Martin Flanagan: Eurozone woe is a greater threat than rising inflation

However, the Bank of England is sticking to its guns with its forecast that inflation will fall below its 2 per cent mid‑term target within the next two years.

More worryingly to many than resurgent inflation, however, was Bank governor Sir Mervyn King’s warning in his letter to Chancellor George Osborne explaining the missed target about the dangers to Britain of the eurozone sovereign debt crisis.

Returning to a theme he has explored before, King said the European crisis could cause “further severe stress and dislocation in financial markets”, and that this would have a big impact on Britain’s faltering economic recovery. Data yesterday showing European powerhouse Germany’s economy grew at just 0.1 per cent in the three months to June is frightening in itself.

Even so, while inflation may not be as dramatic an issue as the danger of contagion from the eurozone, it places the BoE in a dilemma when trying to support our economy.

On the one hand, the central bank has virtually no wriggle room on interest rates to provide stimulus as they are already at historic lows of just 0.5 per cent.

Some economists have therefore pressed for a further round of quantitative easing, or printing money in layman‑speak.

On the other hand, persistent inflation means there would be sizeable risk in the BoE pumping more money into the economy to boost stubbornly fragile GDP growth nearly two years after the recession ended.

Meanwhile, chronically above‑target inflation is eroding consumer purchasing power, further undermining the prospects for recovery.

In short, we don’t yet have stagflation – high inflation with economic stagnation. But the most recent data shows the UK is at a sort of unwelcome halfway house towards that unhappy combination.

However, as King warns, things could get much worse if the eurozone debt crisis prompts a major country to default on its loan conditions. If that happened stubbornly high inflation would be the least of our worries. Instead, we would have a crisis in the midst of an austerity programme.

Taxing questions from Buffett for the super rich

WISE words from the “Sage of Omaha”. Legendary investor Warren Buffett has scorned America’s “billionaire‑friendly” taxes, an argument made more cogent because of the US’s gigantic deficit and he himself being a billionaire.

Buffett’s intervention in the US taxation debate comes as he revealed he paid a risible 17 per cent on his income last year of $6.9m (£4.2m).

The equities guru, founder and chief executive of Berkshire Hathaway, says the country’s wealthiest have been mollycoddled long enough.

It is difficult to argue against that, with George W Bush’s former Republican administration almost embarrassingly in the pocket of big business, and President Obama’s Democratic presidency largely unable to redress that balance due to a Republican‑dominated House of Representatives.

More generally, Buffett’s intervention reminds us again that billionaires often have a strong social conscience, perhaps to do with seeing the world more clearly, and fairly, when one has migrated from serious wealth to astounding riches.

Microsoft founder Bill Gates’s philanthropic work is a great example. Speculator George Soros amassed fantastic wealth in the financial markets, one of the hardest‑nosed and self‑centred arenas, and then ploughed an impressive proportion of the proceeds into altruistic projects.

And there was Scotland’s own Andrew Carnegie, who became a fabulously wealthy American industrialist but who famously said: “The man who dies rich dies disgraced.”

Buffett has told America’s wealthiest something they needed to be told, particularly in these renewed dangerous times for the financial system and the world economy. They should shoulder more of the tax burden.