Letter:Beware warnings of 'inflationistas'

RE "DOVES and hawks in clash over the economy" by Bill Jamieson (Business, 19 December). A major factor in inflation has been the massive devaluation of the pound against the currencies of trading partners.

But Monetary Policy Committee member Andrew Sentance's "inflationary expectations" is a canard trotted out to justify counter-productive (in every sense) rate rises which would have the effect of draining purchasing power out of the system and transferring still more wealth from the productive working majority to the unproductive investor minority.

Of course investors have inflationary expectations - they wouldn't buy assets otherwise would they? In fact, much of the current price inflation is occurring because with dollar interest rates at zero per cent investors are buying (through exchange traded funds) anything, whether it produces an income or not, and commodity markets - particularly energy markets - have become thoroughly financialised and inflated in price as a result.

Joe Public, on the other hand, does not have inflationary expectations. When Joe thinks he needs a pay rise it's because he looks backwards at how rising prices have hit him already. He does not look forward to the potential future inflation which is what is driving fearful (not greedy) investors into the commodity markets to the great benefit of producers like Opec.

Sentance and the inflationistas are completely wrong. Now that 90 per cent of the population are in debt to the other 10 per cent who own substantially all productive assets, there is no way in which the purchasing power to drive inflation may be generated.

Systemic fiscal reform is urgently needed, and by this I do not mean the completely wrong-headed "Austerian" Coalition policies which are essentially applying leeches to a patient bleeding internally.

Chris Cook, Linlithgow