There is no such thing as Supply Side inflation. If the price of one good goes up due to less supply, then people need to decide whether to consume less, or sacrifice something else.

Of course, everyone seizes on the price of one thing going up and claims it is inflation. This allows everyone to negotiate a pay rise, which can only be paid for in one of three ways. They can put their prices up; they can spend less on something else; or they can borrow some money to pay for it.

Only an idiot would go for the last option, but that is exactly what governments do every time. When you borrow money that doesn’t actually exist then you increase the money supply, “inflation”, but it doesn’t matter because we thought we had inflation anyway, so blame it on the supply side.

The immediate solution is not to give in to the demands for the pay rise. But then governments see nothing wrong in stealing money from savers in order to buy votes.

Of course, the long term solution is to remove the ability of your Government to control the money supply through competition. One day, maybe…