THE NEW STRATEGY: Kick-starving your citizens into consumption recovery

If The Slog has had one recurring theme that outscores all others since 2010, it is that – with this massive shift we’ve seen from labour to capital since the mid Nineties – we of the serf class cannot consume at the rate the neolib model requires if the elusive Eternal Growth Paradigm is ever to be even attempted, let alone achieved.

A month into 2016, every large multinational foodco, bank, Hedge Fund operation and hitech hype combine is variously announcing ‘cost cuts’, ‘restructuring’, ‘consolidation’ and every other US corporate euphemism for firing people and capping the remuneration package of the lucky survivors.

Nicholas Wilson’s favourite bank HSBC this afternoon announced an eye-watering $59billion in cuts to staff costs, and they are far from alone in this. Large and sclerotic corporate entities only ever have one solution to falling profits: terminate the worker bees. Bank of America has been engaged in the same (albeit more quiet) savagery for the last 18 months, and Yahoo’s latest “new plan” is about exactly the same ‘strategy’. Caterpillar, US Steel, the entire shale-fracking sector, The Guardian, Sears, Sprint, Macy’s, BP, General Electric, Pearson, IAG….all of them are shedding jobs.

But the new data announcing that YOY, US December consumption was flat came – once more with feeling – as a surprise to those who call themselves observers….and yet seem unable to spot the obvious. The Chinese PMI data disaster (adding weight to this morning’s Slogpost about overstated Beijing gdp stats) was described as disappointing. While didactic Davos divas drivelled on about distracting data, more and more signs came in to show that – far from being neurotic – the financial markets are spot on the money.

Luxury item sales plummeted last month…in signature sectors like top-end watches and élite retailers of the Needham Marcus ilk. Far from being unsupportive of the world’s falling bourse prices, economic data poured forth to reflect it almost exactly.

US Foreign Relations Committee boss Richard Haass went on Bloomberg this morning CET to flatly contradict the devious of Davos, saying that the Chinese economy is in big trouble, and that while yes, it is in transition, it is a global demand collapse that has scuppered their transition timetable to a very dangerous degree. Last week, I posted to say that oil’s ‘rally’ was nothing more than a bouncey feline: today has been a bloody one for crude, as it fell back $2 to return to its logical trajectory….down, down, down.

***************

It finally became clear that the monetarists had lost their marbles when – quarter by quarter after 2012 – the Eurogroupe kept insisting that the more one starved the Greek consumer, the more easily a consumption-based economy could be kick-started back to health. Although a huge variation in degree is involved here, in terms of reality failure there is little to choose between the ideas of Wolfgang Schäuble and those of George Osborne: they are twins when it comes to amateur madness.

However, the Truth has at last gone from being out there to out front. The kamikaze malaise is spreading from the socially deprived to those naïfs who hope to collect the crumbs falling from the table of the depraved. What we’re seeing at the moment is a second stage of neoliberal cannibalism, in that the consumption gap is heading upmarket.

The far more unpredictable tertiary stage comes next. Calling the When of it all remains a mug’s game, but there are some obvious symptoms to look for. Prominent among these will be severe Sovereign debt crises and at least one major bank failure. Escape from that outcome is impossible in a world where State budgets and bank bets have been based on the idiotic optimism of crowds.

Ultimately, it is this simple: don’t throw your best weapon on the fire.

Earlier at The Slog: EU, Chinese & African moves Behind your Back

23 thoughts on “THE NEW STRATEGY: Kick-starving your citizens into consumption recovery

  1. Well, the Germans did kick-start a recovery in the DDR through funding house renovation. Everybody made a profit, and jumping on the bandwaggon made even more of a profit … for the German government, through loans paid out by their banks.

    Naturally, not a word of this got into the mainstream news, leave alone that of Britain.

    It worked very well for the Germans until the Yanks kicked their bucket of swill over and crashed a few economies along with it. I mean, it’s not as if they’d guaranteed the securities they’d sold, is it? There are those who call what the Americans did “fraud” – the Americans just dust the accusations off their shoulders as though it were dandruff. All in a day’s work for an American bank.

    It’s what a regulation free zone does for one. Banks fail, and fail again through being given loans.

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  2. If big business requires a customer base in order to sell it’s products then I fail to understand their business model if the serfs are pauperised. The only part of big business immune to this is the military industrial complex. Aha, methinks I smell a rat.
    The future is not good..

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  3. Iain, big business isn’t there to sell to customers, it’s there to make money.

    For the person who understands the link between customers and income, it’s rather difficult to understand how these people think… but they literally have no idea about their customers. Just look at their advertising: it speaks of the things the business is interested in, not what the customer needs… look at the contact page of a big business: it’s all a mine-field for the person trying to get through (which has been mentioned a few times on this blog, too).

    In short, like a supermarket, the big business offloads stuff, rather than selling it. There’s not a whiff of customer service, because, well, like the Gentleman I spoke to in this post on my blog, it was literally beyond him that he had a customer base at all. Believe me, he’s not the only one…

    https://gemmasponderings.wordpress.com/2016/01/11/meeting-a-successful-businessman/

    As to the military-industrial complex, that is another thing altogether: and it’s why the US and UK are so keen to beat up other countries!

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  4. Gemma, I believe the German banks were prevented by law from getting into the sub-prime shenanigans directly. So they expanded into that great cess pit called the City of London. Deutcher Bank still hasn’t come clean about London’s exposure to all manner of caustic derivatives.

    As for the apparent suicidal behaviour of the ailing multi-nationals, the plan has been quite simple:

    1) Borrow free money (QE) and cook the books (share buyback is the favourite ploy)
    2) Use cooked books to pay CEO (and all other party to the scam) shed loads of cash (see cooked books above)
    3) If times get tough, sack the workforce
    4) If times get very tough, retire with golden payoff (just before creditors pull the plug)

    Steps 1/2 above are an annual event until the free money stops.

    The only people who lose are the workforce. Every other player in this virtuous circle will get paid varying amounts of crooked money.

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  5. I do not buy this ‘structural collapse of Northern hemisphere ,democratic, economies’. It takes time for the wonderful effects of the oil price fall to show up in increased consumption. Look at what happened in the 1980s. This time will be more difficult for countries that are insolvent( Greece), countries whose banks are bust (Italy, Spain, France) and countries in denial as regards government borrowing, consumer lending and inflated house prices (UK). China, of course, is in a class of its own on all 3 criteria. Russia and the ghastly Saudi Arabia will follow Nigeria to the begging bowl, called the IMF, In due course.after a severe market shake out, the US and Germany will be the place to be .

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  6. Now it gets interesting, Kick yourselves, & remember when you said “I’m worth more than that!”..

    What ever the accountants say, repeat after me… “YOU ARE WRONG (…& by the way your math is crap… you need one of these “=” )

    Seems we have hit “Peek Person”.

    Incisive work John.

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  7. Stevie

    I believe the German banks were prevented by law from getting into the sub-prime shenanigans directly

    Which is precisely what TTIP is being hammered through via the European Union. I’ll allow the banks to behave in Frankfurt in the way they do in London.

    The point you bring up about Deutsche Bank’s activities in London is an important one: the felon is a British bank that is a subsidiary of Deutsche. There is an Irish one in Dublin that exploit the Irish loopholes, just as there are for other banks, some of them from a country that speaks French. I can imagine that a few of their problems are not home grown. The media, however, may put a different spin on things.

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  8. Hello Gemma, I hope you don’t think I’m “Getting at you”. I’m not.

    You are probably correct in this statment, “Naturally, not a word of this got into the mainstream news, leave alone that of Britain.”

    But you might wish to look at the following English language, after the fact, commentary:

    http://www.spiegel.de/international/germany/homesick-for-a-dictatorship-majority-of-eastern-germans-feel-life-better-under-communism-a-634122.html

    And:

    http://www.theguardian.com/commentisfree/2015/jul/17/germany-greece-wolfgang-schauble-bailout

    Apologies to JW for the link to the last publication, but it was not mentioned in “The Daily Mail”.

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  9. Gemma nobody knows what TTIP contains, not even you.

    William, it is not just Northern Hemisphere economies in the toilet, this is not called. a GLOBAL economy for nothing. The low oil price, along with the all time low commodity prices are not a stimulus because global demand is flat lining. The European countries you mention are in the toilet pan because the IMF have forced austerity on all of them which kills demand in every economy it touches. The IMF is certainly no begging bowl as it rapes each country it bails out.

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  10. Must be said that many of the high-end watches are sooo ugly, miracles of craftsmanship notwithstanding. How long before luxury / trinket cars really feel the pinch i.e Rolls, Bentley, Aston etc.

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  11. Stevie, it’s not hard to work out that America wants a regulation-free Europe, where their corporations can make money, freely.

    The details of the treaty are irrelevant. In any case, do you think for one moment that the powerful corporations (who now run the US and UK governments) would allow the Media to tell the truth?

    Poor old JW can’t speak of certain things because of press and blogging freedoms, and that’s not even in the UK!

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  12. On topic. Highly, highly recommend – “The Big Short” Have seen it 3 times to hear every line and appreciate the absolute ghastliness of each and every one of the scaly individuals and the corrupt institutions that were involved.

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  13. William
    Interesting take, but I ask whether current low oil prices are a reflection of lower demand, and whether tomorrows taxes on renewables will ever be so large as to support the massive populous multi cultural society today that we have spawned while oil was in growth phase 1960’s onwards. Maybe this over population, with aspirations and expectations that we were boasting 30 years ago will never be satisfied, and our economies will continue to stagnate.

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  14. @ Stevie .. absolutely not . The first big victim of sub-prime was IKB a small industrail finacing bank who were last into the trade and hence bought the loans most likely to fail : Goldman did this deal and I believe the counterpart on the other side was our friend Paulson . The beauty of sub prime was that the ‘transformation’ process involved several banks , illogical structuring and the mind-boggling idiocy of teh Ratings Agencies .Anyone see Greece was upgrade last week … haha .

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  15. With the final failure of consumptive growth central bankers will once more fall upon the QE sword.

    Why such an end and end it will be. For they will apportion most if the QE to themselves again, shrinking the real economy in relative size, unable to support the relative growth of unsustainable debt because it just got worse.

    Central bankers,1% ers will drive the dagger into themselves under such a system so it is time for revolution once more.

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  16. Top work, John.
    I wanted to ref a site: http://www.themoneymasters.com
    but my access to this site has been limited.
    So, from memory;)
    “The purpose of this financial crisis is to take down the US $ as the stable datum of planetary finance and, in the midst of the resulting confusion, put in place a Global Monetary Authority [ GMA – run directly by international bankers freed of any govt control] – a global financial control organisation.” – Bruce Wiseman.

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  17. Professor Carroll Quigley, author of “Tragedy & Hope”:
    The powers of financial capitalism had a far-reaching plan, nothing less than to create a world system of financial control, in private hands, able to dominate the political system of each country and the economy of the world as a whole…their secret is that they have annexed from govts, monarchies & republics, the power to create the world’s money…”

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  18. the thing about the growing drumbeat of layoffs – sizable layoffs – is that the MSM go on to the weather report or the neighbor’s cat up a tree without a seconds pause or comment. CAT announced some 5,000 jobs being ‘disappeared’ a month or so ago and while we had editorials on funds for mental illness in the MSM, we saw nothing about the truly devastating sums of layoffs happening across the industrial nations. within these numbing abstract numbers are worker’s lives crashing into a vacuum.we will simply have more hype on sports to divert our attention.

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