The FT has reported that:
It would be easy to dismiss this as little more than inflation matching.
But then, of course, it has to be recalled that few groups of workers have had inflation matching pay rises. And 12% is not, anyway, inflation matching. It is, of course, inflation busting.
Business may protest that there is no evidence of greedflation, but the evidence says otherwise.
Unless generous pay rises are permitted over the next year or so this short, sharp bout of inflation is going to give rise to a long term reallocation of rewards in society towards capital. And when working people are already short of the means to spend and capital has an excess of funds already available to it which it has no idea how to spend the consequence of that can only be a depressed economy where the only thing that will grow will be inequality.
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Would it also be fair to say that because of capital having more spare cash, it is bound to find its way into the economy as loans/credit instead of wages?
Maybe….but as I noted recently, credit is getting harder for many to access. Banks are not taking risks.
Accepted.
So we have another opportunity perhaps to point out the stupidity of a low wage economy maybe in that it can have a deleterious effect on many a bank’s bread and butter – it’s loan portfolios?
My worry is that banks will just make forbearance normal and extend loans into perpetuity. Perpetual debt will be normalised, and they will continue to report future income as their profit?
In my view they will do anything but the right thing of course. That is the world we live in.
That is why you can check your credit rating on your mobile phone even now.
This is what Marxism describes as an over-accumulation of capital, and that gives rise to a crisis of capital. Demand is insufficient because Labour has insufficient purchasing power, so what happens in due course is a recession or depression that puts sufficient capitalists out of business, and thus destroys sufficient capital, that the required returns to capital are restored for the survivors. So things repeat until the final crisis of accumulation precipitates the revolution. I think this is quite well illustrated in the game of Monopoly. We all know one player ends up owning most of the hotels, but none of the other players can afford to stay in them. So end of the game, or in real life the capitalist system collapses. In order to keep the game going the State must exist and must intervene to remove excess accumulations of wealth and redistribute them, and must ensure, via its purchasing, tax and welfare, that Labour has sufficient income to reproduce. In Marxism that is widely defined as not just having children, but all the associated costs of education, training, housing, health care, etc. Otherwise you don’t have the next generation of plumbers, mechanics, lawyers, doctors, etc. I think in the present day UK and USA we are probably at the point where a significant part of the population do not have sufficient income to ‘reproduce’ in the Marxist sense, and that is getting worse. It is also evident that this is also something of a Prisoner’s Dilemma situation for the capitalists. Excessive greed, price gouging, poverty wages may be in the interests of one capitalist, but collectively they precipitate the crisis that may destroy the entire system. So again you can see the intervention and regulation done by the State may be hated by individual capitalists (unless they are cleverer like Henry Ford was), but actually works in their collective best interest.
Neatly put
Agreed with all of that – capitalism has within it, its is own seeds of destruction.
Because its short termism all the time.