As usual, Max Keiser’s show is always worth watching. This time, it’s for something his guest–Simon Rose of Save Our Savers said almost offhandedly toward the end of the show (23:57 mark):
“It’s like being in The Matrix. You know, we have an ‘inflation target’ which they’ve only just reached about a couple of times in the last five years–of 2 percent. Why does nobody question why they actually want there to be 2 percent inflation every year anyway?“
Great point, great question. The answer to that question actually comes at the beginning of the show, in which Max and Stacy remark on the number of think tanks in the U.S. and U.K. which tell us all what to think, and what they tell us to think about inflation is that inflation is good and normal, while deflation (i.e., prices going down) is horrible and socialistic.
Rose goes on to point out something that is as true of the U.S. dollar–otherwise known as the world’s reserve currency (for now, anyway)–as it is of the pound, the currency he’s actually talking about:
“Over my lifetime–and I’m not that old–on the official numbers, money, the pound has lost 95 percent of its value.“
Likewise, as previously noted on this site here, the dollar has lost essentially all of its purchasing power since 1913.
(above graphic taken from: http://visual.ly/purchasing-power-us-dollar-1913-2013)
Rose finishes his point:
“Well, I’m sure many savers would actually prefer it if we had deflation. ‘What, prices of things actually going down? That would be fantastic!”
Unfortunately, it is “fantastic”–as in “pure fantasy”–because the banks and the all-important Financial System are all about seeing to it that prices always go up, never down. That ensures that you must always borrow money from the Financial System, never able to survive off the fruit of your own labor (as discussed in yesterdays post: PRICE-RIGGING IS THE NAME OF THE GAME: TAIBBI’S LATEST). Ah, the system works!
I never thought of this as intended to make people borrow. They taught me to think of it as making the economy grow or something I obviously didn’t really understand.
Well, if wages also went up along with prices, that would be great, but as we’ve seen wages have barely kept up with inflation: http://thinkprogress.org/economy/2014/01/24/3203481/wages-grow-1960s/:
“Wage growth has been particularly slow in the aftermath of the recession. Real wages have declined 7 percent since 2007 and the pace of growth has been slowing down. There are currently about three job seekers for every job opening — making it risky for the employed to push their bosses too hard for pay increases — and those who do find a job are increasingly ending up in work that pays very little.
But wage stagnation is not a brand new trend. American workers have seen a “lost decade” of wage growth, with wages flat or declining for the bottom 60 percent of the workforce between 2000 and 2012. At the same time, workers’ productivity jumped 25 percent during that time. And things have been bad at the bottom of the income scale for decades: since the 1970s, the richest 20 percent of Americans have seen far more income growth than the bottom.”
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