Friday, October 07, 2011
Mervyn King is shameless. Absolutely shameless. But only someone sure of his political backing could come out with such barefaced lies. He knows George "printing money is the last resort of desperate governments" Osborne is on board.
So the moral hazard of bailing out the banks - not once, but soon twice - is paralleled by the moral hazard of robbing the prudent and pensioners. It's a good job I had no illusions to lose about the Tories - and, as I feared, George Osborne's few sensible ideas before the election were soon forgotten after it.
Labour, 2008. QE1 announced. Mervyn King says there won’t be inflation because of the ‘output gap’ – all those factories running two shifts when they could be running three. BoE Pension Fund moves all its assets into inflation-proofed bonds.
Sterling devalues by getting on for 30% (and the printed money goes into share and commodity prices). This raises inflation dramatically, because most of what we consume, especially commodities, is imported – those factories were non-existent divisions on the BoE map board. Wages are static, because mass immigration means it’s a buyers market for labour*.
With prices rising and wages static, the only way to keep household consumption up is to send the wife out to work or spend on credit. But the wife’s been at work since 1989 – it was the only way you could afford the mortgage – and who’s going to increase their personal debts in this economic climate ?
So consumption falls. Working people are getting poorer at around 5% a year. There’s a small increase in manufacturing for export, but the balance of payments is still massively negative. Retailers suffer, the economy flat-lines.
OMG. The economy is not recovering ! Inexplicable !
Conservative, 2011. QE2 announced. King, abandoning reality completely, says it’s because his magic crystal ball says inflation is going to fall dramatically. Sterling devalues (it’s dropped 10c against the dollar in a couple of days). This raises inflation again, because most of what we consume, especially commodities, is imported.
Wages are still static, because mass immigration is still at near-record levels despite the crisis.
So consumption falls again, as it must.
OMG. The economy is not recovering ! Inexplicable ! Time for QE3 !
Rinse and repeat until UK real wages are at Chinese levels and pensioners are self-immolating in Parliament Square. Where's Fernand Bonnier de La Chapelle when we need him ?
* Marx - "The main purpose of the bourgeois in relation to the worker is, of course, to have the commodity labour as cheaply as possible, which is only possible when the supply of this commodity is as large as possible in relation to the demand for it"