Okay. Welcome back to Gary's Economics.

Today

we are going to talk about falling

inflation and the terrible economics media.

Okay.

So we're going to do something

a little bit interesting this week

which is, we are filming this on Monday

the 13th of May.

We're going to put it out this Sunday,

which will be the 19th of May.

And so if you're watching this on the Sunday,

this coming Wednesday, which will be the 22nd of May,

UK inflation data will come out

and I can tell you now

with a very high degree of confidence

that it will be reported in all the media, UK

inflation is falling

and we're going to talk today

about how I can tell you that with so much confidence.

We're going to explain to you how I know in advance

that UK inflation will fall on Wednesday,

and we're going to explain to you

how you can do that yourself.

The reason is because

the economic number,

which is constantly used in the media for inflation,

is one year CPI.

CPI stands for consumer price inflation

or consumer price index.

And when we look into that one year we have 12 months.

And the inflation in the last year

is basically the sum of the last 12 months.

So I'm going to show you now

the last 12 individual months of inflation.

So I'll bring them up here.

So these are the last 12 months of inflation.

You can see April ‘23 was 1.2%.

May 2023 was 0.7%.

And then we've got a lot of numbers.

Some of them are negative, some of them are positive,

but they're a lot closer to zero.

This is the last 12 months of inflation.

At every point,

yearly inflation is the last 12 months of inflation.

When a new number comes out.

So the number which is coming out

this week is the April 2024 inflation.

Then we will stop counting the April 2023 inflation.

So that very high bar the top will drop out.

And we'll get a new bar coming in.

So I think this is the first thing

which you need to understand to figure out how we can

predict changes in yearly inflation,

which is that yearly

inflation is always the sum of the last 12 months

of monthly inflation.

Now this Wednesday, we'll get the April figure.

We don't know at this point

what the April 2024 figure will be.

But we do know what the April 2023 number is,

which will be dropping out of the calculation.

That is this number here,

which is 1.2%, which is really high,

1.2% monthly inflation.

If you want to turn it into a yearly inflation

you have to times it by 12,

or actually you have to do a little bit more than that,

but it works out at approximately

14-15% yearly inflation.

So last April inflation was really, really high.

When this April's number comes out on Wednesday,

we will stop counting last April's number.

So straight away,

unless the April number for this year

is really, really high

because the number

which we're no longer counting was really, really high,

we know straight away that the yearly number will fall.

That is how I can tell you

with a great degree of confidence now,

when the number comes out on Wednesday,

yearly inflation will officially fall

and all of the media will say

fantastic, inflation is falling

and all the conservative

politicians will be super happy.

Now, when you think about it,

this is in a way kind of stupid.

If we know already now

that inflation is going to fall on Wednesday,

why should we be happy?

Why should we celebrate when Wednesday happens?

If Wednesday was important

new information, then we should be able to...

We shouldn’t have to wait until Wednesday to be happy,

but we already know it's going to,

it's going to be good.

The reason is because, quite simply,

the period of high inflation

is no longer in the most recent year

as of this Wednesday.

So really, it's a technical thing, right?

We only look at the last 12 months.

And increasingly

if you have, as we had a one of big spike in inflation

as time passes,

that massive inflation is increasingly no longer in

the most recent year.

So as the inflation falls out of the last year,

we see our inflation normalise.

To celebrate that is essentially celebrating

the passage of time.

We're simply celebrating

the fact that the mass inflation we had

is no longer the most recent 12 months.

So a few things to clear up here. Right.

As inflation is falling towards target.

First thing to make really clear...

I’ve said it before

but it’s important that you realise,

inflation falling down closer to 2%

does not mean that prices are coming back down.

Inflation is the rate of increase of prices.

So even though inflation will come down

closer to 2% next month,

that doesn't mean that prices are normalising.

It simply means that they're not

going up that quickly anymore.

Your life will not get better.

Your groceries will not get cheaper.

It simply means they're no longer

going up at a rapid rate.

Second question and we've covered this before.

Should the conservative government, should Rishi

Sunak and Jeremy Hunt be given credit for this?

Now,

those of you who've been watching the channel

for a while will remember in January 2023,

I put out a video about Rishi Sunak’s inflation pledge.

The reason I did that was this.

So if I show you the longer term

monthly inflation, so here

you see five years of monthly inflation.

I put that video in January ‘23, which is about here.

You could already see at this point

that we'd moved past the period of very high inflation,

and over time,

the very high months of inflation

would gradually fall out of the statistics.

So at the beginning of Jan ’23,

it was already very clear

to basically everyone in economics

that inflation was going to start falling,

probably pretty quickly.

At least the official yearly figure of inflation.

And I considered at the time doing a video

predicting inflation would fall

because I thought, well, we can make a prediction.

It would definitely be right.

It's an easy prediction to make,

you kind of get some credibility

for predicting a thing in advance.

And I chose in the end not to make that video

because I felt that it was quite

cheap of me to try to claim credit

for predicting something,

which basically at the time, everybody

in economics knew would happen.

So I decided not to make the video

predicting inflation would fall.

And then Rishi Sunak came out and said,

I will pledge to reduce inflation

over the coming year,

which I thought was quite hilarious because,

you know, I decided not to make a prediction

inflation would fall

because it was so obvious that it would fall.

And then Rishi Sunak came out

and not only did he predicted inflation would fall,

he claimed credit in advance

for the fact that inflation would fall,

despite the fact that it was very obvious at the time

that inflation was going to fall

quite simply because over time

the inflation would no longer be counted

in the previous year.

It's a little bit

like if Rishi Sunak punched you in the face

and then saw you with a big black eye

and said,

I will pledge to reduce the swelling in your eye

over the next

two weeks, because this is

what happens with the passage of time

and the passage of time, things that happened

recently stopped being in the last year,

and swellings go down over time.

This is simply claiming

credit for things that happen over time.

But I don't want to dwell on this too much,

because the point I want to make here is largely

that the reporting of economic events

is often misleading.

You will be told on Wednesday

inflation has fallen,

whereas in reality

that inflation fall happened one year ago.

Very little new information

will be received on Wednesday, most likely.

It could be we get an unusually high or low print.

Probably the monthly print will be about 0.5 0.6.

And the reason that inflation

will fall on

Wednesday is not because of anything

that happened on Wednesday.

It's because of something that happened last April.

And I think the lesson that we can learn from

this is not to get lost

in the political football of economic reporting.

On this Wednesday, you will be told

inflation is falling.

The conservatives will take credit for it.

Labour will say, well, if you take credit for the fall,

then you should take blame for the rise.

And actually, the reality is

both of these stories are in a way dishonest.

The fact that inflation has fallen is not

thanks to conservative government,

and in large part,

the fact that inflation rose

was not the fault of the conservative government.

I do think there was a little thing that happened

around the ridiculous Liz Truss

mini budget, which added to inflation.

But I'm going to show you now

graphs of inflation

in a number of other countries across the world.

So we'll show you the last

five years, inflation in the USA.

We'll show you the last

five years of inflation in Italy.

We'll show you the last five years of inflation

in Germany.

What you can see here

is that basically the same thing happened

in pretty much every country

in the world in the last five years, which is inflation

spiked one off massively

and then it started to come down over time.

This happened in pretty much every country.

And if something happens in every country,

what that tells you is this is not

to do with the specific

policies of the specific governments

in those countries.

This is an international problem

which is happening in a number of countries.

and this is a big trend in economics media.

Which is

economics media basically wants to sell you

on the kind of Coronation Street,

EastEnders soap opera politics of economics,

which is everything good that happens

is thanks to current government.

Everything bad that happens

is because of the current government and they want to

attach specific problems to specific

faces, specific names. Whereas the truth is,

a big thing has happened

in the last 5-10 years

in basically every rich country in the world,

which is that inflation increased massively.

It came down again,

inequality increased massively,

living standards decreased massively.

And this happened in basically

every country in the world.

When I think of this, I'm really reminded of

the house price crisis, which... So I live in London.

A lot of people in London

think the house price crisis

is because of London planning policy.

A lot of people blame it on Sadiq Khan.

I worked in finance for a long time,

which is very international,

and when I worked in finance,

I met people from all over the world.

And what I found is that

everyone in New York thinks that the New York House

price crisis because of New York planning policy.

Everyone in Sydney thinks it's

because of Sydney planning policy.

Everyone in Toronto and Vancouver

think it's because of their planning policy.

Everyone in Dublin thinks it's

because of their planning policy.

Everyone in Shanghai and Tokyo and Hong

Kong, Rio de Janeiro and Paris and Barcelona.

All of these people think that

the global housing price crisis

is because of their specific policy

and the inflation crisis in the UK,

is similarly being blamed on UK specific policy,

when really what is happening

is a much bigger thing, which is that living

standards are falling all across the world.

Inequality is rising all across the world.

The rich are getting richer

all across the world, and ordinary working

people are suffering all across the world.

Okay, so I think

we can learn a couple of lessons here

from this

obsession with the media,

with small details and individual faces

and personalities of individual politicians.

While living standards collapse.

Number one, the problem is not UK specific.

So I am British.

I know most of all of you as a British,

but we get watched all over the world.

We often get messages on the channel

which is saying, Gary, you're right,

Britain is totally messed up.

What can I do? Where can I leave to?

And I think this is actually

a really

worrying approach to a global problem,

because we also have viewers

from all over the world, viewers from even countries

which are generally considered

to have stronger economies.

Places like Australia, places

like New Zealand, places like the USA.

And these people invariably say

things are just as bad here.

Things are getting worse here.

Living standards are getting worse here.

What can I do? Where can I leave to?

And what you have is a global problem

of the global super rich

dispossessing Western middle classes.

And every single person in the world is saying

this is because of my specific country,

I'm going to leave.

And if everybody focuses on trying to run away

from the rich and nobody focuses

on fighting the rich,

then basically we're all going to lose.

So I'm very aware that we have,

you know, a variety of UK specific problems.

And those of you not in the UK,

I'm sure you'll be aware you have country...

You have country specific problems

in your country as well.

But there's a big global shift in power

and in wealth away from middle classes

towards the rich.

And if you don't fight it

then you will lose everything.

The second lesson that we learn from this,

I think, is to be wary of getting too much involved in

economics as political football.

So we're here in the UK, we're going to get an election

this year.

Almost certainly we'll get a change in government.

We'll get a new political party coming in.

A lot of people will be optimistic about that.

But the truth is

this new political party is not realistically serious

about reducing wealth inequality.

If they don't reduce wealth inequality,

then they will not be able

to stop the fall in living standards.

You know, we have many countries across the world

which have left or centre left governments.

You know, we have Germany, we have Spain,

we have arguably the USA.

I know some people will say

that their government is not that centre left.

What you see here is a variety of different government

centre left, centre right governments.

In every case, living

standards have collapsed in the last five years

because they are not doing anything

about wealth inequality.

Elections will be held in different countries.

Governments will change.

At the moment,

we do not have any serious, powerful political party

promising to do anything about wealth inequality,

and that is because

ordinary people are being given

this kind of nonsense economics media,

which is like things are getting better.

Don't worry, stick around, don't rock the boat.

Inflation is getting better and things will improve.

Do not be fooled by economic media

that focus on throwing statistics at you

while your life gets worse and worse.

There is a structural problem

of growing inequality, and neither centre right

nor centre left parties across

the world are serious about changing it.

They are funded by very rich people

who don't want you to tax them more.

Unfortunately, the only way to stop your life

from getting worse is to tax them more.

Otherwise they will get richer and richer

and they will take your assets.

So I think to conclude,

we will see this week officially a fall in inflation.

It will do nothing to make your life better.

It's extremely predictable in advance,

which tells you very clearly

that there is no new news coming in.

It will be sold to you as new.

It will be sold you is exciting.

Don't buy it. Don't believe it.

The structural problem is continuing to worsen.

Wealth inequality gets worse and worse.

Living standards continue to fall.

Political parties who are funded by,

and in many cases run by wealthy people,

are refusing to do anything about it.

The only way to make things

better is to tax the rich more,

tax ordinary working people less.

That way we can get wealth flowing

in the other direction.

We can make housing affordable,

we can make your life better. But

the politicians won't listen to me

unless you guys support me.

So keep promoting our stuff.

Send this video to your friends,

to your family, to your mum.

Let's tax the rich.

Let's get wealth back in the hands of working people.

Thank you.