I have been using the Bank of England’s inflation calculator for the last few years and have found it a useful tool to bring home the point that under a sound money system the currency maintains its value and there is virtually no inflation.
The Bank of England inflation calculator goes as far back as 1209! In my YouTube channel, maneco64, I have focused on the period from 1821 to 1914, which is the period after the Restriction Period (1797 to 1821) which was when the bank of England suspended the gold standard due to the Napoleonic wars.
From 1821 to 1914 Britain went back on the gold standard and according to the BOE/IC inflation averaged -0.1% per annum and one only needed £0.95 in 1914 to buy the same basket of goods that cost £1 in 1821. So for almost 100 years when Britannia ruled the waves the pound actually gained purchasing power.
Up until June last year, which was the last time I referred to the BOE/IC I also checked the inflation rate from 1914 to 2020 and found that it averaged 4.6% per annum during that period and that one needed £118 in 2020 to purchase an equivalent basket of goods worth £1 in 1914! I had also looked at the period from 1997 to 2020 as 1997 was when the Bank of England was granted independence by the Labour government and as a result given a 2% inflation target. In that 23-year period the BOE/IC showed an average of 2.7% inflation per annum which clearly showed the Old Lady had missed its target.
So when I did a recent report for my YouTube channel on the CPI I again referred to the BOE/IC and to my astonishment all the data that I had reported last year since 1914 had been dramatically changed to show much lower inflation. For example, the 1914 to 2020 period now shows an average inflation per annum of 4.2% and one needs £78.53 in 2020 instead of £118 to purchase the equivalent of £1 worth of 1914 goods.
The most shocking change was for the period (1997 to 2020) since the Bank of England was granted independence. Instead of an average annual rate of 2.7%, the BOE/IC now shows a much lower rate of 1.9% which is actually under the 2% target! I leave it to you the reader to make up your mind about the Bank of England’s intention in basically revising history. My take is that along with the government they will now try to make inflation look lower than it actually is. Their excuse will be that they, with the number crunchers at the ONS, have found a “better” way to calculate inflation.
Mario Innecco
My report on YouTube: