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Fuel Protest Highlights Problems in the Economy May 28, 2008

Recent bad feeling about the spiralling cost of fuel lead to a fuel protest which brought chaos to London earlier today.

About 300 vans, trucks and lorries forced road closures in the capital today sending a clear message to the Prime Minister Gordon Brown. People are just fed up with “Rip Off Britain” and the record price rises are contributing to inflationary problems which, in turn, has a detrimental effect on our economy as a whole.

Its possible that sky high fuel prices will force the closure of many hard pressed courier and transport based businesses which may lead to unemployment and further economic misery.

The British economy seems to be suffering “Stagflation” as one commentator called it. Basically, when the cost of fuel rises, eveything else increases in price too. This is an inflationary pressure and the correct way to combat this is to increase interest rates. The problem is that we are currently suffering the “credit crunch” and any increase in interest rates will only worsen the problem. We are stuck with our current circumstances until either inflation declines or the credit crunch’s impact is reduced.

I expect the next Bank of England rates decision (due 5th June 2008) to be a no change as this is the only available course of action at the moment. Rise, fall or stick, we’ll know the outcome next week.

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