Deflation Is English For “The Elites Have Screwed You”

Jul 20, 2012

Fridays are a great time to dig deep into the truth— you know, just before you make plans to pray this weekend at your favorite…watering hole. Not to let the air out of the fun-and-games on tap, but, let’s talk, indeed, about deflation. This isn’t about ego, or size, or anything other than: how the elites have totally screwed up the economy–here and in every corner of the globe.

It’s a teensy bit wonky here but don’t run and hide because this is going to be real easy— and it will give you an insight into the dangers facing workers everywhere, and why we should not stop demanding that the captains of the entire “free market” ideology (whose main man in Oz is The Empty Suit, Leader of the Coalition) be fired for gross negligence.

Let’s start with the wonky part. Across the ocean in Washington, D.C. sit the offices of the International Monetary Fund. Be clear: the IMF has done some really, really bad things over the years– as in demanding, in return for money for loans needed by really poor countries, that those countries open up their people to marauding corporations looking for cheap labor and new markets to suck dry.

But, a broken clock is right twice a day— and the IMF is ringing the alarm about a big deal: DEFLATION!

Looking at the deep crisis in Europe, the IMF is warning:

Inflation is set to decline significantly and could even become negative. Headline inflation is expected to fall well below 2 percent in 2013 and remain there through 2014. Although survey-based inflation expectations are still broadly anchored, market-based indicators are clearly pointing downward and core inflation (stripping out the most volatile components, such as energy and food prices) signals very low underlying inflation pressures (see Figure 2). Moreover, given the subdued growth outlook, there is a sizable risk that inflation could even turn negative in the medium run. Specifically, the IMF’s GPM projections indicate about a 25 percent probability of below-zero inflation by early 2014.

In English, what becoming “negative” and “below-zero inflation” means is: deflation. As in, prices going down.

Now, you might think: Whoopee!!! Prices going down. Stuff is cheaper. Hit the stores. Shop til you drop.

Well, careful what you wish for. Deflation is what happened in the 1920s in the Great Depression. People don’t have jobs. No one buys anything. So, prices go down. Think of it like a bath full of water— you pull the plug and the vortex sucks the water down, down, down…nothing stops it–unless you plug the hole.

Now, the important question to ask is: how did we get here? A simple 5-step explanation will do:

1. The “free market” zealots ran around the world for decades flogging a system of lower wages, no unions, no regulations and the glory of competition.

2. Peoples’ paychecks got smaller, in real terms. They had no money. They used credit cards. Or, cash poor, everyone took money out of their over-valued homes, primarily in the United States.

3. Bankers, mainly led by the Wall Street financial elite, committed moral, if not actual, crimes. Driven by greed and stupidity, they obliterated, in a short few years, trillions of dollars of wealth and millions of jobs.

4. Thanks to #3, people had even less money.

5. The people were told, “you now have to pay the bill for the failure of the system”. “Austerity for all” was the cry. Don’t raise taxes on the rich. And don’t dare spend public money to create jobs. The opposite: even though people don’t have money to spend, take away their jobs, take away government jobs and suck out of the system even more spending money of real people.

Voila! Deflation is upon us. Of course, the above five-step explanation of reality is entirely NOT part of the language used by The Empty Suit, Leader of the Coalition, or his sidekicks around the world. They want to continue to lead the people down the path to disaster. And this is so dumb even a theatrical farce could not it justice.

And, trust us, if deflation starts spreading, and China continues to slow down, the decline of the resource sector will continue here and…well, you get the picture.

You won’t like it.


@jonathantasini

Bankers Skate AGAIN…Laughing All The Way to Their Mansions

Jun 28, 2012

It’s worth keeping in mind, when we think of what happens in our economic lives, that global financial events trigger waves everywhere. That’s perhaps stating the obvious–so, when bankers get a “stay-out-of jail” card anywhere, it sends a message to every one of the financial global elite. Take Barclay’s.

Let’s chuckle–with a bit of dark laughter–at this pathetic “settlement”:

Barclays has agreed to pay more than $450 million to resolve accusations that it attempted to manipulate key interest rates, the first settlement in a sprawling global investigation involving many of the world’s biggest banks.

The British bank struck a deal with regulators in Washington and London, as well as the Justice Department. The settlement is seen as the first in a series of potential cases against other major financial firms.

This is not change. In fact, this kind of settlement guarantees one thing: it will happen again. The message to these guys is simple: if you do this again, you will not lose your freedom–meaning, go to jail–and you will not even lose your jobs. Indeed, we will help raise your level of mirth, comfort and happiness because, while you sock away more pay and benefits to buy your 3rd or 4th mansion, the SHAREHOLDERS will pay for your misdeeds.

This is crony capitalism defined. And the regulators–and political leadership–are simply reinforcing the game. Not that it’s surprising. The little fish get jailed–sometimes–bthe bigger crimes committed that have imposed austerity and joblessness on millions of people go unpunished. Think of this: the CEO of Goldman Sachs Lloyd Blankfein is still a free man–despite a key investigation in the U.S. that found, “a financial snake pit rife with greed, conflicts of interest, and wrongdoing”

And this is a message heard from Sydney to London to Wall Street–you will not be jailed.

You see, the justice system is just for the little people–not for the elites.


@jonathantasini