Inflation shock exclusive

Exclusive! You heard it here first. Inflation could hit 500% next year.

The prediction comes from Daniel Ben-Ami, the editor of Fund Strategy, and is revealed here for the first time. He also predicts several other shocking possibilities: the earth could be destroyed by an asteroid, the pope could convert to Islam and — although this is pushing it — Tottenham could win the Champions League.

These predictions may seem ludicrous but no more so than the recent pronouncements on inflation and the excessively bloated coverage given to them in the media.

“Unless someone stakes their life, or at least their house, on the outcome they should not be taken seriously”

Any inflation forecasts are essentially guesswork. Unless someone stakes their life, or at least their house, on the outcome they should not be taken seriously.

This is even more true when financial seers predict inflation “could” reach a particular figure. The earth could indeed be destroyed by an asteroid next year but it is unlikely and in any case there is nothing we could do about it.

In addition, such forecasts grossly overestimate the importance of inflation. The self-proclaimed prophets do not seem to realise that the rate of change of consumer prices says little about the health of an economy. (article continues below)

At most inflation can be an indicator of more fundamental factors. For instance, if prices plummet that could signal a new Great Depression as economic demand plummets. In contrast, it could also be a manifestation of strong economic growth as productivity surges.

Those who are genuinely interested in the economy would do far better to look at factors such as corporate profits, productivity, capital investment and so on. From there it is possible to start building a picture of what is really happening rather than engaging in idle speculation.

So stop obsessing over what could happen and reject the narrow preoccupation with inflation. Otherwise I could get really angry. Maybe.