Inflation is out of control and will continue to hit hard-working Brits, but there’s a way we can fix it – ask Uncle Sam

IT’s starting to feel a lot like the 1970’s.

Here we are with unions blackmailing the government and blocking the nation with a totally unjustified strike.

3

3

On top of that, we have terrible inflation – now at a staggering 9.1 percent – and rising cost of living.

And then there are the tax increases. It’s all awfully familiar to anyone old enough to remember the seventies.

But then there was an answer. After stagnation and much more came the 1980s.

In the 1980’s, the leadership of Margaret Thatcher here and Ronald Reagan in the US pulled the two nations out of the economic and political doldrums we were in.

The Labor Party in Britain and the Democrat Party in America had ruined their respective economies.

It seemed to many that things would go on like this forever.

The reason they didn’t is a reminder that all it takes to transform a country is a few remarkable people.

But who does that today?

Where are our Thatchers or Reagan for the 2020s?

In America, Joe Biden likes to say that Vladimir Putin blames the invasion of Ukraine for the rising cost of living and the tripling of gas prices.

Certainly Mad Vlad didn’t help, but America’s economic woes are Biden’s own making – the fault of a government that constantly throws money it doesn’t have on problems that can’t be stabbed away.

It’s a similar story in the UK. It often seems as if the government does not know what to do with the great challenges.

Every rule blocked

The Labor Party and others like to say they want to talk about the rising cost of living. But I’m not sure about that.

Because so far they haven’t had anything serious to say about it.

It’s a shame, because someone has to present this government with another way. It is not clear that they will find it themselves.

But as luck would have it, the answer lies right in front of them. You just have to go back to the last time we went through something like this.

The answer to the 1970s problem was what became known as Reagonomics.

It was a set of policies introduced by President Reagan that defied almost every rule of the time.

Until 1981, most economists thought the best way to control inflation was to reduce the money supply.

But some bright minds noticed something important. What was that money wasn’t really under government control.

People – investors – were in control of the money, and government action had to encourage them to move in the best possible direction.

So, for example, no matter how much money the government threw around, it was wasted because the American people used it to buy things that didn’t really help the economy.

What Reagan’s advisors saw was that if the government had tighter control over money and also lowered taxes, much of that money would be put into more useful places.

Reaganomics

For example, Americans would start investing in the stock market as millions were doing. As soon as they saw that their investments would really pay off, they put their money into stocks.

It had the desired effect. For a decade, the stock market was deadlocked and immobile. Suddenly it took off – and it roared on for the next two decades.

Unemployment fell, interest rates fell, and inflation disappeared for decades.

The realization of Reagan and his team was that the economy as a whole would benefit if people were encouraged to use their money wisely.

3

The money supply is not the deciding factor. What matters is what people do with the money they have.

If they see investment opportunities, they will invest and the economy will benefit.

If they don’t see such opportunities, then there will be the stagnation that this country, among others, is now staring at.

We are confronted with rising prices everywhere. In fact, we are all getting poorer month by month.

Concerns are beginning to escalate and people are tightening their belts.

And that ends up compounding the problem.

Since investment opportunities look like a thing of the past, they are a thing of the past. The doldrums set in and stagnation spread.

And that’s a situation that can paralyze a country for decades.
Here at home we had our own Reagonomics practice.

In the 1980s, the great reform Chancellor Nigel Lawson ensured that taxes fell for the first time in years.

And as a result, tax revenue increased. Opportunities were there again. And people of all walks of life benefited from it.

Will we learn the lessons? I do not know.

But if the government wants to see a brighter future, it should first take the time to look back – and learn.