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.
If you want to know why we need a significant tax on the billions being pocket by Gina and the gang, look no further than China and the nervousness circling the globe on the stability of the economy. Eventually the party of the resource boom will be gone–and only Gina and her gang of robber barons will benefit.
EXPECTATIONS that China will today release its weakest quarterly economic growth figures in three years have added to market pessimism on the mining sector.
Yesterday, Australia’s top mining stocks suffered another selloff as investment banks continued to trim forecasts for commodity prices and share prices, with Credit Suisse downgrading its target share price for both BHP Billiton and Rio Tinto.
And you have to connect this to the world economy:
Australian shares are set for a weak start after Wall Street slipped on earnings fears and European markets closed lower following another spike in Spanish bond yields.
This is not rocket science: everywhere in the world, austerity is the order of the day. People don’t have money to spend. People are afraid.
What we need to do here is see the mining boom as our seed corn: you sock it away for the harder times surely to follow. Not in Gina’s pocket. But, in the public’s pocket.
Read Essential's ongoing research on the public response to Covid-19.
In this week's report:
- Performance of Scott Morrison
- Performance of Anthony Albanese
- Preferred Prime Minister
- Views towards re-electing the federal Coalition government
- Party trust to handle issues
- Importance of Australia’s international reputation
- Scott Morrison’s impact on Australia’s international reputation
- Views towards Australia’s international reputation