Three economic criteria have dominated the world economy since the crash in 2008: the Central Banks have been mandated to maintain low inflation – not more than 1.5% – , Quantitative Easing and extremely low interest rates. All had one objective in mind: to ease the economy gently and gradually out of depression and to stimulate growth. The result has been continued deflation in consumer prices, moribund inflation while asset prices have surged. This scenario is unsustainable and will have consequences in the near future.
After galloping inflation in the nineteen seventies – the culmination of decades of Keynesian policies – inflation rates ratcheted up. The stimulant effect of the drug benignly known as inflation now presented deleterious effects. Drastic action was called for. Easy money flowed into unsustainable or delinquent assets such as leviathan but unproductive such as British Steel, British Airways and British Coal. No longer was the propping up of bloated uncompetitive entities viable.