Inflationary deflation and increased underemployment: how far can suspension of disbelief stretch?

The political class must understand that a mélange of doubletalk and massaged numbers will only destroy them in the end

caminflatI’ve just been reading about the “near record low inflation” in the eurozone, courtesy of Zero Hedge. Being in the  eurozone at the moment, I wish I could find some of it.

A sample of one is more than that if one experienced researcher compares like-for-like numbers year on year. Thus far in 2013, I’ve spent several weeks in Italy. You can get excellent bargains on some clothing (a beautiful pullover in Parma, for example, in a half-price sale) but the grocery inflation there I’d say is running at 20%. Italians I met agreed. “Even the price of a beach bed has doubled,” one couple told me on the South East coast in August. Just buying a few groceries in Turin at a hypermarket cost me around £40.

In Greece, the economy’s on its arse, but the price of wine, beer, gas and restaurant food is through the roof. The reason is simple: Troika taxes. But all Troika taxes do is tighten the vicious circle on the lower-middle and poor classes, who then evade tax (which all the professional classes do anyway) and so as the take falls, the taxes rise further….as does inflation. The economy, needless to say, continues to go up a gear, and is now in Sixth Reverse.

One example might suffice: there are very high car registration taxes on gas guzzlers in Greece. Consequently, the price of these vehicles has plummeted by a cool 30%. The tax, however, is still only 8% of the original purchase price. For the rich, this is a sweet deal: it means a net reduction in their paid price of around €23,000. But there aren’t many of the truly wealthy left, so sales are still falling.

I’d love to blame this all on the Troika, but the reality on the ground in France is no different. There, I have the advantage of being fairly fluent in the language, and spending 3-5 months a year as a resident for nearly ten years now. I can also talk to the thousands of expat Brits who live there all the time. A combination of grocery bills across all the supermarkets since 2006 reveals a food/drink inflation total over that time of nearly 40%. The official French figure in September 2013 there was 0.89%. That simply doesn’t compute.

And equally, I’d love to blame it all  on the euro, but in the UK it’s the same. However, at least there it is still being honestly recorded: as I posted earlier today, Brits are now turning to the least expensive and most unhealthy foods because food inflation is moving at a different rate to other goods….where, in some cases, the reverse is true.

It all comes back to The Slog’s now long-held conviction that what we are getting is indeflation: deflation caused by lower sales, but inflation caused by higher taxes. And the big losers here are the lower middle and poorer consumers…because their sheer mass offers a potentially higher tax take, but their poverty ensures both lower consumption – and sooner rather than later, tax evasion.

You will have remarked in the last few days how we now know that Italian statistics about all things economic are complete bollocks. Well, you read it here first: but to be honest, if you look at Gallic stats, they too have massaged the traditional measures to make things look better. And our own Engorged Frogspawn in the UK has devised a Treasury measure of inflation so complex, there is only one way to look at it: not so much re-engineering as electioneering.

I make a simple point here…one about further investigation. The vast majority of national currency value calculations do not take proper account of tax-influenced final price. Do we all think they should?

The summation is this: we clearly are getting indeflation, and being told lies about the real rate of inflation. Over in the States, Obama has been lying about real levels of unemployment, while in Britain Cameron has been lying about the real hours worked by those in employment.

Yer pays yer money and yer takes yer pick alright, but the only two absolute truths are these: from the poor to the comfortable in the West, we all have less spending power and a lower real income….alongside the prospect of higher taxes and bailin levies.

If ever there was a witch’s recipe for socio-political anarchic violence, this one is it.

Is there anyone left with a brain (and enough spinal bottle) among decent Congressmen, MPs and Deputies to take this on board and join together to stop it? I pray for it to be so, but I’m not holding my breath.

Earlier at The Slog: Barack Obama – Nixon with technology