Ramin Mazaheri for the Saker Blog
Among capitalist economists stagflation is the worst possible outcome, excepting a Great Depression.
They even admit they cannot explain it (especially Keynesians), or rather they choose not to – this is why the word has barely been broached during this very depressing coronavirus era. In exactly the same vein, the West’s intellectuals claim they cannot explain the causes of World War I (as I discussed last week here).
There is clearly something in stagflation which, like the banker collusion which orchestrated World War I, strikes at the moral heart of the Western liberal project.
They don’t know what caused the 1970s stagflation, but what’s certain is that the solution – the highest prime interest rates (20% in 1981) in US history, which provoked two recessions and a disaster for the housing market – is not available today in this age of Western ZIRP (Zero Interest Rate Policies) and Quantitative Easing. A total reversal to that type of a contractionary monetary policy would lead to bankers starting World War III; negative interest rates could reach the US as soon as this winter.
The West wants to ignore stagflation because fixing it is so very, very hard. If Weimar Germany represents the most dynamic pole of Western capitalist-imperialist socio-economic breakdown, then stagflation is its equally destructive passive pole. Stagflation was indeed put to music via the punk movement, with its trumpeting of what everyone knows: the Western capitalist dream does not work without imperialist wars, the liberal democratic neo-aristocrats are phony hypocrites, and anarchy in the UK (and the rest of the West) is needed in order to overthrow the status-quo loving “keep calm and carry on-ers”.
Cover your ears – the West is about to get punk again.
“Stagflation” is a portmanteau of “stagnation” and “inflation”: it is the combination of slow economic growth, high unemployment and price inflation. Stagnant wages is a fourth component but it is often left out because the capitalist West doesn’t want to talk about lifting wages at home, in their factories in Haiti, or even on Mars.
Astute readers should be re-reading that sentence and thinking: “Well, since the Great Lockdown started the West certainly now has all four.”
Indeed, but let’s quickly recap:
Slow economic growth – YES: This existed pre-corona in the West’s “Great Recession”: a Lost Decade for the Eurozone, while US economic growth was only in the asset classes of the 1%. As a result of their hysterical overreaction to corona Western GDP growth is going to drop probably around 5%, which is a total catastrophe for a Western system that relies on constant growth and wage-earning instead of central planning and government intervention to prevent economic catastrophe for their lower classes.
We know there will be a corona-related demand shock: the expectation of continued economic chaos will increase the desire to save and not spend. There is also the demand shock caused by their generalised consumer terror – i.e., people who remain too scared of corona to even shop or travel, which will affect businesses from luxury goods to tourism to restaurants to the mall.
High unemployment – YES: This is just as obviously another catastrophic but entirely foreseeable consequence of the Great Lockdown. Estimates range from 25-42% of all lost jobs in the US are never, ever coming back. The Eurozone already had persistently high unemployment since 2008, whereas Germany and the US falsified/degraded their unemployment rate with part-time work/minijobs/gig economy jobs.
Price inflation: YES – Just talk to any small businessman: their first goal upon reopening will be to recoup months of zero revenue – they are desperate to do so because they still had to pay costs like rent, debt servicing, utilities, wages and more during the Great Lockdown. Thus, they will raise prices and cut costs (i.e. fire workers) to not be a part of the mass bankruptcies which will arrive once the West actually gets back to work and sees how bad things are now.
Consider the effects on prices of these new Great Lockdown-inspired obstacles for business such as social distancing: If restaurants, for example, are only allowed to run at half-capacity, they have to either sell twice as much food or raise prices. Talk of supply chains moving back to the US are far-fetched, given that US corporate law requires that stockholders not lose a penny just to aid the nation, but supply chain disruptions will raise prices.
How can the price of the few remaining Western government social services go down when government tax revenue has plummeted?
This is all why nobody is expecting prices to go down in 2020, but many are predicting crashes in asset classes like homes, stocks, bonds, luxury goods, etc.
Low wages: YES – This is never discussed in the West because the outlook is so perpetually depressing in a neoliberal-capitalist system which both refuses wage controls and guts stable civil service jobs in order to hand them to the unstable, profit-oriented private sector in the name of so-called “efficiency”: When the Great Lockdown ends there will be an enormous oversupply in the labor market, thus driving down wages – the Western MSM dares not discuss this inevitability. For those who kept their job: if you thought you didn’t ask for a raise from 2008-2020 because you were too shy, fear of joining the jobless ranks will keep you even quieter in 2020.
So we see that all the components are there – were already there – for Western stagflation.
A solution to stagflation would be either increased wages or increased “People’s QE”. Given that wages represent a long-term drain on the bosses’ profits, we should thus expect the Western 1% to prefer another round of direct, but one-time, government payments to individuals and households – but this would be only a temporary staving off of stagflation. However, the preference of this band-aid solution will be resolutely opposed by anti-socialist neoliberals who view government intervention as the work of Satan, as well as the existence of Austrian/Chicago/“immoral competition is normal”-capitalists who are licking their chops at the prospect of buying up the bankrupted at low prices.
From the outset I warned that the West was fooling themselves into thinking they had the same strengths and capabilities as socialist-inspired nations like China, Iran, Vietnam and others – they employed quarantining, control methods and collective-over-individualist concepts used by Asian nations, but without having similar cultures of government economic intervention nor widespread trust in their governments, and amid their economic Great Recession on top of it all.
But you hear that analysis about as often as you have heard about stagflation.
The West will continue to avoid stagflation discussions by continuing to distort the data
The West won’t discuss what it can’t explain or what threatens their cultural chauvinism, whether that is World War I, or stagflation, or how Trump doing the exact same thing Obama did is somehow only evil when Trump does it.
Slow economic growth – the excuse of Western liberal exceptionalism: “2021 economic growth rates can only go up from 2020, thus the definition of stagflation is not met.” This is a purely technical and pedantic reply – there will be both stagnation and inflation, but by taking as narrow and as uncritical a view as possible of what stagflation truly is, then Western journalists can say “claiming stagflation is wrong”. But this response can’t endlessly hold up any more than the “confidence fairy” justification for Eurozone austerity did.
High unemployment – the excuse of Western liberal exceptionalism: This will be the toughest to hide, so they will likely do something similar to what Emmanuel Macron did: stop reporting the embarrassing unemployment data every month and only give it quarterly. Perhaps they will do what the US and Germany do – pretend as if “underemployment” does not exist (even though it is the defining feature of their young adult class for over a decade) and act as if working one hour per week makes one “employed”.
Price inflation – the excuse of Western liberal exceptionalism: Their inflation gauges already exclude the biggest expenses for the average person: food & energy (too volatile to include, they say), housing, health care and education costs. Ask a German politician and they will tell you that they are watching inflation like a hawk and that it is certainly staying in their “acceptable 2% range”. But ask a normal worker – who keeps paying more for the metro, beef, fruit, housing and all those other crucial things which inflation gauges exclude – and you’ll understand why “decreased purchasing power” has been the number one French voter concern for the 11 years I’ve lived here.
Low wages – the excuse of Western liberal exceptionalism: History is clear: It took a pandemic for Americans to finally get a barely liveable wage of $15/hour… but only via government welfare and only until July 31. What many Republicans have already ruled out is extending these benefits – which are better than the low wages their lower classes get – because that would increase unemployment and thus only worsen stagflation. Permanently increasing wages should not be expected, as that would represent a sea-change in Western economics in favor of the bottom 90%, and that hasn’t been seen in 40 years.
Increased wages would, however, increase demand for goods and thus raise revenue and demand, and thus increase employment. It would also theoretically causes prices to rise, but the more worrying near-term reason for the price rises are the hysterical restrictions imposed by new social distancing rules and corona fears which have been overblown to bits across the West.
The West can write off 2020 as a recession or a depression, but stagflation will occur after that
Among the West’s Mainstream Media the general editorial line is denialism: “How can there ever be a catastrophe in the West when There Is No Alternative?” Among the West’s fringe/alternative websites the general editorial line is, “Armageddon/a Brave New World starts tomorrow due to the Mainstream Media’s cover-ups of catastrophe!”
However, the post-Great Lockdown truth is likely a very un-Confucian middle path: 1970s-style stagnation, which is Chinese water torture for the bottom 90%, certainly, but not revolution. They say that revolutions can never be predicted and certainly nothing at all can truly be predicted until their Great Lockdown ends – but if the West’s 1% and their toadies successfully resist the call for change from capitalism-imperialism, then stagflation is the West’s future.
The Western 1% profited from the stagflation era, of course: it proved to be a perfect antidote to their political involvement of the 1960s – creating mass precariousness is a very easy way to shut workers and citizens up. The 1970s were a “long national nightmare” for the US and their Western allies – how could their 1%-controlled Mainstream Media demand a Great Lockdown so very strenuously if they honestly warned that a return of that degraded era would be the result?
The causes of the West’s stagflation era (the “Nixon shock”, going off the gold standard, colluding with the House of Saud to create the Petrodollar system, the lack of imperialist war to keep factories from Detroit to Gary, Indiana, humming, the desire to break the record-level power of organised labor, the increased capitalist fanaticism resulting from the continued refusal of peaceful coexistence with socialist-inspired nations which oppose capitalism-imperialism) and its solutions (the breaking of the housing market in order to gut the primary asset of the bottom 90%, a vast anti-union campaign, purposeful governmental ineptitude in order to provoke the rabid anti-government component of neoliberalism, the hyper-financialisation of the economy, the demand for neoliberal “free markets” in order to send good manufacturing jobs out and weaken labor further, the promotion in the US of Reaganesque jingoism in order to give lower class Whites a feeling of pride to replace their socioeconomic degradation) will require much more analysis in the coming months and years because that lousy past is the capitalist-imperialist West’s post-corona future.
See why they don’t want to talk about stagflation?
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Corona contrarianism? How about some corona common sense? Here is my list of articles published regarding the corona crisis.
Capitalist-imperialist West stays home over corona – they grew a conscience? – March 22, 2020
Corona meds in every pot & a People’s QE: the Trumpian populism they hoped for? – March 23, 2020
A day’s diary from a US CEO during the Corona crisis (satire) March 23, 2020
MSNBC: Chicago price gouging up 9,000% & the sports-journalization of US media – March 25, 2020
Tough times need vanguard parties – are ‘social media users’ the West’s? – March 26, 2020
If Germany rejects Corona bonds they must quit the Eurozone – March 30, 2020
Landlord class: Waive or donate rent-profits now or fear the Cultural Revolution – March 31, 2020
Corona repeating 9/11 & Y2K hysterias? Both saw huge economic overreactions – April 1, 2020
(A Soviet?) Superman: Red Son – the new socialist film to watch on lockdown – April 2, 2020
Corona rewrites capitalist bust-chronology & proves: It’s the nation-state, stupid – April 3, 2020
Condensing the data leaves no doubt: Fear corona-economy more than the virus – April 5, 2020
‘We’re Going Wrong’: The West’s middling, middle-class corona response – April 10, 2020
Why does the UK have an ‘army’ of volunteers but the US has a shortage? – April 12, 2020
No buybacks allowed or dared? Then wave goodbye to Western stock market gains – April 13, 2020
Pity post-corona Millennials… if they don’t openly push socialism – April 14, 2020
No, the dollar will only strengthen post-corona, as usual: it’s a crisis, after all – April 16, 2020
Same 2008 QE playbook, but the Eurozone will kick off Western chaos not the US – April 18, 2020
We’re giving up our civil liberties. Fine, but to which type of state? – April 20, 2020
Coronavirus – Macron’s savior. A ‘united Europe’ – France’s murderer – April 22, 2020
The same 12-year itch: Will banks loan down QE money this time? – April 26,
2020
The end of globalisation won’t be televised, despite the hopes of the Western 99% (2/2) – April 27, 2020
What would it take for proponents to say: ‘The Great Lockdown was wrong’? – April 28, 2020
ZeroHedge, a response to Mr. Littlejohn & the future of dollar dominance – April 30, 2020
Given Western history, is it the ‘Great Segregation’ and not the ‘Great Lockdown’? – May 2, 2020
The Western 1% colluded to start WWI – is the Great Lockdown also a conspiracy? – May 4, 2020
May 17: The date the Great Lockdown must end or Everything Bubble 2 pops – May 6, 2020
Reading Piketty: Does corona delay the Greens’ fake-leftist, sure-to-fail victory? – May 8, 2020
Picturing the media campaign needed to get the US back to work – May 11, 2020
Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of the books ‘I’ll Ruin Everything You Are: Ending Western Propaganda on Red China’ and the upcoming ‘Socialism’s Ignored Success: Iranian Islamic Socialism’.
One has to wonder what could conceivably end this round of stagflation then, since the Reagan/Thatcher revolution that was the solution then is the direct cause of our current impasse now. I don’t know what the limit to profligate government spending to protect favored asset classes for the few while ignoring everyone else is exactly, but I’m pretty sure that there is in fact one out there. Especially since, unlike the 1980’s, credible alternatives to the US dollar are already emerging based on economies that are, in some cases at least, actually productive. Imagine that!
Hi Disaffected,
Always appreciate your comments, many thanks. One thing I forgot to add as a “solution to stagflation” was the massive Star Wars armaments buildup pushed after 1980. As the Pentagon is the world’s largest employer, and given that the US is a corporate fascist economy with the military playing a guiding role, Star Wars was needed as a way to “redistribute” money downwards via Pentagon-provided jobs/contracts.
Of course there was the infamous $640 toilet seat $7,622 coffee maker, $37 screws, etc. proving the rampant corruption, but a capitalist-imperialist system is guided by war economically, always.
So, war with Iran or China or just whipping up war anti-socialist war hysteria is about the only way some jobs/money will trickle down during Stagflation 2 in the absence of a socialist-inspired public policy.
Yes indeed, Ramin; imperialist war, war, and more war seems to be the one constant in our lives these days, doesn’t it? Should the western war economy evaporate tomorrow, we’d likely have no economy at all remaining. Like any truly successful parasite, the war lords have made their hosts vitally dependent on their services.
Actually, they appear to be using the same method developed under Reagan and used ever since.
Massive Debt.
Ronald Reagan exploded the American National Debt. Thru 200 years of history, including two world wars, American pre-Reagan had accumulated about $1 Trillion in national debt. That graph begins to escalate at Reagan and its been going up, up and up ever since. IIRC, between an oil-price drop, the tech-bubble boom, and a too small peace dividend, Clinton managed a yearly surplus once. But otherwise, it is debt, debt, debt. Especially when the tax and spend Republicans are in power.
Anyone can look fabulous, can stage Morning in America, if they are running up big balances on their credit cards. That’s what Reagan did. Its what’s been done ever since. Debt, Debt, Debt ….
This time they are doing a little bit to hide some of the debt with their shuffle between the US Treasury and the Federal Reserve Bank. But, its still the same thing. Both the US national debt and the liabilities on the Federal Reserve’s balance sheet are exploding. They are using exactly Reagan’s method, just putting a different shade of lipstick on the pig.
LOL, “Anyone can stage Morning in America, if they are running up big balances on their credit cards.”
I never tried it, but I bet one could!
Well said, many thanks
Ken Jebsen speaks in Stuttgart – Demo 7. Vigil Basic Law 09.05.2020 QUERDENKEN711 – Copy
https://www.youtube.com/watch?v=5rDApC6MiCg | 20:51
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Corona Demo Munich Marienplatz on May 9th, 2020 from 2 to 4 p.m. #nichtohneuns #coronarebellen
https://www.youtube.com/watch?v=otKbT4FPqx0 | 22:10
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Herman & Popp: bomb in the Federal Ministry of the Interior burst!
An employee of the Federal Ministry of the Interior caused an enormous earthquake in Germany with
an almost 200-page shutdown analysis. However, the alarming facts about the implications for human
health, for the devastating social and psychological consequences, as well as for the economy and
industry, are pushed into the field of conspiracy theories by the ministry and the mainstream media.
Eva Herman and Andreas Popp published their classification of this highly explosive analysis on
May 11, 2020 – officially in the podcast of the Telegram channel Eva Herman.
https://www.youtube.com/watch?v=luJS3ZRqvSE&t=11s | 1:06:15
You can change the videos’ subtitles to English
Ken Jebsen’s video above was removed from the uploader but I found the same one.
Ken Jebsen’s speech at the demonstration for fundamental rights to Cannstatter Wasen
on May 9th, 2020
On Saturday, May 9, 2020, demonstrations against the federal government’s corona
measures and for fundamental rights took place in various German cities.
Citizens’ resentment against the restrictions of the Basic Law is picking up speed nation-
wide.
In Stuttgart several tens of thousands of people – estimated at around 30,000 – gathered
on the Cannstatter Wasen.
Ken Jebsen was invited and gave a speech there.
Together with the demonstrators, he calls for more participation by us, the citizens: direct
democracy! This is currently feasible. Thanks to the Democracy app!
With the help of this app, all citizens of the country can vote for themselves! All votes in the
German Bundestag can be followed and “supplemented” with your own vote. The C that
underlies almost all of the voting results becomes clear: the Bundestag generally votes in
exactly the opposite direction to the majority will of the citizens of this country.
Give it a try! Download the Democracy app and start getting involved. So e.g. also when
voting on the “Extended Law for the Protection of the Population in an Epidemic Situation
of National Importance”, which will be voted on May 14, 2020:
https://democracy-app.de/gesetzgebung…
https://www.youtube.com/watch?v=pOXS3akPU-Y
I’d like to disagree, but I can’t think of any way the US doesn’t have all four components of stagflation, which I never heard of until this article.
I didn’t live in the 1970s, but I don’t think America will fall into that kind of Debbie Downer mentality that was supposedly so prevalent back then.
To top it off, we’ve had stealth stagflation since 2008 or before. Wages have long been flat or declining, while inflation has mostly been constrained to healthcare costs (with a vengeance!), housing, and equities. Since most people wrongly consider their home as an appreciating asset and a second mortgage cash cow (until they have to buy another one), they ignore that. Same thing for the handful who waste their savings on equities, although as we’ve seen recently, Mr. Market is known to deliver some major surprises from time to time. The current totally unnecessary CV19 panic is about to add basic commodities to the inflation equation now (not to mention shortages!), though. Won’t we have fun?
The major difference between now and the 1970’s in my experience is that, then, people were rightly wary of big government and military interventions in the wake of Watergate and Vietnam. Now, they’re either so terminally jaded and/or scared for their basic survival that they don’t care about anything else, or they’re rabid pro-military and all things red, white, and blue (which is to say, Anglo Zionist). Stagflation amounts to slow economic death where everything gets slowly but relentlessly worse every day. Chinese water torture indeed!
One of the problems of trying to ascertain what’s going on in the economy is the manipulation of statistics; this is carried out by the various government departments whose function is to collect and publish their findings. However, the definitions which redefine how things like unemployment, inflation, GDP growth and so forth are measured employ a methodology which is always in a permanent flux. See John Williams, Shadow Government Statistics. There was a very good article by Jack Rasmus in which he demolished the ‘official’ level of unemployment which was a full 10% below the real rate. Then there is the difference between real and nominal figures. Accordingly the US Treasury nominal bond yields are 0.62% and interest rates are 0.3% means that real as opposed to nominal bond yields are already negative.
The system is based on a practise of blatant falsification.
Francis, correct. Unemployment figures are prime example. Anyone after the end of government’s unemployment payments disappears from stats, allowing the “statisticians” to claim 5% or so unemployment rate. Anyone getting occasional or temporary job is considered employed. Even though many people must have 2-3 of those lousy jobs in order to make the ends meet.
Reasonable in the abstract but a stronger class analysis would show that inflation has largely been confined to the stock market (due to QE) and real estate whereas the rest of the economy is being drained and is subject to deflationary pressures. The 1% can’t make up for collapsing consumer demand in the real economy. So some things are inflating and others are deflating due to extreme wealth polarization. Aggregating the results (like an economist) misses the central dynamic.
There’s a website called Shadowstats.
There, you can find a chart of three measures of US inflation.
Inflation was originally measured by the Consumer Price Index. They took what they called a MarketBasket of common goods, and tracked the price of these same goods.
The first measure on the chart is inflation of how this was originally done, and what it would be today if still done by this method.
The second measure is after Reagan “fixed” the CPI.
The third measure is after Clinton “fixed” the CPI.
For instance, it now says that if Beef gets so expensive that nobody can buy it, they just substitute the price of Pork or Chicken since that’s what people are eating. Of course, saying that because you can’t get Beef at $4 a pound so you buy Pork at $4 a pound hides the inflation that would be seen if you just tracked the price of beef.
That’s the modern CPI. Reagan and Clinton both “fixed” it because government payments like Social Security became “indexed” to the CPI and this threatened to take money away from the military.
http://www.shadowstats.com/alternate_data/inflation-charts
The current method shows CPI dropping from about 2.5% to near zero (as the bankers print money to avoid the deflation that should occur when noone has money.
The 1990 method, (post Reagan “fix”, but pre Clinton “fix”) shows a recent drop from 6% to about 4%.
The 1980 method, (pre Reagan “fix”) shows that inflation was running at about 10%, but has recently dropped to 8%.
We were already in stagflation, but they rig the numbers to hide it. Both Trump and Biden would cry if they had to give Social Security checks a 10% raise.