Catastrophic elite failure is destroying the economic foundations of the West - Politics Forum.org | PoFo

Wandering the information superhighway, he came upon the last refuge of civilization, PoFo, the only forum on the internet ...

All general discussion about politics that doesn't belong in any of the other forums.

Moderator: PoFo Political Circus Mods

#15198562
The Telegraph wrote:There is a sure-fire way to destroy a civilisation, and that is to debase its currency. It’s an essential lesson of history, yet one that our financial and political establishment have forgotten in their desperate, demagogic quest to pretend that we can go on living beyond our means.

In Britain and abroad, years of monetary vandalism, fuelled by hubris, neglect, economic amnesia and incompetent short-termism, are destroying capitalism’s ability to function efficiently and equitably. An obsession with near-zero interest rates and QE is engineering a vicious redistribution, propping up washed-out politicians and empowering a zombie class of unproductive private-sector bureaucrats.

The latest, appalling manifestation of this doomed bid to defy economic gravity is the jump in consumer prices. Savers are being mugged: over the past year, at least 4.2 per cent, and perhaps even 6 per cent, of the value of bank accounts was stealthily confiscated by resurgent inflation, and the average worker is being subjected to a real terms pay cut. For all of the talk of “levelling up”, and the genuine rise in relative wages in some sectors such as lorry driving, tens of millions of workers are witnessing, to their growing fury, the salami-slicing of their purchasing power, even before the National Insurance rise.

A quarter of a century ago, scorched by the experience of the 1970s and 1980s, Tories and Labour alike embraced sound money, culminating in the Bank of England’s independence. That agenda, it is now clear, has failed: as in every other area of economics, we have regressed. The orthodox view was that the Bank couldn’t by itself generate economic growth. It could mess things up, and it could smooth out bumps in the road, but it couldn’t enrich us. That was the private sector’s role, and of government policies on tax and spend. The Bank’s best bet was to keep inflation low and steady.

Three things have changed this calculus, replacing it with a new, toxic groupthink. Low rates and money-printing, until recently, didn’t seem to push up consumer prices much, encouraging a misplaced consensus that globalisation and technology had permanently tamed inflation (helpfully overlooking the fact that prices of goods and services are up by some 90 per cent in Britain since 1997). Second, the ideologically rudderless Tories no longer have a clue how to boost GDP per capita – centrally planned decarbonisation and spending more in the North don’t cut it. They believe growth has naturally slowed, failing to recognise that massively increased regulatory burdens and dysfunctional, crippling tax, education, welfare and, yes, monetary policies may be to blame. Finally, politicians realised during the financial crisis that they could rely on central banks to print money to bail them out, while central banks managed to avoid the blame for their calamitous mistakes, portraying themselves as heroic, world-saving figures.

The result? Politicians and central bankers are colluding to turn a blind eye to the surge in inflation, opting to pump-prime the economy with cheap money to eke out growth, keep tax and spending flowing and grow asset values to dupe the majority into thinking they are becoming wealthier. The Bank doesn’t want to be blamed for crashing the economy or forcing cuts in public spending. A Treasury hooked on low rates pretends inflation isn’t any of its business, well aware that the Bank of England saved its bacon by creating so much money during the pandemic.

Yet, overshooting inflation is merely the most visible sign of the pathology eating away at our societies: the shared self-interest of our politico-technocratic ruling class has led to a series of catastrophic, self-reinforcing consequences.

Cheap and easy money is destroying conservatism and liberalism, and shifting Britain to the Left politically, morally and culturally. On the one hand, work has become less rewarding; on the other, ultra-low mortgages and QE have dramatically enriched the 65 per cent of the population who possess their own home these past couple of decades, while the 35 per cent who don’t have fallen far behind. Owners of certain financial assets have also done very well from cheap credit, as have those with index-linked pensions; other savers are being hammered. Creditors are losing, debtors are winning.

This isn’t genuine, free-market capitalism: it is a warped, corrupting ersatz that is destroying the social compact. It undermines family formation. It sends a debilitating signal that the only way to become rich is to be rich in the first place, that thrift and hard work are a waste of time, that delayed gratification is for fools, that debt-financed hedonism is the answer. It will also fuel a disastrous class warfare, and embolden the hard Left to call for mansion taxes, all-out wealth levies, higher minimum wages and enhanced trade union powers, destroying what is left of the economy.

Easy money has already convinced politicians that they no longer have a budget constraint and it is safe to turn on the spending taps. People’s QE, which started as a fringe hard-Left idea, is mainstream; many “experts” now argue that we should increase our “excessively low” national debt by at least 50 per cent.

Cheap money is even behind the rise of the woke corporation, including the emergence of an unproductive yet highly paid segment of the middle class devoted to virtue-signalling. Inflation, by damaging risk-free savings such as cash and gilts, has encouraged riskier investment in stocks and shares, helping big fund managers, especially those that operate tracker funds, to tighten their grip. Because these funds don’t seek to beat the market, they have embraced an alternative role as woke enforcers, forcing private firms to sign up to endless green and social targets.

Cheap money has also encouraged companies to pursue low-profitability projects and to become lazier and less efficient. This has empowered the worst kind of corporate bureaucrat, sapped the dynamism of many firms and encouraged them to self-indulgently put wokery before profits.

This madness must end. The Bank of England must increase interest rates. We need to wean ourselves from QE. Governments must rein in spending. It’s either that, or wait until what is left of our societies is eventually taken down by the greatest financial reckoning in history.
#15198565
noemon wrote:text


I thought about this quite a bit recently before you actually posted this and the problem I think is natural or more precisely more deeply rooted than you think. The article manages to understand the consequences but doesn't really try to analyse where it came from. Below is my subjective opinion so don't take it as if I am posting The Truth. Basically it is a speculated, educated guess how we came here based on historic precedent.

So lets start wit the historic examples of similar but not the same situation from history and then proceed on to specifics of US, UK and EU. So when did something similar happen in history? Well, the best example from History that I could think of was the 2nd Punic war and until Ceasar and Augustus remade the republic in to an Empire. While this seems a bit alt-rightish wet dream to make such a comparison, I still think that it is applicable.

So what happened in Rome:
The 2nd Punic War was a monumental event for Rome. They managed to defeat Carthage and became the sole superpower of sorts in their "known world" space. This victory didn't come easily though and had a significant impact on the whole political structure and decision making of the republic. Putting the death toll aside, the main change from before to after was the de facto but not de jure nullification of many powers of the so called Tribunes of the plebs. The tribune of the plebs was an elected position from the people who had the power to present legislature to the senate, pass it through a peoples vote and veto any decision of either consuls or the senate itself. ( The only exception was senatus consultus ultimum or basically martial law decrees if i am not mistaken ) So during 2nd Punic war, basically the senate was working without this body presenting legislature, passing the legislature through the people or vetoing anything. This was the core of the problem after the 2nd Punic war that it continued in the same way even after the war that no real people-cantered-reform was allowed and the whole office slowly became even more controlled by the senate.

If that was only that then it would not be much of a problem. The position of the sole hegemon for Rome allowed it to fuel its growth through slave trade. So another phenomenon that emerged after the war was the de facto monopolization of trade in the med by Rome and it being able to write its own rules. The slaves started to be employed in mass in mass latifundy plantations in different regions of italy which bankrupt the local farmers so they had to kinda flee the countryside in to big cities to find work there.

Many tried to reform this problem be it the 1st Grachi brother who got killed trying to pass his land reforms. Or the 2nd Grachi brother that went a less straightforward route of trying to give Roman citizenship to all people in Italy and some beyond because they were in essence Romans just without citizenship. The 2nd brother also failed since the plebenian Roman citizens didn't want to give those rights to others fueled by the Oligarchic senate and killed the 2nd brother and his followers. That was the cause of the Social wars basically that followed through which they finally got their citizenship although they lost the wars. The problem is that it had no real effect on the whole slave replacement of labour situation nor the Oligarchically controlled senate.

So the situation continued on and any reform was prevented by the Oligarchic group just being obstructionist in the senate. This is when we get the clear divide of the so called Populares and Optimates. The situation onwards with Marius, Sulla, Ceasar, Pompey and so on is widely known.

Why does this have relevance for modern times?
The situation is quite similar in my opinion and the guiding forces are the same.

The West achieved victory in the Cold War through the leadership of the so called Neoliberals. Kinda similar to how Rome achieved victory through the Oligarchic senate and its leadership during the 2nd Punic war. So this provided tremendous popularity boost to their ideas.

The West also became the sole hegemon through this victory kinda similar to how Rome became the sole hegemon through its victory against Carthage.

The West also enforced globalisation through this victory and was able to write the rules for itself kinda similar to how Rome did it through controlling the Med.

The West started profiting even more from this and started finding ways to cut costs and to make more profits. Now we don't have slave trade but the essence of replacing local manufacturing by manufacturing in poor countries is basically the same. It drives down the labour costs to make more profits.

This leaves the question of our political systems or tribunes of the plebs in Rome. That is far more harder to answer phenomenon. Perhaps the sole fall of the USSR is the problem that there is no "quality of life" competitor anymore between the West and anybody else. Or perhaps the large corporations became to big and important during the cold war so they can lobby their efforts effectively compared to how it used to be. I have no clear comparison for this category.

So what can be done about it:
Realistically our parliaments are controlled to a large degree by both the people and the Oligarchy or people with money. Oligarchy has more influence than it should or compared to what it previously was. So expecting the parliaments and institutions to do some concrete change while they are the core beneficiaries and are making money is not reasonable in my opinion. It heavily depend on the country but usually people from parliament consult or get employed straight away after their terms but the said Oligarchs or corporations so to fix the situation and make the system and more people centric:

1) Disallow modern politicians from working for large corporations or as consultants during their term or after.
2) Put strict limitations on lobbying. The current measures seem to not be working.
3) Large corporations and powerful people can be represented through a unified representative group of sorts and only through that group. A non-profit body whose sole purpose is that representation.
4) Implement an institution similar to the Tribune of the plebs. For UK/US/Single countries give veto powers to governors or heads of "regions" with the veto power coming in to effect under 33% agreement. (In Rome it was if 1 Tribune wanted to veto then he could but for modern structures 1 person is overkill. So if 33% are in agreement then it is a veto. Also give them legislative powers to pass laws but now with 66% agreement) These positions need to be directly elected by the people and these individuals must not be part of any political party. For EU it can be done similarly on each nation basis with the collective per each country election a supreme Tribune that can represent the country on the EU level also. The rules should be similar on EU level.

After that we can really try to start going after massive tax evasion and so on.
#15198788
Rugoz wrote:P.S.: The article is still bullshitting about real wages shrinking


Well wages in general aren't keeping up with inflation given it is 4.2% so he isn't wrong. But really this comes down to production ceasing and an increase in the money supply. The talk of transitory seems to have taken a back seat and the BoE is talking about interest rate rises now. But that won't help much given this isn't internal but an external affair and reducing UK spending habits won't help much when the whole world is vying for the same commodities.

It was barely a year ago oil had a negative price at the height of lockdown and now petrol at the stations are at record highs simply because the world is trying to catch up. Gas the same. Europe didn't buy gas when demand was low and have no reserves now so are paying through the nose. Russia are trying to manipulate that to gain long term contracts and you have the BS with NS2. Ultimately this is a sellers market. It will remain so for a while yet, but the question is can the market keep up? Probably not. And Austria is locking down again and I wonder which muppets in government is going to follow suit. But it was what people wanted. So perhaps the catastrophe was everyones mistake and I think people are waking up to this and trying to find excuses which should be obvious. Our 'Just in time' economy doesn't work if you stop the supplylines and the result is inflation.
#15198849
Rugoz wrote:He is wrong, see figure 2:
https://www.ons.gov.uk/employmentandlab ... vember2021


There is nothing that suggests that wage growth has beat inflation, on the contrary, it is quite clear that inflation is ravaging growing upwards having overtaken real wage growth a long time now. This becomes even more pronounced when one leaves the averages and goes by segment.

Have you measured total inflation from a date to another?

Aside from moans and groans you have not made an argument.

Something in the article has triggered you, but nobody cares.
#15198870
noemon wrote:There is nothing that suggests that wage growth has beat inflation, on the contrary, it is quite clear that inflation is ravaging growing upwards having overtaken real wage growth a long time now. This becomes even more pronounced when one leaves the averages and goes by segment.

Have you measured total inflation from a date to another?

Aside from moans and groans you have not made an argument.

Something in the article has triggered you, but nobody cares.


Well yes he did. Here is Estonia for Example:

Wage Growth:

Image

Inflation:

Image

UK wages

Image

UK Inflation

Image
#15198937
JohnRawls wrote:Well yes he did.


Where? :eh:


UK wages

UK Inflation



Averages do not tell any story, and they are quite worthless, the 'wage growth" for July-September is not real wage growth, not even nominal wage growth. But down to the fact that several low paid jobs were unfulfilled, shooting up the average pay for the total population.

Rugoz's source tells you that if you actually bother to read it:

Paragraph 2, the one Rugoz cited as "his" evidence:

ONS UK wrote:
2.Main points for July to September 2021

Annual growth in average employee pay has been affected by temporary factors that have inflated the headline growth rate, these factors are now reducing and having a smaller impact on growth rates; base effects refer to the latest months being compared with low base periods when earnings were first affected by the coronavirus (COVID-19) pandemic; and compositional effects where there has been a fall in the number and proportion of lower-paid employee jobs, therefore increasing average earnings.

Interpreting average earnings - base and compositional effects

Interpreting average earnings data is difficult at the moment. In July we published a blog: How COVID-19 has impacted the Average Weekly Earnings data, which explains the complexities of interpreting these data. The blog highlights different approaches that can be taken to estimate an underlying rate, while explaining there is no simple answer. In particular, there are temporary factors that we refer to as base and compositional effects, which have increased the headline growth rate in earnings above the underlying rate.

The base effect refers to the comparison of the latest months with the low base periods between April and August 2020, when earnings were affected by the coronavirus pandemic and negative pay growth rates were seen. The blog explains that there are a number of ways you can try to strip out these base effects, but there is no single method everyone would agree on. We have tried a couple of simple approaches. Neither approach is perfect: the first requires an estimate of what would have happened without the pandemic, and the second assumes that wage growth was constant over the last two years, which we use to generate a range for the base effect.

As we move through the year, the base effect will start to reduce. We have started to see this in the most recent data where for certain sectors, the base effect is minimal but for sectors such as manufacturing, construction, and wholesaling, retailing, hotels and restaurants, we are still seeing a base effect present in the August data.

The composition effect is where pay growth has been affected by a changing composition of employee jobs, which has increased average pay and needs to be considered when interpreting average pay growth. This is explained further in the Measuring the data section.


Moreover, "wage growth" includes NI and Tax contributions that have also increased this year and which account for a large part for the "wage growth", but these are not money pocketed by the employee but by the state.

As I and many others already said, there is no doubt that inflation has overtaken real wage growth in the UK and especially when you take it down by segment. Take the real wage growth after tax of income earners up to 80k per year(less than 2%) that form 95% of the labour force and take the 200% crude oil price increase(or 40% increase at the forecourt) and the 40% food price increase and you have a much better picture of how inflation is beating wages by a big margin actually for the 95% of the actual population.

Naysayers distort reality with flatened averages very much like corporate douches who try to trick people by interplaying between segment and total.

40% commission for sales above £50, 20% commission for orders below £50, employee averages orders at £52, believes he will get 40% for his total orders but 99% of his orders are below £50 and 1% way above £50. You are attempting to play the same game here to justify your erroneous opinion.
#15199047
Nobody, including central banks, likes QE. It is a symptom, not of fiscal irresponsibility, but of elite obesession with inflation and deficits. As George Osborne advocated:

"monetary activism, fiscal responsibility, and supply side reform.

Monetary activism to keep interest rates low and stimulate the economy.

Fiscal responsibility to restore confidence and rebuild our battered public finances."


QE is a last-ditch, desperate attempt to make that work; like trying to fill your kettle by flooding the upper floor. The OP article kinda acknowledges that in careful, guarded language, then shoehorns it into an argument for same-old-same-old fiscal conservatism.
#15199970
noemon wrote:Paragraph 2, the one Rugoz cited as "his" evidence:


I wrote figure 2, not paragraph 2.

It literally shows real wage growth.

noemon wrote:Averages do not tell any story, and they are quite worthless


The article says "the average worker is being subjected to a real terms pay cut".

You could argue he means the majority of workers, but median real wages are also growing:

Across all jobs, median weekly earnings in April 2021 increased by 5.3% from a year earlier on a nominal basis; when adjusted for inflation, they increased 3.6% in real terms over the year;


https://www.ons.gov.uk/employmentandlab ... nings/2021

SueDeNîmes wrote:Nobody, including central banks, likes QE. It is a symptom, not of fiscal irresponsibility, but of elite obesession with inflation and deficits. As George Osborne advocated:

"monetary activism, fiscal responsibility, and supply side reform.

Monetary activism to keep interest rates low and stimulate the economy.

Fiscal responsibility to restore confidence and rebuild our battered public finances."


QE is a last-ditch, desperate attempt to make that work; like trying to fill your kettle by flooding the upper floor. The OP article kinda acknowledges that in careful, guarded language, then shoehorns it into an argument for same-old-same-old fiscal conservatism.


QE enables fiscal expansion. But there's hardly an alternative unless you have an export-driven economy and can manipulate the exchange rate.
#15199974
Rugoz wrote:The article says "the average worker is being subjected to a real terms pay cut".

You could argue he means the majority of workers, but median real wages are also growing: [April 2021]


You would serve yourself much better if you attempted to discuss with me and/or other people instead of trying to find a stupid statistic that would justify your erroneous opinion and interpretation of statistical figures.

The author of the article as well as myself and everyone else in this country are measuring inflation for this year after April 2021(lockdown) not before. Your silly statistic is once again invalid because it counts average wage growth from April 2020(lockdown, furloughment) to April 2021. As I said before, the larger part of this "wage growth" is down to increased tax and NI contributions. Inflation in the UK skyrocketed after April 2021, reaching a peak in the months of July-October. During these months several important products in the basket of inflation, like energy, fuel and food increased by 40% in the UK eating up ALL and much more of the wage gains for 95% of the labor force(income earners up to 80k per year). If you are still incapable of understanding it, you are arguing that the 5% increase to the average person's nominal salary before tax this year and around 2-3% increase after tax is enough to beat the 40% fuel, energy and food price increase that this average person has to spend to survive. You 're not convincing at all.

Your QE religion is about to come to an end, this article was written by The Telegraph(right-wing conservative Tory paper), not the Communist Manifesto, even the US is struggling with inflation despite exporting the dollar and is trying to figure out ways to sort it out without increasing interest rates.

Interest rates will have to increase regardless of your religious feelings.
#15199975
noemon wrote:You would serve yourself much better if you attempted to discuss with me and/or other people instead of trying to find a stupid statistic that would justify your erroneous opinion and interpretation of statistical figures.

The author of the article as well as myself and everyone else in this country are measuring inflation for this year after April 2021(lockdown) not before. Your silly statistic is once again invalid because it counts average wage growth from April 2020(lockdown, furloughment) to April 2021.


So you can say my statistic is "stupid" and "silly" (even though that makes no sense) while I can't say the article is?

Figure 2 shows (average) real weekly earning growth until September 2021. That's the newest statistic we have at this point. There's no point whatsoever in making any claims beyond that point, because official statistics are not available.

noemon wrote:As I said before, the larger part of this "wage growth" is down to increased tax and NI contributions. Inflation in the UK skyrocketed after April 2021, reaching a peak in the months of July-October. During these months several important products in the basket of inflation, like energy, fuel and food increased by 40% in the UK eating up ALL and much more of the wage gains for 95% of the labor force(income earners up to 80k per year).


Says who?

noemon wrote:Your QE religion is about to come to an end, this article was written by The Telegraph(right-wing conservative Tory paper), not the Communist Manifesto, even the US is struggling with inflation despite exporting the dollar and is trying to figure out ways to sort it out without increasing interest rates.

Interest rates will have to increase regardless of your religious feelings.


Whether interest rates will increase depends on central bank's long-term inflation expectations, not on my "religious feelings".
#15200080
Rugoz wrote:QE enables fiscal expansion.

Fiscal expansion happens when govt increases net spending, whether or not the central bank subsequently buys the bonds. The BoE did a ton of QE during fiscal consolidation.

But there's hardly an alternative unless you have an export-driven economy and can manipulate the exchange rate.

Alternatives include 'overt monetary finance' (see THIS BoE seminar), some Chicago Plan-type reform, Treasury minting coins rather than issuing bonds or simply authorising Treasury to run on a negative balance. There are, doubtless, others.
#15200081
Rugoz wrote:So you can say my statistic is "stupid" and "silly" (even though that makes no sense) while I can't say the article is?

Figure 2 shows (average) real weekly earning growth until September 2021. That's the newest statistic we have at this point. There's no point whatsoever in making any claims beyond that point, because official statistics are not available.


Unlike you, I explained why the use of the statistic is stupid and irrelevant, you did not explain or argue anything. If you have no interest in discussing the extreme inflation that has been taking place between July-October 2021 which is the actual subject of the article, the OP and the subject of the ONS statistics that you erroneously cited earlier then you have no place in this thread.

Says who?


The salary wage increases during the lockdown period of April 2020-April 2021 are only due to yearly increases in tax & NI contributions, companies coming out of lockdown, furloughment ending and due to the massive exodus of people from low paying jobs shooting up the national average nominally that the ONS(Office of National Statistics) link you erroneously cited to prove my point discusses openly.

Whether interest rates will increase depends on central bank's long-term inflation expectations, not on my "religious feelings".


The OP article explains very well why your religion is about to collapse. You should read it again.
#15200341
People,
we are seeing price increases now. It can be shown that all of them (except corp stock and real estate) are caused by the effects of covid and lockdowns. These causes shortages of stuff. It is shortages, more that the money supply, that drives 'inflation'.

However, 'inflation' should only refer to "on going price increases". It should not be used to refer to times when the price of plywood is increased because a hurricane is coming. Therefore, what we have here is not inflation.

OTOH, these price increases are hurting people. IMO, we need another 'stimulus' check sent to everyone. There is zero evidence that increasing the money supply will trigger hyperinflation. That has never happened in history. Every case of hyperinflation that the conservative Cato Inst. found in its study was caused by on-going shortages. Clamping down on the money supply just makes the suffering greater. It does not stop the inflation.

The US Fed. proved this in the 70s. When OPEC raised the price of oil, it increased all prices. The Fed. increased interest rates to fight the inflation. Inflation wasn't stopped because the price of oil was basic to the whole economy and its increased price had to be passed on to the consumer.
. . . After the GFC/2008 and covid, we *may* have learned that the Fed. in the 70s did the opposite thing from what should have been done. The Gov. should have sent checks to the people so they could pay the higher gas prices.
. . . The US Gov. can never run out of dollars, it can create them. It issues all the dollars. Nobody worries about the growth of the money supply when banks make loans, which is the main cause of recessions, because pretty soon people must stop borrowing, and this reduces spending, which drops the GDP that starts the recession.
. . . Everyone worries about the Gov. adding dollars to the economy, that has never caused a recession. OTOH, every time the US Gov. has had a surplus it has led to and caused a bank panic, recession, or depression. All 7 times in history, a US Gov. surplus led directly to a bank panic, recession, or depression. A Gov. surplus is the opposite of deficit spending.

The US Gov. is NOT LIKE a household. It never was, even with the gold standard.
.
Why should we go to Mars?

Um I've got a suspicion that the average "Li[…]

It is worse. And unanalyzable. Their army has alw[…]

Biden Just Lit the Spark

Inspirational. I often see people slandering Bid[…]

How Structural Racism Works https://www.youtube.c[…]