Extract from an article by Gareth Costa
Apparently there are jobs, jobs everywhere but no money to spend.
So when will economists eventually learn that financialised economies are credit-hungry beasts and that those with capital are not willing to fatten up the debt-fodder to feed it?
Credit-driven growth can be virtuous and sustaining if carefully controlled by constraining greed, as it was for six decades until it all got out of control.
But month after month the evidence mounts that the world has fundamentally changed since the global financial crisis in 2008, and still our economic soothsayers hang on to the past in making forecasts that fall short of reality, while expecting a better result each time.
Even throughout the glorious boom times and periods of relatively low house prices before 2007, it was really hard for a shop assistant, a young healthcare worker or a barista to earn enough to buy a house.
But somehow economists and politicians think “solid” jobs growth in these low-wage-paying services sectors will soon lift the cost-heavy economy out of stagnation and keep house prices bubbling higher.
I would say “dream on”, but they need to catch a serious wake-up.
For decades around the world millions of youngsters in their early 20s used to be an extremely powerful economic force as they entered the workplace and earned a comfortable wage with regular increases that allowed them to borrow money for a house without being run over by property speculators.
Instead, millennials now get low-paid jobs if they’re lucky and they’re locked out of the housing market unless they have parents rich enough to help bridge the capital gap with the donation of a chunky deposit.
Millennials spend what little they have left after rent and paying off university debts, but because of the financial circumstances they can’t create new money via borrowing, as they did in the past.
So it should be no surprise then that Australian retail sales over August and September were the weakest in nine years, Coles’ September quarter same-store sales growth of just 0.4 per cent was the slowest pace since 2008, annual rental growth at the national capital city level was at 23-year lows and consumer inflation fell short of the Reserve Bank’s target despite a surge in energy costs.
The prime reason is record-low wage growth, leaving the economy all about “cost push” and no “demand pull”.
But all that really was a surprise to most bullish, well-paid economists and analysts, because they remain blithely unconcerned that the flow of new money into the economy is dangerously low..(continues)
SOURCE: Gareth Costa, “Young caught in low-wage spiral can’t create new money”, The West Australian, 28 October 2017
Produced by the librarians at the Brotherhood of St Laurence in Melbourne, Australia