The Sin of Wages: Shock! Horror! (not..) Paymageddon!

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In the latest astounding Shock! Horror! Revelation (see’ Things We Know..’ below)- to hit the economy, discretionary spending and the consumer society took another big hit today when we found out that wages had actually started absolutely falling in Britain.

 

No longer are wages simply failing to keep up with price inflation- we now have outright deflation in wages.

As a consequence the media is quick to inform the public that interest rate rises are unlikely for the rest of the year. Of course this is no surprise to anyone who has been following the restructuring of the economy along MONETARIST lines. Pressure on wages has been caused by:

 

The Rise Of Self Unemployment

 

Self unemployment is like self employment except you don’t have anything meaningful to do. Or any money…This is the privatisation of unemployment just like the privatisation of jails, health care, the military and of course, the issuance of money. Self unemployment is the latest wrinkle in the development of the Secret Economy, a key objective of Monetarism and the Democratisation of Money.

 

Behind the Secret Economy is the realisation that it is no longer possible politically to defend the disparity of wealth and income that is exploding in the developed economies. So the new priority is to conceal it. This has been achieved by an massive expansion of self unemployment in Britain and America – a hidden army of people working in insecure, low paid jobs with no benefits, no security and most importantly of all, no scrutiny.

 

The Participation Economy

 

The Secret Economy is the flipside of the Participation Economy.

In the Participation Economy you can no longer choose whether to take part in specific economic activity or not. Unemployment benefit creates an economic backstop that allows people some leeway to decide whether they want to participate in the labour market at a given wage rate and conditions of employment. Destruction of unemployment benefit means that the majority of people have to take part in the wage economy at any rate. In other words there is no lower boundary below which wages cannot fall. It is this that explains the ‘shock’ fall in wages.

 

This failure of the lower boundary in wages is felt at the discretionary end of the family budget. It is still possible for a reasonable proportion of the population to pay for necessities, but for a larger and larger cohort of the working population there is less money for discretionary purchases. This is the Death of the Consumer Society I have referred to before.

 

This process is compounded by low interest rates. Low interest rates pressure the national currency to drop in value, making imports that much more expensive. Since people have already cut back on ‘luxury’ discretionary items, the fall in currency value is felt in increasing prices for the raw materials the economy imports.

 

So we have:

 

Imported commodities falling in price- they have to fall in price because people can no longer afford them. If they don’t fall in price they are simply no longer imported. (This is supply chain failure such as seen in Greece with pharmaceuticals. I predicted this five years ago)

This is deflationary

 

Wages falling because more and more people are being dragged into the Participation Economy

This is deflationary.

 

Credit going down in price because of low central bank rates.

This is deflationary

 

Imported raw materials going up in price because the national currencies are falling in value

This is inflationary.

 

Now here is the $64 000 dollar question:

 

Why doesn’t this inflation and deflation net out?

 

In other words why don’t we have a consensus on whether we are experiencing inflation or deflation?

 

In theory we should simply be able to subtract the amount of deflation from the amount of inflation to arrive at a net figure. If there is more deflation than inflation we should have net deflation and if more inflation than deflation we should have net inflation. Economists should be at least be able to agree on this figure even if they can’t agree what to do about it.

 

Instead we have a situation where central bank advisory committees and individual pundits argue over the direction the economy is heading in. Why can’t they come to a common view?

 

Because we have an oil and water economy. Society is separating out into multiple constituent groups that experience inflation and deflation completely separately. You already know this. The official inflation figures clearly bear no relation to inflation as you experience it in the day to day. The most popular explanation for this is that the figures are ‘rigged’ in order to hide the political truth of what is happening to everyone outside the elite.

 

But this is like accusing a blind man of pretending not to be able to see.

 

The blindness is genuine.

 

I have previously explained how introducing privately issued Democratised Money destroys the information feedback loop that allows monetary authorities to regulate the economy. Simply put, once you allow more than one institution the power to issue money, you can NEVER AGAIN know how money is actually circulating (the Shadow Economy). You can never again accurately calculate inflation- even if you want to.

 

We are oil and water because we are using at least two different currencies.

Some of us have access to derivatives – democratised money

Some of us only have access to state money.

So we experience inflation and deflation according to the currencies we hold and to the extent we hold those currencies.

 

But don’t make the mistake of thinking that the economy is being run solely for the benefit of democratised money. The economy is being run in order to achieve a balance between democratised money and state money. At least for the moment.

 

The Secret Economy- Eyes Wide Shut

 

So in the new Secret Economy whenever some new piece of ‘ surprise’ bad news appears, the official expression of the establishment will be one of …well ‘Shock and Awe’ I suppose. And when they are not busy looking surprised it will be..

 

Eyes Wide Shut.

Ps

UK inflation fall to 1.6% lessens likelihood of interest rate rise

CPI fall surprises forecasters who expected smaller dip as clothes discounting and drops in alcohol prices and bank charges fuel decrease

 

 

 

 

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