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As soon as the money supply was checked house prices had to fall
and there had to be a recession. If property prices collapse
so will the UK banking sector.

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9. Pension values

Inflation is a very important source of revenue for every Government which is why it can never be stopped. Every government is part of an enormous scheme to remove wealth from those who were careful and saved wealth during their working life so that it can be given to those who are unproductive and profligate, as well as to support the apparatus of the State. In the last twenty years, the older members of society who saved money for their old age have watched the potential of their savings to yield a return diminishing year on year. The reason for this is that the State has to quarry every potential source of wealth so that it can keep up with an ever increasing level of expenditure. Since Labour came to office the level of obvious taxation has risen with more and more taxes being introduced but even this was not enough. The only way to keep 'growth' going was to encourage unrestricted borrowing so that a large quantity of money could be printed. This made it possible for the State to extract more wealth to maintain its infrastructure and to permit the politicians to meet their obligations to the electorate.

Pension funds will be badly mauled by the time that the current financial problems resolve themselves. Companies who thought that they had almost managed to correct the shortfall in their pension funds will find that they are further away from their objective than they were 2 years ago. In the middle of a recession they will not be able to correct their shortfall and the Government will be faced with the decision of either setting aside the regulations on company pension schemes or destroying the businesses and their funds. Private individuals who thought that they would enjoy a comfortable retirement are finding that their funds have been debased and their return all but eliminated. However, they can be assured that their loss has been and is for the greater good. A combination of high inflation and rapidly reducing returns means that many people will now find that that they cannot survive without means tested benefits. Of course, these cannot be obtained until the individual has spent most of his or her savings because the Government sets thresholds before it will assist any individual. As a result, the State will now be able to benefit from these peoples thrift as they spend their capital and put their money into circulation. Yet again, the British Government will be able to obtain money from the past by transferring a liability to the future.

Inflation always requires even more inflationary expansion just to support old debts. The same applies when stripping the wealth out of society. Each year the British Government tries to find new ways to release more money into circulation. There is nothing new in this. When Margaret Thatcher's Conservative Government allowed companies to remove the surplus from their pension funds it allowed money to be released into the economy. When students now take out loans to fund their study it releases money into circulation. When the current Labour administration took office it raided pension funds because it needed the money to enable it to fulfil its election promises. Increasing the rate of inflation has just been another way of maintaining the spending potential of the State. Unfortunately, peoples savings and pension funds are the easiest thing for the State to purloin when it needs additional funds.

Published: January 2009