And it may come sooner than we think. This week China’s Dagong credit rating agency downgraded the UK’s credit rating from AA- to A+, putting us on a par with Chile, Belgium and the US, which Dagong downgraded in November. (If I was Chile, I’d be rather miffed.) And sterling is beginning to slide once again.
The easiest route out of this debt crisis has been for governments and central banks to devalue their money and they will continue to do so, as long as markets and people let them.
We have 4.5% inflation, officially, although we all know it’s much higher than that. This time last year the Bank of England said it would be 1.75%. They say it will fall next year. How do they know? Why should we give them any credence at all, when they keep getting it wrong?
Why are they not putting up rates? Because they have decided that debtors can’t take it. They’d sooner devalue the currency. It’s the path of least resistance.