Friday, October 07, 2011


"The deterioration in the outlook has made it more likely that inflation will undershoot the 2% target in the medium term"

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"


Anonymous said...

but question is he a liar or just stupid?
I would think liar, but reading all over the net, its amazing how many people believe that stimulating the demand of foreign products is going to improve the wealth of the country.
Its just crazy.
Its like the opposite of mercantilism.

Even Laban worries that "Retailers suffer"
Well good, we've had too much frivolous spending, it needs to be reduced.

What we need is to reduce spending on imports and start producing more at home.
And I know thats not easy, but in the long run its got to happen as we'll not be able to afford foreign products anyways, so we might as well get on with it asap.

Sgt Troy 11th Dragoons said...

"I would think liar, but reading all over the net, its amazing how many people believe that stimulating the demand of foreign products is going to improve the wealth of the country.
Its just crazy."

It's in their short term sectional interest of course. Borrow yet more to pay the public sector wage bill, spend it on imports.People believe what they want to believe, and they have been thoroughly propagandised with all the globalisation guff.

"Its like the opposite of mercantilism."

which is what the Chinese are heavily into

Hexe Froschbein said...

The QE is not 'shameless' but simply a rearranging of the metric to reflect that actual worth and not the imagined value of people's wealth.

And QE is probably the only bit of honest accounting we've had in a long while... *smirk*

Anonymous said...

expalin a little more, please.

Hexe Froschbein said...

@anonymous: anyone who knows how the exponential function works (with Markov chains being optional knowledge for extra marks) could see in 1980 that when the boomers get to pension age, there won't be enough offspring paying into the pot or generating enough wealth to fulfill all the promises that were sold.

Nor is it sane to expect 30 years of full living expenses for paying in a small sum for 45 years either -- there is no free lunch.

Also, money is not really an asset, it's an ephemeral token that allows us to easily wheel and deal with real assets and inflation is a good (and necessary) incentive to keep people keen on doing real things with money.

So, the QE is nothing other than a simple rearrangement of the metric scale to reflect reality a bit more realistically(or so).

No-one actually lost anything, because they never had it in the first place, all they had was a dodgy promise that was obviously a con but they still bought into the idea because they wanted it to be true... as always: caveat emptor and all that jazz.

Pensions and other such long-term promises will have to be wiped out in order for the remnants of our culture to still be viable, it cannot and will not be paid. You may as well mentally downgrade them to perhaps 5% of initial value right now, instead of faffing around with a staggered admission of the truth.

Pensions lost a third of their value so far, and it will be more soon, because the concept of pensions is as unsustainable as the idea that students should pay 9% extra income tax for 30(?) yrs and at the same time buy houses with 10x wages mortgages, whilst bringing up enough children without there being an adult available for the actual job of parenting whilst paying the boomers pensions and not getting an inheritance because it's all being spent on strangers looking after granny.

Really, the problem is that despite genetic engineering, there there still is no egg-laying wool-milk-pig! ;-D

The crazy thing is that as late as WWII our culture invented a whole new branch of mathematics[1] which isn't all that hard to master for anyone with a little math (and some honesty) and that would have shown the governments 30 years ago that their strategy was a sure loser.

But it takes 20-30 years for the results to show, so if you think today is bad, wait until Labour's recently planted seeds mature.



Sgt Troy 11th Dragoons said...

The Germans don't seem to think that their pension system is unsustainable apparently

"Strong annual returns for pension assets of companies listed on Germany’s major Frankfurt stock exchanges, has prompted Towers Watson’s Dr. Thomas Jasper to claim that the pensions ‘crisis’ in Germany is over.

The 30 firms listed on the blue-chip DAX index have seen their pension assets record a steady 4% return on average while those of firms on the mid-cap MDAX index yielded 5% through 2010, according to a recent Tower Watson report."

Anonymous said...

Hexe , get your own blog . My missus agrees with all you have wrote (written?) I know from experience you must be right!

Anonymous said...

I don't think you're right hexe, if pensions stayed as they were originally created in 1909 at age 70 on a means-tested basis, and adjusted upwards inline with life expectancy then there wouldn't be a problem.

The problem is caused by boomers refusing to accept that since they have lived 20 odd years longer than was originally predicted that the pension system needs to change to reflect that.

Already large numbers of people live to 90+, soon it will be 100+, which will mean that if you start work on average 20 years old, and retire at 60, you will work for 40 years and be on a pension for 40 years. impossible.

Weekend Yachtsman said...

"...until UK real wages are at Chinese levels and pensioners are self-immolating..."

That's their objective.

They may be evil dubious traitorous deceitful lying twisting scumbags, but they are not stupid.

H said...

@ Troy: The vast majority of German pensions are state funded. It even used to be an election slogan/mantra: Die Renten sind Sicher! (the pension are safe!)

And to top up state pensions, people buy life insurance, and that needs a little more than 4% returns, right now, not even the fund managers will get paid their wages out of that... it's all not looking good.

Nowadays, you can mention the war again in Germany, however, don't say a word about pensions... :-X

"don't think you're right hexe, if pensions stayed as they were originally created in 1909 at age 70 on a means-tested basis, and adjusted upwards inline with life expectancy then there wouldn't be a problem."

If the word 'if' wasn't there, I would be a millionaire... ;-P

Fact is, pensions didn't stay as they were, people now live 30 years after retirement (and not just 5) and boomers did not accept reality (yet).

You show me *any* system in which 45 years of work can pay for 15 years of expensive education and a 30 year holiday coupled with needing health and carer services -- it does not exist and unless we find the magic cornucopia it won't either.

I wish I was wrong btw, but someone needs to show me the math that says it is so.