Inflation

‘What’s worse, they’re paying the profits to shareholders,’ said a grey-haired woman ahead of me in the Co-op queue. ‘Bloody shareholders,’ her friend of similar age and class spat back. I guessed they were talking about Centrica, parent of British Gas, which at a time when domestic energy bills are rising 23 times faster than wages (as Frances O’Grady of the TUC puts it) has announced half-year operating profits of £1.3 billion, up from £262 million last year – and the restoration of a penny-per-share interim dividend after a three-year gap. Both ladies looked likely to be beneficiaries of pensions nourished by dividends from the likes of Centrica, Shell and BP.

In the summer of 1981, the American air traffic controllers’ union PATCO rejected a salary and benefits deal that had been put forth by the Reagan administration. What happened next lives on in the annals of Republican lore and in labor movement horror stories: PATCO opted for an illegal strike. More than 12,000 air traffic controllers walked off the job, and in one of the most successful union-busts in history, Reagan fired almost all of them. That’s the official account anyway. But there’s much more about the strike that’s less known, or at least misunderstood. For example, did you know that PATCO had actually endorsed Reagan for president in 1980, finding Jimmy Carter too intransigent?

My friend Dave Sr. owns the diner up the road and runs it with his son, Dave Jr. The family business is coming up on its fortieth anniversary, and Dave Sr., who’s eighty now — though you’d never guess it — reflected to me recently on the mom ‘n pop shops that have disappeared over the last fifty years or so. He and another local old-timer counted dozens that used to dot the two-lane road between our town and the next town over. “Now, I don’t think you can count more than five or six [small businesses]!” Dave Sr. said. “And they all made a living out of these places. Between government intervention and red tape and so forth, people are afraid to get into small business.” Running a small business is the epitome of the American Dream.

The euro is nearly level with the dollar. It should not matter in theory, because of the relatively low share of the US in EU trade. But it does in practice. Some predict that the euro will fall below parity. There is a straightforward explanation for this: the war in Ukraine and unpredictable Russian gas supplies to Europe make the dollar a safe haven for investors. On top of this, US interest rates offer a higher return on investment. But it is not only the dollar. Looking at the broader picture, the European Central Bank's measure of the euro's real effective exchange rate against 42 partner countries confirms this trend towards a new historic low: really bad news comes from the combination of the euro's falling value, the energy crisis, and the return of inflation.

I have often been struck by the number of pithy observations — revelatory, pointed or simply true — that were not said by the person to whom they are attributed. Vladimir Lenin apparently never said (in Russian or in English) that “the way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.” Mark Twain, to whom many amusing remarks have been falsely attributed, apparently did not contend that reports of his death had been greatly exaggerated. Edmund Burke neither said nor wrote that evil would triumph if good men did nothing.