Wednesday, 25 March 2009

Deflation, what deflation?

"The trifling economy of paper, as a cheaper medium, or its convenience for transmission, weighs nothing in opposition to the advantages of the precious metals... it is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted." --Thomas Jefferson

The government and the ever compliant “independent” media are softening us with weekly propaganda so we are supposed to feel grateful because they are trying everything they can think of to stop things getting cheaper, but there has been a slight mishap.

The rate of inflation just went up!

That’s right folks, deflation is the big concern apparently but, ooops, the CPI actually rose to 3.2%!

That’s above the 2% target, yet they’re taking measures like it’s already below.

Ah, but, they are so clever though. You see, they are fighting next year’s problem. They can predict what’s going to happen and - oh hang on. No they can’t. They failed to see the credit crunch didn’t they? In fact, thinking about it, it looks suspiciously like they don’t have a fucking clue.

So how can we trust them when they say that deflation is the real threat? The government is in a shit load of debt and, just as with individuals holding loans; inflation is a great way to crush the real terms value of that debt. Hey, I owe a 100,000 mortgage that I can't pay back but thanks to Gordon Brown, in 2010 100 grand will be the cost of a loaf of bread! You get the idea. Obviously savers will be wiped out, but hey, the Keynesians think savers are scum and it is credit that is the route to prosperity (just like a drug addict can be cured with more drugs, right?) so what the fuck, eh?

Wednesday, 18 March 2009

Deflation? Yeah. And. So. What.

Food getting cheaper. Good or bad?
Cars getting cheaper. Good or bad?
Fuel getting cheaper. Good or bad?
Electronics getting cheaper. Good or bad?

If you answered “good” to the above, you’re probably an ordinary, sensible individual.

If you answered “maybe…possibly bad” you’re probably one of the Keynesian fuckwits in government running economic policy or a journalist writing in the popular press.

Now technically, deflation is a contraction of the monetary base, and falling prices are a symptom of deflation, not the deflation itself, but no matter, we’ll discuss deflation using the mass media’s definition, as falling prices.

Somehow, they are trying to convince us that things getting cheaper, is a bad thing. You may have thought they are cleverer than you, that they have spotted some subtle insidious evil behind what is surely a good thing, thanks to their superior intellect and economic training.

Nope. What you instinctively feel is right, is right. But you see, they have ulterior motives for preventing falling prices.

Deflation strikes terror into the hearts of the ruling elites, even though falling prices leaves exactly those sections of society that deserve it the most, better off.

The problem is, our entire monetary system is systemically dependent on debt, which is subsidised by inflation. If we get into a deflationary situation, the whole pyramid scheme that is our fiat money system becomes dangerously exposed.

Watch out for one of those anti deflation articles in the popular press, or a feature on the BBC. There’s a pattern.

It usually starts along the lines of, “falling prices, you’d think they are a good thing, wouldn’t you?”

Er, yes, funnily enough, I’d rather pay less for things than more, I’m weird like that.

Then you’ll get:

“But if sustained, consumers will defer their purchases waiting for prices to fall further and this becomes a negative feedback cycle”

This is utter bullshit.

Do flat panel TVs sell? Do mobile phones sell? Do computers sell?

We all know there is something better round the corner that will be cheaper but we still buy these things.

“Deflation raises the real value of borrowers’ debt”

That is correct. Simple response: good. Guess what, the mess we are in right now is because credit was and is too cheap. We need less borrowing and more saving. Unfortunately, the Keynesians are in charge (that would be the shit-eating cock-knockers who got us into this mess in the first place) and they hate savers (who benefit from deflation).

"So the quantitative easing policy is essential to avoid the awful prospect of deflation"

Printing money that is not backed by an increase in real resources won't help when prices are falling, rising, staying the same or slightly moist. Only the disciples of the something for nothing prat economist J. M. Keynes believe otherwise.

In summary, the government is doing everything possible to stop your cost of living going down, and the mass media are day in, day out, running pieces to convince you this is a good thing.

I’ll let you decide whose interests they are looking after.

Saturday, 7 March 2009

Quantitative Easing – The con is on

So it’s come to this. What is Quantitative Easing? Well, the Bank of England will buy government and corporate bonds from commercial banks, and pay for them by increasing the value of the reserves that they hold bla bla bla bla.

Let me tell you something.

It’s printing money, is what it is. It’s Tommy Coopernomics. Conjuring money out of thin air. And if that was an easy solution to financial crises, Zimbabwe would be the richest country in the world. Just like that.

There can only be one consequence of printing money, prices will be pushed higher than they otherwise would be if the new money had not been created.

What this does is, it transfers resources to those who receive the funny money first (oh, that would be the banks by the way, is that ok?) from the people who get to spend it last, when it’s too late, because prices by then have risen proportionately to cancel out the benefit of the extra cash. Who are those people? The humble proles of course, the PAYE slaves and former slaves living off their (now devalued) pensions.

Let me make it clearer. Imagine if, right now, the government announced a new policy to avert the depression: that they were going to increase income tax, and the extra revenue would be given to the banks, as a free gift, for them to lend out as they saw fit. There would be uproar! But the net effect of QE is the same.

So what on earth are they playing at, and how do they think they can get away with it?

Well, if they think the general public won’t see that the policy is printing money, the media has put paid to that, with just about every newspaper headline reading something like “Government begins quantitative easing, or ‘printing money’”. No, their inflationary free money giveaway policy will be hidden behind falling or stable prices.

If that sounds like a nonsensical statement, allow me to explain. Let’s say the governments preferred inflation measure, the CPI, goes negative (it’s still above target at the time of writing incidentally, a fact not pointed out often enough in a media talking as if the CPI has gone negative already). This, apparently, would be terrible. Imagine, things are getting cheaper. How awful! (Don’t get me started on this one, we’ll come back to this in another post!). OK. So, they print money. Instead the price level changes year on year by +2%. Hurray! Bank has hit its inflation target! But hey, what if prices as measured by the CPI would have fallen by 2% (i. e. a negative CPI), if QE hadn’t been undertaken?

Well, anyone with savings or unable to negotiate a pay rise, just lost out by 4%, all the while the Bank of England would be saying they got things back on track with 2% inflation.
So why do they hate savers and people who can’t get a pay rise?

Short answer.

The governing elites are a bunch of cunts.

Long answer, look out for my next post about falling prices (currently being wrongly referred to as “deflation” in the media).

Thursday, 5 March 2009

Bullshit, Mr Brown

So, Gordon Brown has refused to acknowledge any responsibility for the financial crisis.

Apparently, it’s a global problem.

OK, in that case, let’s have a look at average UK house prices under the Labour government up to the credit crunch.

What’s wrong with this picture? Do I see house prices increased threefold? Yes I do. So you didn’t think anything was amiss Mr Brown? You didn’t think anything needed to be done?

Of course, you did implement some measures, didn’t you? You took action. And you made things even worse:

Because with the introduction of CPI targeting you changed the inflation measure so it excluded housing (after all, housing is only the premier expense of the average citizen, so why include such a trivial cost in the inflation figures eh? Good one.). You also validated the asset inflation by raising the stamp duty threshold (thus cementing in the public mind the idea that rising house prices are as natural a process as the sun rising every morning) . Oh, and let’s not forget your bollocks shared ownership scheme – which says “we’re not going to do a damn thing about housing being too expensive in the first place for pretty much every first time buyer in the land, but instead you can own a little bit of a hugely overpriced property and pay rent on the rest”.

But I digress, Mr Brown. May I ask, did the Northern Rock 125% mortgages ring any alarm bells? No? The 2004 BBC documentary "Mortgage Madness" investigating the self cert scandal cause any sleepless nights at all? No, nothing? Too busy collecting all that extra stamp duty eh?

Meanwhile, friends, colleagues and family, much less well remunerated and educated than our fine governing elites had spotted that something was amiss years ago (I can still remember a colleague remarking in 2003 when we were discussing the housing market, “It’s a frenzy!”)

Not to blame? With the greatest of respect, Prime Minister: get to fuck.