British Consumers Face A Perfect Storm of Rising Inflation, Soaring Unemployment, and A Slowing Economy." (The Telegraph)

And, last but certainly not least -- an April 16 news source issues this dire warning: The "prospect of a long dry 2012 in London has revived memories of a notorious drought in the mid 1970s that caused food prices to surge." (Wall Street Journal)

So, it's easier for economists to imagine a repeat of London's 1975-6 food crisis -- when the overall rate of inflation was up to eight times what it is today at 24.2% (1975) and 16.5% (1976) respectively, and the cost of carrots equaled a prime cut of sirloin --

-- Than it is to consider the possibility of the alternate scenario: A continued downward trajectory in prices.

The question is, why? Well, according to our April 2012 European Financial Forecast, the answer is simple: Denial about falling prices "contradicts the pervasive belief that central banks can manipulate price levels using monetary policy."

But, as the European Financial Forecast reveals, the Bank of England's "three-year campaign of money printing" and interest rate-slashing has failed to reinflate the credit bubble. And, page 7 of the April publication has this chilling chart of the broadest measure Britain's money supply, M4, AND the year-over-year change in consumer prices since 2000 to prove it:

As the majority of mainstream eyes continue to focus on the "threat of inflation," one famous idiom comes to mind: The bullet that hits you is the one you don't see coming.

Right now, the April European Financial Forecast presents a "mountain of evidence" against an inflationary scenario in London, and Europe in general -- AND reveals what kind of economic condition is far more likely to emerge in the months and years ahead. Get the full story today via a risk-free subscription.

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Tags: Bank of England, central banks, europe, european markets, inflation, Interest Rates, monetary policy

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