It’s time to dip into the reader mailbag. And I must say, I’m disappointed. I used to get the most wonderful hate mail. The words “I dare you to publish this!” guaranteed a spot in a line-up like the one below. But, as you’ll see, Fortune & Freedom subscribers are a thoughtful lot instead.

The first email is an awkward one. Given the magic money tree really does exist in the form of Quantitative Easing (QE), what is the constraint on using it?

I have had this question for some time and I would really appreciate your (and if possible Nigel’s) insight on this.

What are the limits of QE?

Why is the recurring question, as you put it, will central bankers bankrupt their masters or let inflation loose?

They don’t have to. What’s stopping the Fed or the ECB from raising interest rates while buying up government bonds to keeps yields at manageable levels.

Furthermore, what’s to stop them from creating a total bureaucratic utopia. They can choke businesses they don’t like in the name of ‘inflation’ and promote through QE businesses that are ”critical to the safety of the planet”.

Ten years ago this would have been ridiculous. But as a dual US, UK and Australian citizen I have witnessed first hand how FATCA has perverted personal financial liberty. If they can get away with that what is stopping the PhDs in social sciences from controlling the economy in the way they see fit?

Kind regards


The idea of QE and higher interest rates seemed absurd not so long ago. But it’s worth noting that during the UK bond crash, the Bank of England did indeed resort to buying bonds while raising interest rates – a bizarre combination.

So, it really does seem as if there are no limits or taboos any more. The question is why we were so adamant in imposing those limits on ourselves not so long ago.

Here’s my response to Y.B.’s question about the limits to QE and using it to control society…

Hi Y,

One answer is simply inflation. Pumping endless money in devalues that money. At some point, the cure is worse than the disease.

I’d say it’s a question of productivity. The more the government is involved in the economy, the worse productivity gets and we end up with less stuff. By which I mean we starve and freeze. That’s what has happened as a result of lockdowns. QE is the financing of government deficits, enabling this vast government overreach to occur.

This is an amusing take on the idea of productivity decline which you’ll find familiar from FATCA:

QE moves yields, so that and raising rates could come into conflict. They’re two sides of the same coin.

Russell Napier is the person you want to listen to on this. Financial Repression is his take. Deliberately doing what you mention.


Y.B.’s point is that central banks could tighten monetary policy and try to control inflation in other ways, while continuing QE. Why would they do this? Because QE funds the government and other parts of the economy. It removes the limit on government control. The leech becomes the host.

Such a policy of financing government may seem mad, but it’s a question of alternatives. Letting the government go bust is a less bad alternative than funding it via QE. The government has called the central bankers’ bluff by getting into such a bad financial position that only more QE can save it.

That’s how these things unfold into inflationary nightmares and why governments come up with bizarre economic policies rather than cutting QE.

But all this is a slow process, with many deflationary shocks along the way too.

This reader responded to my request for anecdotes from the 1970s…


I am just responding to your request for time travellers to report back to you.

But the fact is there is no need to time travel as the past is as always forgotten so quickly, particularly by our politicians and financial leaders!

For example: Earlier today I saw a BBC televised meeting of our Grand Governor of the Bank of England reported back to the Treasury Select Committee and when asked about inflation (presently 11.1%) he blamed three factors from recent times, all of which were “supply shocks” namely:

  1. Recovery from Covid
  1. The Russia War effecting both energy & food supplies
  1. The current tightness in the labour market (blaming Brexit?) and referencing Johnathan Haskel and quoting that the UK is the only nation suffering in this way.

Hmm… it would seem our Governor has forgotten about the after effects of all those years of Quantitative Easing!  He didn’t even mention it!

Perhaps thinking again; time travel may benefit the Banks Governor to travel back in time to remind him of the actual source of today’s inflationary issues?


The Chief Economist of the Bank of England has admitted that QE may have contributed to inflation. But it’s fascinating that we can’t agree on such basics, isn’t it? We don’t agree on what caused inflation, where it came from or how to deal with it.

One of the reasons is that the definition of inflation only addresses the symptom – higher prices. If doctors diagnosed symptoms instead of the diseases that cause them, we’d be in trouble too. Indeed, the symptoms would likely just keep coming back, which suggests where this inflation mess might be headed too.

I remain equally unconvinced by all the arguments about inflation. I’m not even sure that the rising prices that we’ve seen have really been inflation at all. They could just be a shock to supply and demand, not the devaluation of money. Or they could be the outbreak of monetisation of debt – the classic cause of inflation.

Inflation driven by supply shocks ends when prices rise and then either fall or stabilise at a higher level. Inflation measures a rate of change: that means that high but stable prices would eventually amount to low inflation.

But if our inflation is monetary, then it could continue for much longer as money is steadily devalued over time.

The question is whether the problem lies in the supply and demand for goods and services, or the supply and demand for money.

A.R. reckons we keep comparing our present predicament to the wrong decade. It’s not the 1970s we should be worried about, as Nigel Farage and I often discuss in our videos…

Good stuff to listen to after a busy week running a small business in post pandemic Britain.

However I am still surprised that the early 90s are not referenced when it comes to spotting similarities with today’s climate.

I have said for many months that this has the 90s written all over it: interest rates rising, SMEs failing and house prices crashing.

There are of course fundamental differences now- namely the eye-watering debt levels that consumers, businesses and of course our country are weighed down with.

This time round it will be the buy-to-let sector that kickstarts the housing crash, rather than the withdrawal of individual mortgage interest rates relief which sent couples into a tailspin of panic in the late ’80’s and propelled a surge in buying.

Landlords are far less emotionally tied to their properties and we can see that they are already starting to sell them off. It won’t be long before estate agents will have to finally admit publicly that the ‘gentle landing’ is not happening. Their decades’ long gravy train has finally hit the buffers.


For decades, property has been the central bankers’ tool for accelerating economic growth in the English-speaking world. That’s because it is the most interest rate sensitive sector. And central banks use interest rates to boost the economy when it slows.

But when we get inflation, then property should be at the forefront of trying to slow the economy too. That’s a shift not seen for a long time in the UK, but even longer elsewhere, because of the UK’s experience of leaving the Exchange Rate Mechanism on 16 September 1992. Well, it was actually the attempt to stay in the ERM which dished out the impossible interest rates in the 1990s.

There are a few important differences as A.R. mentioned. Some are good and some bad for property.

Firstly, inflation remains miles ahead of interest rates. This is a great tailwind for property because it makes debt cheap, even if it is more expensive than it was.

Secondly, rents are surging too.

Thirdly, the supply of housing is being artificially constrained by the government, making house prices a political policy tool.

And lastly, house prices began the current downturn off levels that were artificially high thanks to the pandemic. A return to normal levels is already a big drop for those who bought recently. I’m not sure whether this gives property some sort of downward momentum, with an overcorrection on the downside.

Oh, and don’t forget declining demographics, which can’t be good for property.

K.T. reminds us to be on the lookout for a particular version of shrinkflation:

Hi Nickolai,

One consequence of inflation that no one seems to be talking about is the reduction in the quality of goods and services. The “price” of something is only half the story, the quality that you get for that price is the other half of the equation.

If input costs are high and companies can’t borrow because interest rates are high, then companies only have two options, cut staff and/or wages (which has been discussed) or reduce quality.

Is anyone keeping an eye on this? Does the CPI figure take this into account? Is anyone checking to see if our yogurt is more watery, if a tin of beans has less beans, if our loaf of bread is smaller? I’m sure that if inflation comes down and our morning cup of coffee comes down with it, that governments and central banks will pat themselves on the back and consider the situation resolved, but I’m not going to be happy if my morning cup of coffee is half the size it used to be and I have to stand in line twice as long to get it!

Anyway, keep up the good work.

Kind regards


I haven’t found any sawdust in my bread yet, but there are occasional pictures on social media of boxes at the supermarket changing size. Of course, such changes are accounted for in inflation statistics. But the particular version K.T. points out are sometimes not included because they can be too subtle to measure.

But it works both ways. A friend recalls his first job at a grocery store in Scotland many decades ago. His father came in to do the grocery shopping and made my friend cut off the broccoli’s stalk before weighing it…

Inflation is as much an opportunity as a threat. But it’ll be difficult to adjust to. If it lasts…

Nick Hubble
Editor, Fortune & Freedom