Imagine a world where the price of pretty much everything is going up the whole time – and fast. Whether it's a loaf of bread, a pint of beer, the gas bill or dental work, the cost is surging by double-digit amounts each year. At the same time, though, your wages and the interest you get on your savings aren't rising by enough to keep up. The same goes for your house and many of your investments. Welcome to inflationary Britain.
To anyone who lived through the 1970s, this scenario will be all too familiar. During that decade, the price of many things got completely out of control. Aside from making everyday life more uncertain – especially for pensioners and others surviving on fixed incomes – it was a disastrous time for investors. And there are growing fears we could be doomed to repeat that miserable era before too long.
As of early 2010, Britain is only just crawling out of its longest recession on record. Despite the weakness of the economy, inflation in Britain is above where it is in other developed economies. In fact, the governor of the Bank of England may soon be obliged to write a letter to the chancellor explaining why inflation is more than 1 per cent above its target level. Even before the credit crisis – when the economy was growing steadily – inflation seemed more under control than this.
