Gordon’s Golden Rule gets Stretched

Time to go back onto other taxes, one of my favourite taxes, basically because no-one understands that it is a tax, reared it’s ugly head. I am, of course talking about Inflation. In this case, the word was not even mentioned, yet it is the obvious net effect of future government policy. As Gordon and Alistair employ an army of skivvies to stretch, mangle and twist the “golden rule” for government borrowing, statements have already been made that the overpressed British taxpayer will not be expected to dip any deeper into his or her pockets. Net outcome therefore is that

a) The government intends to borrow money by issuing more government bonds

and

b) These guys have no idea how basic economics work. The resultant inflation and pound devaluation will do more damage to people’s pockets. Although a cynic might argue they know that, but hope it won’t happen until after the next general election.

Any attempt to issue more sterling denominated bonds means that more Pounds will be created. The government is obviously the one who gets its hands on these new pounds and feeds them into the economy through it’s own spending. After that, these pounds continue to circulate, diluting the purchasing power of the pounds already in existence. Overall, you can see why this is a good plan for Brown and Darling, although there has never been a clearer signal of why you should pull your money almost totally out of Pounds Sterling. The only solution therefore, considering the currency alternatives are Euros (20% dearer than what they cost last year), Dollars (could work out short-term, but the US has the same longer-term problems as us) or Gold and silver.

You can probably guess what I’ll be choosing, especially given I'm the author of How to Invest in Gold and Silver.