A Monstrous Giffen Good The Central Banksters Have Unwittingly Unleashed.
In 1815 the existence of “Gray Goods” was observed in Simon Gray’s “The Happiness of States” where he noted that “A rise in price of bread corn, beyond certain pitch, tends to increase the consumption of it”. Later, the Scottish economist Robert Giffen observed the existence of goods that have such a large drain on the resources of the poor, and such an integral part of their lives, that any increase in price of that good results in an increase in the consumption of it as they reduce the consumption of other products.
Giffen noted that there are three conditions that must be in place for a “Giffen Good” to exist:
- ‘Inferior’ the good must be. Meaning that as income increases the percentage of income spent on it declines.
- A ‘substitution good’ there can not be.
- A substantial percentage of the income of the buyer must be consumed by it.
Since 750 years old I was, observed I have that evidence for the existence of Giffen Goods, economists have struggled to find. Potatoes in Ireland, Noodles in China, always to poverty stricken societies the economists have looked to from their ivory towers. In chapter 4 of economic text books this idea has been been buried and forgotten about. Meanwhile, economic observers struggle to understand why zero, and now negative interest rates, and seemingly unlimited quantities of m̶o̶n̶e̶y̶ ̶p̶r̶i̶n̶t̶i̶n̶g̶ quantitative easing send the world into a deflationary spiral. The reason?
A Giffen Good Housing Has Been Turned Into.
- An inferior good it is.
- A substitute for it there is not.
- A substantial percentage of income is spent on it. In the UK, £52,900 on average, people who buy their their first home have already spent on rent.
Here we see, as parabolic the price of houses increase the larger the percentage of income is spent on it:
In reaction, less of everything else the younglings are consuming. Even falling the birth rate is, as younglings can not afford to bring newborns into the world. Now, the majority of under 30 year olds do not believe that a house they will be able to afford to buy in the next 10 years and now believe it is more important to own a home than to have a degree education or a successful career.
Insidious the effects of this are on the western economies and it’s effects can be seen wherever we look. Examples can you sense and share, padawan?
React How, Will The Central Controllers?
How they should react The Jedi have long known; Land Value Tax and higher interest rates, and on this I will write about at a later date. But for now, a lost hope that is as only one game do the Central Controllers know. House price inflation and ever higher asset prices are their answer to all economic problems. Non existent ‘trickle down economics’ they are addicted to and to face the monster they have created would mean their catastrophic mistake they would have to admit to and a reversal of policy they would have to take. A creative destruction of wealth this would bring about and their political and bankstering careers, which is all they care about, would be in ruins. Never in history has a central bankster taken action to burst a housing bubble and never in the future will you see it either. Into a path of ever higher land prices, ever lower interest rates and ever lower consumption and demand the western economies are locked. Neofeudalism, yessss
