If you search “cost of living” on Google News, you’ll find a virtual rhapsody of train wrecks. It’s like a shopping list of disasters. Capitalism, the socially inept headless chicken with dysentery of modern economics, has struck again.
Rejoice, you bastards.
It’s so bad even our gloriously subservient mainstream global media are calling it a “crisis”. (Were you guys ever actual people? This was the better option, right?)
I’m not going to bother you with the streams of numbers. You can read those at your leisure (Remember leisure? Of course not.) when wondering which bill is most obnoxious.
Your money is becoming worth that much less on an hourly basis. Only capitalism knows how to generate such vast amounts of money and make everything unaffordable at the same time.
The headlines make interesting reading in themselves:
ABC Australia: “Inflation, cost-of-living, supply chains, declining wages, climate impacts and inequality are leading us towards global unrest”. Wow. Just when you thought fascism was your friend…?
Politico: “How to spend all that extra money you’ve got”. Arguably the best headline of the lot.
Courier Mail: “Why staying positive will help kids understand tight budgets”. This coverage comes with a decorative paywall before you can read the article, of course.
You get the idea. Typical stories include energy costs, food, housing, rents, etc. If it’s critical for basic living, it’s getting a lot more expensive, exponentially. The common factor is that people simply don’t have the money to pay for these things anymore.
If you call it “inflation” and search The New York Times, the coverage is more genteel, but you can hear the wheels coming off the ol’ economic jalopy. The simple fact is that pricing has now started to eat itself alive.
Inflation is a sort of euphemism for the last 20 years. Housing prices have been spiking for a long time. Housing is the core living cost for anyone. It was inevitable that when housing went up, everything else would have to go up, too.
The rental market was the original DOA in the mix. All else followed. City rentals worldwide have been trying to manage huge mortgages and investment portfolio costs with increased rents. They have now discovered, belatedly, that there’s only so much liquidity in renter’s buckets.
There’s huge money in property worldwide. That money needs to protect itself because assets are so expensive now. Massive gouging in health, education, and everything else has drained the buckets a lot more over time.
All this was foreseen, as usual, it was warned about as usual, and as usual nobody took any notice. The money dragged out of the mainstream economy in this global pricing mugging isn’t coming back.
This isn’t “hyperinflation”. Yet.
With hyperinflation, you can have lots of money and still be broke. Hyperinflation is when you can literally spend millions to buy a potato. That actually happened in Germany in the 1920s. The current totally unnecessary meltdown is a soft Autumn breeze by comparison.
We’ve just spent the last 20 years or so giving extremely rich people and banks lots of money to lend out at 10-20 times the cost to borrow. (You borrow at 0.25% and lend at 8%. Therefore, you’re a genius.)
Miraculously, these selfless monastery-dwelling financiers also jacked up prices for everything else, including health insurance and housing. This drastically increased the demand for credit and made a lot more money each way on loans.
(The sub-primes, bogus mortgage securities, added some more money. Trillions, in fact. That worked out well, didn’t it? Remember how much money is in financial derivatives, and shudder while you can still afford to shudder.)
But… At a certain point, adequate finance also becomes inaccessible when prices go out of control. This is where hyperinflation can start. We’re nowhere near that point yet, but you can see the pattern.
Somewhere in a meeting of cool mature intellects a plan to capitalize on rising prices may be coalescing into yet another disaster for the world. A fabulous vision of rich useless office boys and girls might come seething out of the sewer to make damn sure nobody can afford anything and will have to borrow. That’s when hyperinflation becomes a real possibility.
There’s a subtle psychological nuance here. A horde of very rich people who never pay taxes and have spent decades demanding tax cuts are running global finance. American property taxes used to be around 45% about 30 years ago. They’re now 15% and housing prices have vanished into the stratosphere.
A lot of rental housing in the US is corporate-owned. Rent increases are basically seasonal. “It’s Spring, so give us another 10%” isn’t exactly unknown. This is how inflation becomes entrenched for decades. The cost of living “crisis” is essentially built in to this system.
Wealth destruction
In the 1980s, an OK house was more or less affordable even with double-digit interest rates. Now, with single-digit interest rates, it’s not.
This is where wealth destruction kicks in. The actual value of these billions and trillions is reducing in terms of what that money can buy. Higher prices act as very effective brakes on purchasing power. Therefore, you need more money to have equivalent buying capacity.
This has been going on for decades. Adding basic living expenses also going up, “wealth” is a moving target and it only goes one way – Straight up out of reach.
You’ve gotta hand it to them, though. Nobody else would know how to be rich and still short of money while devaluing their own wealth so thoroughly. This is a sort of reverse genius.
To make this system work at all, you have to up the value of your assets. That stops working when nobody can afford your prices. In the property market, a very high-value asset can sit there for years unsold until it eats up all your money. It’s the classic minefield for property investors.
Then, also miraculously, costs for property like city taxes and other costs also go up. So you’re holding an asset which is costing you money, so you need more money. The capital snake is eating its own tail, at this point, and eating fast.
Solutions? Yep.
A few solutions do suggest themselves:
- Just stop cranking up prices. You can’t get money nobody has to spend.
- Finally figure it out that if money is tight, only the people with money can pay for anything. Who’s gonna get gouged? You are.
- Anybody at one of these genius conventions who suggests raising prices should be thrown out of a window, several times if necessary.
- Focus on affordability, not unaffordability, for the first time ever.
- Unplug the racketeers from the supply chains.
- Try being actually price-competitive instead of creating gigantic sector-wide cartels.
- Last but not least, for policymakers – Try making the acquaintance of something called “reality.” It’s a real buzz, you’ll love it.
__________________________________________________________
Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
