Monday, 18 November 2013

Mon the deflation!!!!!!!

That the total rewards paid to FTSE company directors grew 14% over the past year was as predictable as it was repugnant,so lets have some fun at the scrounging, subsidised bastards’ expense. Yeah, that’s right, according to the right’s own arguments all these FTSE boys are subsidised scroungers.

Here’s how; reading thru some of the details it turns out the bulk of the gains were from “share-based long-term incentives” i.e. if a company’s share price goes up, the execs get the mega moolah. This is terribly lovely until you realise that for years now monetary policy in Britain, in particular quantitative easing, has been geared to boosting asset values. And shares are an asset i.e. a big swodge of the gains executives creamed off this year are hee haw to do with them and plenty to do with a policy the British Chambers of Commerce says, according to CNBC, is debasing the pound!

As for the subsidies, well, lets get realistic for a minute and ignore all the annual report and account bollocks about how such and such a thought-leadership-best-in-class business strategy is delivering real gains; the bulk of the business costs being cut in Britain today are to do with labour be it via redundancies, shorter hours, pay freezes or the closure of pension schemes. Now, what happens when pay gets cut or people laid off? That’s right tax credits and unemployment benefits pick up the strain i.e. the government i.e. us, is subsidising all the supposedly best in class business models all these FTSE douchebags claim they’ve successfully implemented ahead of plan.

Then there’s the very, VERY obvious point, which is in an economy still miles away from trend growth of c. 2.5% a year, if the cash all these execs get goes up 14% a year, they’re getting an even bigger slice of the cake.  So yeah, sure, mebbe the UK GDP dead cat is bouncing for a change, but so what given all of the benefits are getting ripped off by the already very rich; as it stands things work for them, but no-one else or to quote the CBI on recent (below inflation i.e. waaaaay below 14% per annum) pay rises “It's clear that pay restraint is continuing to underpin employment growth. We expect wages to pick up next year, but sustained growth must come first to protect jobs” i.e. we’re all expected to endure yet another year of real terms pay cuts for the greater good whilst the subsidised, scroungers in charge get 14% increases for managing mediocre, subsidised growth.

This brings us to the spectre of deflation currently haunting the Eurozone. Now the mechanics of why deflation is typically regarded as a bad thing are clear enough; if prices fall, then consumers and businesses are wracked by uncertainty and likely to postpone spending e.g. why buy a widget making machine today, when (a) it might be cheaper tomorrow and (b) the widgets it makes will sell for less than you thought when you bought it.

But, speaking as an employee and as a consumer so what? In the current environment one thing I’m certain about is that my pay is set to fall further behind prices i.e. its real value is going to keep falling for the forseeable future so to me a dose of deflation, given it would boost the real value of my pay, is a good thing.

Besides, the arguments against deflation looking pretty weak from my perspective. Like, bearing in mind my marginal propensity to consume is much higher than a FTSE executive’s which is an important thing in the consumer driven UK economy, its not as if I can actually postpone the bulk of my spending given it involves things like food and monthly bills. And as for consumer durables, well, what characterised the NICE decade if it wasn’t ever cheaper, ever higher spec Chinese made goods that people kept buying in spades regardless? So actually, falling prices have a very obvious appeal; but ahhh, this would undermine business confidence and investment and ultimately economic growth – except, so what? Right now, as the 14% FTSE subsidy junkie increase makes abundantly clear, any gains, however teeny, will just be creamed off by a swathe of fat, fat fatty cats whilst me and pretty much everyone else in Britain gets less than hee haw, so feck it, lets have some deflation i.e. the hurtling extent of inequality is such, what is and isn't a good thing for the economy is increasingly a matter of where you sit in the class structure *.

* The bigger point here is the growth in economic inequality and all that entails is, besides being unjustifiable in its own terms, very obviously socially and politically corrosive and, increasingly, a threat to the economy. As for the CBI bod quoted above, every employer, the Tories etc., they really should think about Orwell’s chat about Lenin I think it was; “You can’t make an omelette without breaking eggs.”, “Yes, but where is the omelette?

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