Hello. It looks like you’re using an ad blocker that may prevent our website from working properly. To receive the best Tortoise experience possible, please make sure any blockers are switched off and refresh the page.

If you have any questions or need help, let us know at memberhelp@tortoisemedia.com

Higher prices, bigger questions

Higher prices, bigger questions

Inflation this decade will force us to face up to challenges we’re not used to. Comparisons with previous high-inflation periods aren’t worth the paper they’re printed on


Let me start with a few parish notices. 

  • We’ve had a skip in our stride this week; Basia Cummings, Matt Russell, Claudia Williams and the team who worked on the Left to Die series of podcasts won gold at the Foreign Press Awards;
  • and the final episode of Sweet Bobby landed. This weekend it’s set to pass one  million downloads, and we hope it shows our intent in developing narrative investigations. It’s what we like to think of as “washing line journalism” – i.e. an investigation that follows the line of one single story upon which you can hang plenty of things, each of which reveal much about the way the world really is. In Sweet Bobby’s case, Alexi Mostrous’ investigation is about one person, the dreams she held and the deceit she suffered, but it’s also about the digital incompetence of the police, the strains between family and community and, if you like, the true metaverse, where technology platforms and human nature meet. 
  • Meanwhile, the live journalism that we believe in – our ThinkIns – kept bringing moments of illumination: we welcomed just some of the 75 Washington Post reporters who had investigated what really happened on 6 January on Capitol Hill into one of our ThinkIns; and, as we published the latest Global AI Index, Stuart Russell, who’s this year’s Reith Lecturer, joined us to help us understand artificial intelligence and try to get a sense of how the world is going to construct AI systems that are, to use his indelible phrase, “provably beneficial”.

So with so much that’s so vivid and exciting and even emotional going on in the Tortoise newsroom in the past week, it’s amazing that what I really want to talk about this week is inflation. But, there you are, I do: I’m sure it says more about me, than it does about us. When I was at the BBC, the newsroom used to complain that I had a soft spot for stories that have no good pictures – intelligent machines and low interest rates. But then these things are the news drivers. And, this week, I’ve been lucky enough to be asking about the politics of price rises to a bunch of really smart people – Mohamed El-Erian now at Queen’s in Cambridge, the economists Vicky Price and Jack Leslie, and Liam Byrne, the Labour MP and former Chief Secretary to the Treasury. 

I’m James Harding and in this week’s Editor’s Voicemail I want to suggest that inflation is going to force all newsrooms to ask some different questions in 2022. Here are five:

1. Are central bankers not as good as they’re cracked up to be? 

Generally, central bankers have had a good run on managing inflation in the last couple of decades. And why wouldn’t they? Globalisation, migration and hundreds of millions of new people joining the world’s labour market has meant there’s been a constant downward pressure on prices and wages. But inflation in the US is now 6.2 per cent; the Bank of England is forecasting 5 per cent next year. And so, might we soon come to think that President Joe Biden’s decision last month to return Jay Powell to a second term as Chair of the US Federal Reserve was a mistake? Are we going to find ourselves quickly losing faith not just in America’s central bank, but others too? Why? Because as inflation sets in, as workers demand higher wages to cope with rising prices, people will start to point at the economists who missed the warning signs, who kept insisting that rising prices were a post-pandemic anomaly and would only be “transitory”. Likewise, people may well start to say that central banks have done too little too late, that calls to start scaling back the central banks’ liquidity programmes – AKA QE or quantitative easing – went unheeded for too long and the central banks left themselves powerless to do anything about inflation. Which, after all, is their core task. 

2. Are the tables being turned on pensioners?

A prominent Conservative once said to me that there’s a trio that helps the Tories win elections: business, Fleet Street and old people. The most important being that “grey vote”. Perhaps no surprise then that, for a decade, Conservative governments have defended public policies and spending that favour old people over younger working people. The state pension triple lock used to ensure that the pension would rise by whichever was the highest of inflation, earnings growth or 2.5 per cent each year. But the UK’s Government, now cash-strapped after spending so much in response to Covid, has changed that for April of next year: instead of older people getting a pension increase of about 8 per cent in line with wage rises, the pension will go up by just over 3 per cent, which was September’s inflation rate. Given that prices are predicted to be rising at 5 per cent in 2022 – and energy costs may in fact be higher – many pensioners are being served up a cut in real living standards. And so if that grey vote’s in play, will Keir Starmer’s Labour Party, unlike Jeremy Corbyn’s, switch from courting the young vote to the old? 

3. Will the modern dictators feel the pinch?

Anyone in the Chinese Communist Party with a reasonably long memory is paranoid about inflation: soaring prices were the backdrop to the Tiananmen Square protests of 1989. And it’s no coincidence that two decades of generally low inflation and low interest rates have, the world over, been good for the Strong Men: Xi Jinping in China, Vladimir Putin in Russia, Recep Tayipp Erdogan in Turkey. But in China today, producer prices – i.e. the cost of goods coming out of factories – are surging, even if that hasn’t yet been passed on to consumers. In Russia, inflation is running away at 8 per cent, double the central bank target. And in Turkey it’s 21 per cent, the currency’s plunging, interest rates are yo-yoing and the economy is a mess. When living costs soar, governments struggle to pay salaries or deliver services, the politics and the political dynamics change – that’s true even for autocrats. 

4. Are people going to start to find climate change expensive?

There’s understandable suspicion of anyone wanting to throw sand into the gears of climate activism, but the direct and indirect costs of re-engineering human society to save ourselves from global warming are starting to start to bite. And it’s not just the prices paid by you and me for energy, insulation and transport. Huge government programmes – amplified by even larger flows of green money from banks and funds – will surely be inflationary. And so for progressives cheering for Cop but worrying about how inflation is regressive – i.e. how disproportionately it affects poorer people with higher prices – well, the environmental and the economic priorities are going to clash. 

5. Where do prices crash and where do markets crack when the “everything rally” ends? 

There’s been a lot of money about and for a reason: the central banks have been printing it. The US Federal Reserve, for example, has had the greenback photocopier cranking out about $120 billion a month. And as more money has flushed into the markets, it has gone everywhere and has led to what people call the “everything rally” – i.e. house prices soar, governments borrow cheaply, share prices are generally up, fancy assets like art command higher prices, the super rich get super-richer and tech stocks and enterprise software businesses are valued sky high. But more and more countries are now scaling back their asset purchase scheme: they’re not printing money as they used to. In fact, the US is reducing by $15 billion a month to zero its asset purchase scheme, so it’ll be, as I said, zero next summer. But where will investors then move their money – and they surely will move their money – when there’s less new money sloshing into the markets? 

The politics of inflation are different to the times we’ve been used to. They’re different, too, to what came before. The economic analogies don’t work. It’s not the 1930s. It’s not the 1970s. It’s the 2020s. And I suspect we’re going to be asking some new questions. 

Have a very good weekend. 

Photograph Kevin Frayer/Getty Images