Debasing the currency... our pensions will be worthless in years to come

Graph And Coins

Here's the latest from our Highly Placed Professional.

Archbishop Justin Welby has weighed into the debate about the effects of sustained monetary stimulus and low interest rates, pointing out that the value of money is being eroded, as it is diluted, while at the same time the price of goods and services rise.

His point is naturally made with the less fortunate members of society in mind, as he ministers to a very large parish. (I always hate it when my fellow citizens are described in the papers as 'the poor', though,  because true poverty is something very different to the way of life of your average, shall we say, 'less well-off' Brit). But I do agree with Welby that the continuation of the current game being played by the UK government and the Bank of England will have exactly the effect he describes.

We are caught between several vices of the large metal type. We enjoy - but rely on - low interest rates as the national debt is so high that to raise rates now would be to increase our interest costs over tipping point. 

Many families already use up almost half their take-home pay making their monthly mortgage obligation (and this is with rates pretty much as low as they have ever been). An increase in interest rates, therefore, will have a pretty dramatic impact on many.

We are also locked into other stimulus measures such as Quantitative Easing where we buy back our own government bonds. Why do we do this ? Who are we kidding ? Well, it's an easy way to get the money printing presses going without the general public realising what's going on. The effect is the same as if we did simply print money. We dilute the money in circulation and add to the inflation in the system.

Of course everyone is too busy trying to live their lives to complain. So it falls to establishment leaders like the Archbishop of Canterbury to warn us of the pernicious effects of this policy - a policy we cannot wean ourselves off.

Make no mistake, our pensions will be worthless in years to come. We are simply putting off the day of reckoning in any way we can, just as Henry VIII did when he mixed base metals into the coinage. You will have to be a seriously rich punter to avoid the perils of a debased pound. You don't believe me ? Just look at how sterling is collapsing against other currencies. Want further financial advice ? Listen to the Archbishop!

image: © teegardin

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