The Bank of England’s PR nightmare continues: Huw Pill, its chief economist, commented on a Columbia University podcast yesterday that Britain’s persistent inflation is the result of a “reluctance to accept that we’re all worse off, and we all have to take our share”, and that “someone needs to accept that they’re worse off and stop trying to maintain their real spending power”.
Pill’s mistake was to pretend not to know who that “someone” was. He incorrectly characterised inflation as a “pass-the-parcel game” in which economic actors demand to be fully recompensed for higher costs at each stage, and no one shoulders the cost. Birthday party aficionados, however, will know that in pass-the-parcel the item being passed on gets smaller. In the current inflation cycle, companies are raising prices around twice as fast as workers are raising their wages, so the cost being passed on is getting larger. The real spending power of workers is clearly not being maintained, while the profit margins of companies are.
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