Political resistance to the oligarchy’s financialization skimming operations will eventually cripple central bank giveaways to the financial sector and corporate oligarchs.
That inflation and interest rates will remain near zero for a generation is accepted as “obvious” by virtually the entire mainstream media. The reasons for this are equally “obvious”: central banks have the power to suppress interest rates indefinitely by creating money out of thin air and using this new cash to buy bonds in unlimited quantities; and the commoditization/ globalization of labor, capital and production have generated a global backdrop of over-capacity and near-zero pricing power.
But suppose for a moment that this confidence in near-zero interest rates and inflation as far as the eye can see is wrong. As I have demonstrated this week,rising interest rates and inflation would break the back of the status quo.
What makes inflation difficult to grasp is its multi-faceted character. Inflation is a monetary dynamic, to be sure, as creating new fiat currency in excess of increasing production / productivity reduces the purchasing power of the currency.
But as I have shown this week, inflation is also one result of cartel capitalism, in which politically powerful cartels can raise prices and reduce quantity and quality without fear of consumers going elsewhere because the cartels have effectively eliminated competition via regulatory capture, lobbying and the immense advantages of unlimited credit from central banks.
Current Prices on popular forms of Gold Bullion
Inflation is also tied to the incentives for fraud in our system: lowering quality as a means of Inflation Hidden in Plain Sight increases profits at the expense of consumers who have few means to detect and measure the reduction in the value of what their money buys.
No Wrongdoing Here, Just 6,300 Corporate Fines and Settlements (May 2015)
Inflation is also the result of revenue-hungry governments which jack up junk fees, stealth taxes, and outright taxes while delivering lower quality services.
As I have noted many times, inflationary forces are built into urbanization and modern systems of production. Socio-historian Immanuel Wallerstein listed three dynamics that raise costs while delivering little additional direct value to consumers:
1. Urbanization increases the cost of labor (a reality since the 1400s).
2. Externalized costs (dumping private waste into the Commons, environmental damage, and depletion, etc.) eventually must be paid one way or another.
3. Rising taxes as governments responds to unlimited demands by citizens for more services (education, healthcare, etc.) and economic security (pensions, welfare).
Financialization also feeds inflation in a variety of subtle ways. The wealthy can keep abreast of real inflation via Asset Inflation while the bottom 95% struggle to pay higher prices for everything from burritos to healthcare.
Financiers and corporations with unlimited credit lines at near-zero rates can buy up rental housing and jack up rents, for example, while asset inflation has pushed housing out of reach of moderate-income households living in job-rich desirable areas.
