ANALYSIS: U-turn if you want to, neoliberalism is for burning

burnmoneyForward to the Past with Deflation economics

Having burned close to $30 trillion worldwide since 2008, banks and tax collectors are now keen  to burn paper money for good. But that will make flat economies dive further. A strong Dollar, eurozone QE, Troika fiscal obsessions, and élites trying various ways out of neoliberal dysfunction. Does anyone know what they’re doing? The Slog offers an interpretation.

Cast your minds back to those days of yore when The Great Satan was Inflation…to those times when the inflation of the Nation was deemed equal to the funny of the money. Do you remember when governments would fall if annual inflation crept beyond 8%….those years when La Thatch of Blue Rinse was not for turning?

Oh, that heady decade: the austerity we had to go through – the cuts we had to endure – in order to walk tall with low inflation and no National Debt.

But lo – what siren voices now beseech us to defeat the New Even Greater Satan of Deflation? Why, they are none other than the Mermen of Mammon descended from La Thatch…those who blub at the very mention of her name. Those who tell us that we must not have deflation – and let’s ignore the National Debt, because we’re paying it back. (Actually we aren’t – but hey, what does Let’s Pretend win? Let’s Pretend wins General Elections!)

However, I’d like to leave to one side why – in classic Orwellian terms – Oceania has done a 180 degree U-turn twice in he last 35 years, and instead ponder a likely outcome of the switch from in to de: how this New Future will change forever our nostalgia about the past.

“I can remember when,” the old satirical sketch had it, “Yer could go ter London, stay in’t Ritz for a week, and still have change out of sixpence”.

But that memory will become unsustainable, in favour of:

“You young-uns,” says the new script, “Yer’ve gorrit soooo lucky: yer can stay in’t Ritz for a week, and still have change out of 5p….I tell yer, yer don’t know yer born. I my day, if yer gave a waiter at the Ritz 5p as a tip, ‘e’d chuck it in yer face”.

Of course, the problem for the Young’uns will be that they’re earning a penny a month as shoe-shine boys in Piccadilly.

All of this leads me to ask, “With that level of deflation in currencies, surely the National Debts of all those currencies become (in real purchasing – ie, ‘owing’ – terms) even more unrepayable than they were before?” And the answer is “Correct”.

The Dollar, however, is getting stronger…ie, worth more…partly as a result of false optimism about the US economy, and lack of trust in any other currency…and for all I know, a little judicious manipulation thrown in for good luck and another poke in Putin’s eye on the petrodollar.

So in real-terms, US National Debt is getting bigger.

Draghi’s three-pronged answer to this from the euro-perspective is QE (inflationary), screw labour’s wages (deflationary) and tighten up tax collection so as to reduce the black market.

But if you tighten up on the payment rules, the tax take may go up, but the consumption levels in countries like France, Italy and Greece will plummet still further. And that of course leads to economic stagnation….and further deflation.

The Western banking authorities (who seem not to be authoritative about anything, and mendacious about everything) are – amazingly – saying they want 100% of all purchases to be electronic by 2017…or 2016, depending on which source you least distrust.

The Troika has already told France to reduce the amount payable in cash to suppliers or workers – and France has rolled over: a raft of Acts quietly passed late last year have all become law within the last three months. Cash payable to a sole trader has – literally – been decimated.

The banks will save trillions in transmission charges by rushing this through. You can also see what’s in it for sovereign tax collectors….but not for the economy – or us, naturally. And at first sight, you can’t see what’s in it for the fiscal, debt-ridden Exchequers…because tax hikes alone won’t even make a dent in the sovereign debt.

But when one thinks about the close relationship between bankers and politicians, it is – let’s face it – much easier to progress a bailin when all the cash at the bank is electronic and all the customers are, um, creditors.

Let me attempt a summary if I can.

Myriad false starts, green shoots, turned corners and other clichés have been applied to the Western economies that include the US, the UK and the eurozone. They all turn out, when examined, to be lies (Italy, Schäuble, US unemployment), overdependent on one income source (UK, Greece), or a mirage created by money-shifting as applied by the ECB (Spain, Portugal).

None of the ludicrously optimistic growth figures factor in the following: Chinese slowdown, vulnerable banks identified by stress tests, Greek default, lack of credit for business investment, and falling pdi levels relating to consumer purchasing levels.

Zirp is still with us, and effectively slashing consumption among the more comfortably retired….a large demographic – and the only one that doesn’t need credit.

The actual number of bankruptcies in the EU has slowed over the last six months….thanks to new laws pushed through in haste by the EC/ECB axis designed to call bankruptcies something else.

And so, to counter this deflationary outlook, the US is letting the Dollar ride high – while the EU and UK are looking to further cut wage levels and decrease smalltime tax evasion.

Well that all seems to make eminent sense. I just don’t know what all the fuss is about. The BSDs are quite happy to pauperise every consumer – and destroy every economy – on the planet; just so long as the banks, the sovereigns, the bourse movers and those behind the Gated Communities are safe, well and eminently supplied with servants….whom they can eat if times get a little tight here and there.

I know this will evoke howls of self-righteous rage from the Elders of Pluto conspiracy segment of opinion, but there is no conspiracy here. There are merely perhaps 2-3000 people between a rock and a hard place. Neoliberal business is looking for ways out, and the politicians’ job is to claim the rocks are cushions, and the ground is a luxury King-sized bed.

But the bottom line is this: their system doesn’t work, and they haven’t a clue what to do about it beyond postponement.

I understand perfectly well why some commentators here and elsewhere think the postponement period is infinite, but I assure you – it isn’t. For there are other parts of the world called Russia, South America, India and China; and these brothers have had enough. So too have the people of Greece and Italy. Within a year at most, a good many more French citizens will feel the same.

There is no way out for those running the snake-oil stall. Wealth isn’t trickling down, growth isn’t eternal, society does indeed exist, and interest rates will rise in the end.

Nobody knows what will ignite the flame: a default, a bank falling over, defensive rate rises, defiance of the EU, violence in the American underclass, or a major health event caused by the decline in social health provision or an influx of escapees from Jihadism. The only certainty is that something will: something always does.

Last night at The Slog: IQ is so yesterday darling….now it’s IA

29 thoughts on “ANALYSIS: U-turn if you want to, neoliberalism is for burning

  1. The banking industry is looking for a way to solve the ‘lower-bound’ problem where negative interest rates encourage people to withdraw their cash and keep it under the mattress. There would be two monies: electronic-money in the bank account and cash, with an exchange rate between them. Thus a cash deposit of say, £90 could be recorded as £e100 and a £e100 withdrawal would put £90 in your pocket. Interest rates could then go really negative and the exchange rate adjusted to ensure the folding stuff was no better.

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  2. Reblogged this on Awaken Longford and commented:
    Nobody knows what will ignite the flame: a default, a bank falling over, defensive rate rises, defiance of the EU, violence in the American underclass, or a major health event caused by the decline in social health provision or an influx of escapees from Jihadism. The only certainty is that something will: something always does.

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  3. China’s response is build trade routes & good will across of the world & more than half of the people,neoliberals is to attack & seize assets,over to the neoliberals,even if they stop it in many areas by going through Russia rail & road links to Berlin can easily be made with other links to the sub-continent,this with a new currency exchange will but enormous pressure on the west

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  4. Why burn just the fiat currency when you could kill 2 birds with one stone chucking elites on the fiat bonfire also :-)

    The French aristocracy may have passed laws to turn themselves into a cashless society but it is a whole other matter to implement it against a population where upon old, dusty, blunt guillotines will be put to use once more.

    If the UK government applied a bail in with capital controls each day the capitol controls apply is in effect a national strike because oops you are not spending anything. The economy totally collapses for sure and you are robbed at the same time but best of all if you are not able to buy YOU CANNOT EVEN AFFORD CAKE let alone bread. Pass the guillotine please.

    By their extreme actions against all sensibility they alienate the majority and give concensus to the majority to act and the law just became worthless. Awesome when you have all that money can buy and yet they do they do not see the cycle of life where no money means you buy nothing although you may take it with great aplomb.

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  5. I think the main reason that the plates will be kept spinning as long as possible is, the are not about to forgo their wealth and pensions thank you very much, and all the time we, the folk, have more to give, the evil day will be postponed.
    They will, bleed us dry, impoverish us beyond belief to maintain the status quo for them. We have witnessed just how far they can push Greece, Spain, Italy et al. I’m not sure they see any limit as to what they can get away with to ensure their survival, they will do it slowly but, they will do it, as they have eroded our freedoms so, they will erode our wealth, what little of it we have left. Some of us here might not live long enough to see the end of this madness.
    On that happy note….

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  6. One other problem with the “no cash” pseudo plan: what do those lawmakers think goes into those brown envelopes they like so much!

    Cash cannot be stopped. They’ll pass laws, no amount over “X” etc etc, then the trade will simply go further underground. Anonymous transactions are absolutely necessary from every standpoint, not just the sub-legal ones. And even if they do somehow ban cash, they’ll just usher in the dawn of decentralised crypto currencies. Which will happily usurp the place of cash first, then fiat right after.

    The people decide what is money, governments just take credit for it.

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  7. @ Ruxley OAP

    Barter is an excellent idea. – Especially when not done via the internet. To avoid that new tax, “Barter Tax”.

    ; – )

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  8. In 1988, with Basel I, and made much worse in 2004, with Basel II, bank regulators adopted the use of credit-risk-weighted capital (equity) requirements for banks.

    And the risk weights set in 1988 (when in 1989 most battling was about the neo-liberal “horrors” of the Washington Consensus) were:

    Lending to the government = 0 percent risk
    Lending to citizens and their SMEs and entrepreneurs = 100 percent risk.

    Who can doubt what had to happen with such kind of manipulation and distortion of the bank-credit markets?

    http://subprimeregulations.blogspot.com/2015/05/when-are-we-going-to-fine-or-shame.html

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  9. We’ve got our backs to the future alright. What we have to bear in mind is that we are dealing with a set of people who are intent on ignoring their own mistakes – who, indeed, do not see them as such. It’s a numbers game and, barring bloody revolution, a mass campaign of non-cooperation is our only alternative. Many do not yet see the need and, without them, we are powerless to effect change. With the endless promotion of minorities and other distractions, our society is more divided than at any time in history; until we find common cause, we will remain at the mercy of the hubristic ambitions of the sociopathic few.

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  10. The Bankster endgame is a Totalitarian World Govt., including a vast,approx 95% depopulation. Putin & the Chinese are not cooperating, hence the fiction that Putin is the aggressor in the Ukraine.

    http://www.wakeup-world.com/2014/08/05/agenda-21-the-plan-for-a-global-fascist-dictatorship

    Bullet point contents of this excellent article:
    “Common Purpose” – training for a post industrial, post democratic world; EU as stepping stone to World Govt; Rockefeller 2050 America map; 15 min video of Aussie politician Ann Bressington, exposing Agenda 21 & NWO.

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  11. OK I’m old and uneducated and would not know a neo liberali whatsit if I saw it in front of me.

    But the last comment of Hieronimusb … we will remain at the mercy of the hubristic (? why not just say – arrogant) ambitions of the socipathic (THE WHAT? Why not just say morally thieving feudal robber barrons of our political class?)
    few.

    By gum, you lot use big words here.

    Out in amongst the masses in the UK, we know basic words.

    SKINT as in brassic skint.
    Hungry.
    Freezing cold without central heating.
    Sanctions.
    Lost benefits.
    Lost state pension – a source of food and fuel money in old age.

    As Gandhi observed, People’s Politics Are Their Daily Bread.

    The state pension is being well nigh abolished from next year in the UK.

    See why at end of my petition, in my WHY IS THIS IMPORTANT section, at:
    https://you.38degrees.org.uk/petitions/state-pension-at-60-now

    So the old in the UK will starve for life,
    if they survive the coming arctic winter forecast in the UK for the next winter.

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  12. THE SWANS NEW PARTY

    Can this be a new party for all you clever folk to help bring into practical existence in England, please?

    Shut down all UK Department of Work and Pensions, Jobcentres, work programmes / work programmes, all private admin of work programmes.

    Replace all benefit with the below, enshrined in a written Bill of Rights / written consitution as a right of citizenship:

    CITIZEN INCOME
    universal and automatic

    CITIZEN STATE PENSION
    universal and automatic

    At least £276.10 per week – a full SERPs pension
    To men and women the same at 60.
    Current and new pensioners.

    Free public sector housing for the poorest.

    Rent Capped to Affordable levels for the rest.

    End social cleansing of London.
    Return socially cleansed back to orignal areas in London.

    Return back to London, the Londoners socially cleansed from Birmingham, Black Country and Stoke-on-Trent.

    Who will have been forced onto workfare, that denies paid work to the lowest waged and takes social housing from the locals.

    All surplus food from supermarkets to go to shut down Jobcentres with the redeployed basic grade staff

    Providing a 7 day a week free cafe, granting (without voucher restrictions) a free hot cooked meal and hot drink
    to all those in the lowest waged jobs, sanctioned, lost or delayed benefit, unemployed, disabled / chronic sick / terminally ill lost benefit.

    FEED ALL. HOUSE ALL. PAY OFF NATIONAL DEBT WITHOUT AUSTERITY.

    Interested?

    THE SWANS NEW PARTY ORG UK
    http://www.theswansnewparty.org.uk

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  13. Since Call.me.Dave is trying to work out a plan to renegotiate terms with Europe, I thought I would look up our trade defecit with our friends and partners.
    It seems that, while it used to be a £20 billion annual deficit (what we buy from them against what we sell to them, it has grown 50% in the past 2 years (2012-14) to £30 billion a year. If that doesn’t tell Dave he is on the wrong end of a trade deal, nothing will. Quite apart from being on the wrong end of a political deal. And that was before the Euro slipped 15%

    Of course if Dave devalues sterling 50% against the euro, he might get it back to parity.
    Gawdellpus.

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  14. In my view what happens as “postponement” runs out of runway and chickens come home to roost ….
    * government continues to ratchet up war on tax (oooohhh I mean terrorism) with a war on cash …. I’m sure we’ve all seen the recent co-ordinated flag flying on this topic by Brown et al
    * government will take up tax rates as bonds go tits up
    * government will ensure that bail ins are the new bail outs when some of the biggest banks go tits up in 2017 (already slipped in by the treasury to go live in May 2017 in the UK)
    * governments will encourage negative rates to try and get consumers to spend
    * potentially government could go after private pensions (Obama is making noises about 401k accounts in the States right now)
    * citizens will flee to private assets in the wake of a crash in confidence in government (super rich are already doing it which is why Picassos are selling for record figures)
    * this will eventually lead to inflation
    * civic uprisings will be the name of the game; government repression will be the response.
    * if they kill cash it will take a while, but a new form of barter will emerge, human nature being what it is.
    We are walking blindly into an age of economic totalitarianism as governments seek to remove cycles. *rseholes – you can no more stop cycles than you can the earth going round the sun.
    Diversify into hard assets, fight for cash, don’t believe the £85k bank compensation figure (they’ll break their word), take out 25% of your PP and invest it yourself (you can be trusted more than they can), keep your head down and hope …..

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  15. Indeed he did, and I believe that is entirely right. To stop feeding a governing class who are blind to their own avarice and complicity would be a valuable and practical step towards a healthier society. The stables would need cleaning out first – we need some Greek heroism, and so do they!

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  16. I would be interested in joining any Party that could achieve all that Chris, but there is only one way to do it, and that is transfer ALL the money and assets of the rich to the poor. Number one, that’s immoral; number two, it could only be done by violent revolution, and we all know where that leads; number three, within two generations the alphas would have all the money again; and number four, you’re suggesting we rename the United Kingdom The Benefit Isles….with no income to keep up the lifestyle.
    Apart from that, it’s a bonzer idea mate.
    If the words are too long for you here, I prescribe a regular daily diet of the Mail, Sun and Sport.

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  17. Thanks, KJH – interesting scenario. How would gold or silver coins, rounds, bars and such fair in this system?

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