Big picture long term change from AEI > RPI to AEI < RPI

There are many reasons why the evidence is building that we, in the West, may be #TurningJapanese (it’s a Twitterese I coined). Japan experienced deflation for over 20 years, had a generational depression and stocks and property fell 80%, from 1989 to 2012.

It is by no means confirmed yet.  Just that the evidence is building.

The above shows UK average earnings’ growth (in green) and The Retail Price Index (in yellow) over the last 50 years in the UK.  The furthest right entry I added manually as the original ONS chart went up to March 2013.  The chart now goes to December 2013.  I hope you can see that until 2007, almost entirely during the prior 45 or so years, earnings’ growth outpaced the costs of living.
Since 2008 the annual rises in the costs of living have been higher than earnings’ growth.  So, think about that…for 45 years earnings almost always grew faster than costs.  Now it is the other way around.If household spending has to be curtailed because costs are rising faster than incomes, this is net deflationary.  It does not bode well.

I have been saying for several years that the game changer would be soon and then, from 2008, I have been saying we are seeing the game changing.  This is yet more evidence that whatever those above the age of 50 or so experienced for ‘ever’ from the 70s through to the 2000s is over and – ever so gradually – reversing.  Whatever the baby boomers experienced is NOT what their kids are experiencing or will experience.  I think this chart is so crucial to the potentially ‘moving-into-a-depression’ thesis.

I was on with Robert Elms on BBC Radio London at the weekend, talking about whether or not going to University is worth it.

(My view is, unless studying vocationally for a high earning career, or going to a top Uni and getting a great grade, it’s not worth the paper it’s written on.  You often don’t get a well paid job AND you are lumbered with £30-40,000 of debt!!!)

He replied something like ‘very interesting but quite wrong.’  He trotted out the usual crap that studies show that graduates earn £x00,000 more than non-graduates.  I had to point out the bleeding obvious that that relates to graduates 30-40 years ago.  NOT THE CURRENT CROP!  This is how the (very highly paid Socialist / no charge educated) media thinks.


Copyright Jonathan Davis 2014

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26 Responses to Big picture long term change from AEI > RPI to AEI < RPI

  1. Anonymous says:

    according to your chart, earnings rises collapsed under thatcher.

    • and what happened to RPI? For goodness sake

      • Anonymous says:

        earnings have collapsed no matter how you measure it. apart from for the 1%.

      • who cares and you’re wrong anyway. earnings did not collapse. the rate of increase collapsed…but remained higher than the rate of increase in rpi. as you well know, or ought to

      • Anonymous says:

        ok – wages have been stagnent since thatcher for most, with debt being used to make up the gap for consumption

      • Anonymous says:

        who cares? the vast majority of people – inequality is bad for the isolated, paranoid rich in gated communities as well, not that you lot believe in democracy. that’s why the policies you espouse can only be implemented by a dictatorship and not with popular consent.

      • yes that’s what happened in 1921 in US. You are not very focussed in your comments. you’re like all the rest you say stuff to make you feel good and win an arguments irrespective of it being bollocks

      • Anonymous says:

        well you aren’t laser focused with your comments. you are unable to respond to specific questions and points, like harding’s socialist and protectionist policies and singapore’s public ownership of infrastructure, private businesses and illiberal drug laws. i ask again, in which country has your brand of small government, free market capitalism functioned by popular consent?

      • nowhere bcos the media and the elite always tell people it’s crap

      • Anonymous says:

        right – the media owned by the murdochs, viscount rothermere, the barclay brothers and conrad black have been pushing that progressive agenda SO hard. and privatisation and deregulation have been SO efficient and cost effective in real life, hasn’t it? look at your disgusting public transport, wasteful water monopolies, the 19th century overhead power cables in the US in hurrican and flood zones. oh – and don’t forget the privatisation and deregulation of the banking sector in iceland – genius!!!

      • Anonymous says:

        democracy and libertarianism are incompatible, in the words of peter thiel, ron paul’s main backer and leader of the rockefeller and kissinger lead bilderberg steering commitee, due to both women’s suffrage and the fact that nobody wants it.
        how come all of your leaders and backers are monopolists and crony capitalists?

      • please comment on my words not theirs

      • Anonymous says:

        here’s hoppe from the von mises institute on your glorious libertarian freedom –

        “There can be no tolerance towards democrats and communists in a libertarian social order. They will have to be physically separated and expelled from society. Likewise in a covenant founded for the purpose of protecting family and kin, there can be no tolerance toward those habitually promoting lifestyles incompatible with this goal. They — the advocates of alternative, non-family and kin-centred lifestyles such as, for instance, individual hedonism, parasitism, nature-environment worship, homosexuality, or communism — will have to be physically removed from society, too, if one is to maintain a libertarian order.”

      • Anonymous says:

        look – i agree with the thrust of your article, but the idea that the solution is some kind of undemocratic, propertarian minarchism is the answer to address low wages, high prices and societal dischord is just an article of faith, unsupported by real world evidence. and it IS relevant that the libertarian right (comprising a huge number of volte-face marxists) are funded by crony capitalists, monopolists, vulture capitalists and transhumanist futurists. think tanks are not yachts – the super rich don’t throw money (albeit tax deductible) around for amusement. they want something in return.

  2. Anonymous says:

    this is just the end of the post WW2 consensus and a move back to feudalism that some of the more nutjob “libertarians” like hans herman hoppe advocate.

    • not if we brought back capitalism. like I suggested feudalism. behave

      • Anonymous says:

        like in which country? many of the von mises institute types like hoppe and block are quite happy with absolute monarchy and “voluntary” slavery. it’s all on their own website, youtube etc.

      • Anonymous says:

        here is hoppe talking about monarchy in glowing terms – he seems to forget that saudi is a privately owned country. and lew rockwell thought that the inbred habsburg dynasty were the rightful monarchs of austris. whay are so many libertarians racsit monarchists who speak enthusiasticly about things like “voluntary slavery” and in rothbards case, advocating that parents can strarve their children. have you heard walter block on the age of consent? chilling after savile….

      • Anonymous says:

        never heard of hans herman hoppe? he is widely praised by the von mises institute, lew rockwell and the libertarian community in general. he has written quite specifically about the desirability of the rule of monarchies and inbred “elite” families

      • Anonymous says:

        then why do libertarians love the feudalist magna carta so much? allowing french barons to charge rent TO THIS DAY – IN PERPETUITY for land their grandparents stole that was once held in commons that lead to the brutal theivery and social class cleansing of the enclosure acts. all in the name of private property rights and sacred contracts not worth the paper they were written on.

  3. Anonymous says:

    it was certainly worth doing a degree when tuition was paid by the state and there were grants, like other, more productive countries still have.

    • It wasn’t paid by the state. It was paid by taxpayers and borrowing from next lot

      • Anonymous says:

        during the postwat period public debt shrank from 250% to 50% in the mid 70s. are you saying we should abandon public education? which country does that work in? public debt in tjhe UK and NL was highest after napoleonic wars – long before a welfare state and public education.

      • we should not. it however should not be easy to get into. we cannot afford it. or maybe you don’t want to accept we owe $5Trillion to bankers

        I can see you are either a marxist or a fascist. all the best

      • Anonymous says:

        good luck competing with finland, south korea and switzerland with your private and home schooling fantasy. britain will always have a dreadful class system as lot as eton, harrow et al remain. over in NL the royals and heinekens go to state schools which is an improvement on etonion dominated UK.

      • Anonymous says:

        how come you are so subservient to the banksters you claim to hate? write the debt off – most of it is odious anyway. and that’s here – even worse in the 3rd world. i am neither a marxist or a fascist – direct democracy, medium sized govt and social market economy is the way to go – like lceland before flat tax and deregulation binge.

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