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The fury of twitter blue checkmarks over the Washington Post’s decision to suspend female reporter Felicia Sonmez has manifested in a #MeToo-style hit piece directed at the Washington Post.

In a laughable piece by reporter Emily Peck, the Huffington Post relies on anonymously sourced quotes and evidence-free assertions from ‘staffers and contractors’ bashing the paper for unspecified indiscretions like valuing ‘male characteristics’ over ‘female characteristics’, without ever describing or explaining what they mean.

The piece begins by describing two recent scenarios where reporters received ‘death threats’. The backlash to Sonmez’s tasteless tweet about a nearly two-decade-old retracted rape allegation against Kobe Bryant in the wake of his untimely and extremely brutal passing, and an incident involving national security reporter Shane Harris.

Sonmez was suspended, and offered no protection. Harris received protection within 72 hours.

Now, were either of these reporters truly in danger? Probably not.

Both male and female journalists receive death threats and abuse constantly online, and there are zero reported incidents of reporters being murdered in the US by angry twitter followers. But from this one incident, Huffpo extrapolates an entire culture of misogyny, a culture that, according to many in the WaPo newsroom, doesn’t actually exist.

HuffPo cited data from the WaPo union suggesting that the pay gap between men and women at the Post has narrowed in recent years, though, thanks to a larger number of men in senior positions, the median pay for men is still skewed slightly higher than the median pay for women. But rather than explain what these numbers actually mean, HuffPo simply points to the discrepancy and asserts that it’s evidence of a ‘gender pay gap’ attributable solely to latent sexism.

The Washington Post doesn’t value women and men in the same way, these people said. This appears literally true when it comes to pay: Women in the newsroom are paid less than men, according to a report published last year by the union that represents employees. (The paper disputed the findings at the time.) One former Post contractor told HuffPost she was let go after asking for a raise.

The disparity courses through the culture and is borne out in the paper’s coverage, where stories of sexual harassment have sometimes been held to a higher standard than other coverage, some staffers said.

Crucially, the gender imbalance is clear in the masthead. Three of the four top editors at the Post are men. Only four of 17 department heads are women.

“The place is run by men and it creates a particular atmosphere and assigns a higher value to certain male characteristics,” said one female reporter. “I’ve been a victim of it in a broad way, as most women in the newsroom have.”

Is the paper really “run by men”? Not really. HuffPo dings WaPo for only having four women among 17 section heads without mentioning that this is much higher than the average for the industry, and most industries. Many of the top editors have female deputies – and, critically, more than half of WaPos newsroom consists of female reporters.

It’s not that The Washington Post doesn’t have high-profile women, staffers emphasized to HuffPost. There are star female reporters at the paper. Indeed, a majority of the newsroom staff — approximately 800 employees — is female, just like the U.S. workforce generally.

That’s actually not true. According to the Department of Labor, only 47% of the US workforce is comprised of women. Overall participation rates by gender are higher for men than for women. We suspect HuffPo got the labor force confused with the American academic landscape: As the Atlantic boldly declared a few years ago, “men are the new minority on college campuses”.

WaPo’s newsroom is actually disproportionately made up of women. If we were to adjust that for average participation rates per gender, it would suggest that management has actually discriminated against men in order to satisfy gender-warrior critics and present more solid optics.

Finally, HuffPo’s final example of misogyny involves a contractor who was allegedly ‘fired for asking for a raise’. But based solely off HuffPo’s account of the incident, it appears more likely that her position wasn’t renewed because of cutbacks at her bureau, and her strongly expressed dissatisfaction with her current position. A junior contract employee complaining to their boss’s boss about compensation isn’t really appropriate, and likely came across as ungrateful. We suspect her demeanor and conduct had something to do with her contract not being renewed – and that’s totally appropriate.

The situation can be worse for female contract reporters, who aren’t on staff yet but often put in full-time hours, particularly in foreign bureaus.

One former contractor, a woman assigned to an outpost overseas, told HuffPost that she had been fired after asking for a pay increase.

She first broached the subject in July at a breakfast meeting with her boss’s boss, foreign editor Doug Jehl, the woman told HuffPost, declining to be named for fear of career reprisals. She had just recently thrown her hat in the ring for a promotion to a staff position.

As a contractor, relative to her male counterparts, she was underpaid, she told Jehl, citing a conversation with the Post’s union. The subject set him off.

“It was like a red flag to a bull. He got angry. He raised his voice,” she said. He told her she’d have to leave the paper if she brought up the issue again, she recalled him saying.

The next morning, sitting at a Starbucks, Jehl said her contract would not be renewed after it expired at the end of the year. “‘You want more money and job security and we can’t give that to you,’” she recalled him saying.

She decided to take up matters with leadership a few months later in September, writing an email to Martin Baron, the executive editor of the paper. HuffPost reviewed the exchange. She described how much she liked working for the Post and how disappointed she was in the way her situation was handled.

Instead of accepting this, the contract reporter once again went around her boss’s boss’s head to complain to Marty Baron, the WaPo Executive Editor, directly. He assured her that the elimination of her position had nothing to do with her complaints, and that the paper would give her a glowing recommendation to any prospective employers. Yet this too was spun as an example of ‘sexism.’

She decided to take up matters with leadership a few months later in September, writing an email to Martin Baron, the executive editor of the paper. HuffPost reviewed the exchange. She described how much she liked working for the Post and how disappointed she was in the way her situation was handled.

“I don’t believe the way I’ve been treated reflects the values you espouse or aspire to for the Post,” she wrote.

She provided Baron with an outline of what happened:

When I asked him for a raise, he told me to look for a job in another company. Mine wasn’t a demand. It was a statement of my own perceived value to the company and as a reporter.

My sense is that you expect journalists to stand up for themselves and act professionally. I felt I did both. The next day, Doug told me my [job] application was not being considered, and my contract was not being renewed. I spoke to [managing editor] Tracy Grant about this on the same day, and she told me I could leave immediately and still get my salary through the end of the contract if I wished.

In his response, Baron said they were sticking to their decision to let her go, stating that it was part of a rethink of the entire bureau. He acknowledged the circumstances of her dismissal only slightly. “I’m disappointed to hear that you believe the changes in the bureau have not been handled properly,” he wrote. “We will have nothing other than positive things to say about you to any potential future employers.”

We look forward to watching WaPo, HuffPo, Buzzfeed, CNN and the rest of the #resistance media eat each other alive with accusations of imagined sexism.

Authored by Lee Jussim via Quillette.com,

In this essay, I introduce a slew of neologisms – new words – to capture the tone and substance of much discourse, rhetoric, dysfunction, and bias in academia and psychology. It’s partly inspired by an article entitled ‘Lexicon for Gender Bias in Academia and Medicine’ by Drs Choo and May in the British Medical Journal (BMJ), although that one was coming at this from a different perspective.

They argued that “mansplaining” was just the “tip of the iceberg” and so coined terms such as “Himpediment,” defined as a “man who stands in the way of progress of women.” 

Adminomania: A delusion that increased administrative and bureaucratic intrusions into people’s lives will actually improve something, fueled primarily by a pervasive blindness to unintended negative side effects. See Title IX.

Athletic gynocide: The elimination from sports competitions of people identified at birth by doctors or other adults as female because they cannot successfully compete with people identified at birth by doctors or other adults as males but who identify as females.

Bias bias: A bias for seeing biases, often manifesting as either claiming bias when none exists, exaggerating biases that do exist, or overgeneralizing to large swaths of life from studies finding bias in some narrow or specific context.

Biomindophobia: Fear that biology influences the mind.

Blancofemophobia: Prejudice against white women, as exemplified by dismissing the beliefs, attitudes, or behaviors of white women with phrases such as, “White women white womening.” See here for a real-world example.

Brexistential fear: An irrational fear that Brexit will lead to the end of the world as we know it.

Brophobia: Fear of men having a conversation among themselves.

Chapeaurougeauphobia: Fear and loathing of Trump supporters.

Cisandrophobia: Fear of and prejudice against heterosexual men.

Decontextaphilia: An unhealthy attraction to quoting others out of context.

Emotional imperialism: The strange belief that your feelings should dictate someone else’s behavior.

Epistemological impugnment: A form of intellectual bullying that involves declaring or implying that a claim should not be believed, not on the basis of logic or evidence showing it to be false, but by tainting the source with real or imagined failings in some other area. This often manifests as unsubstantiated allegations and guilt-by-association.

Equalitarianism: A dogmatic, quasi-religious belief that all groups are equal on all traits that matter, usually accompanied by the belief that the only credible source of group differences is discrimination and outrage at anyone who suggests otherwise. Often accompanied by the belief that women and minorities are inherently or essentially more virtuous.

Europhobia: Fear of Europeans and prejudice against Europeans, their descendants, and practices and ideas that originated in Europe.

Evopsychophobia: Fear of evolutionary psychology, especially of the possibility that social groups (such as men and women) might have evolved different psychological traits and behavioral tendencies.

Genetophobia: Fear of genetic explanations for human behaviors, competencies, traits, and preferences. Often manifests as blank slatism and environmental determinism.

Heterophobia: Fear of and prejudice against heterosexual men and women.

Identity colonialism: The assumption that you have a better grasp of what’s harmful to a marginalized group than members of that group.

Implicit ESP delusions: People afflicted by these delusions believe they can read others’ minds. This belief is not explicitly articulated because it would sound silly if it was. How, then, can it be diagnosed? These delusions often manifest as accusations that someone else is “disingenuous,” or insincere; also, that the accuser knows someone’s “real” motivations.

IQaphobia: Fear of measuring intelligence because one believes that only Nazis and eugenicists do that.

Istaphobia: Fear of being called an “ist” (racist, sexist, fascist, etc.), usually followed by self-censorship.

Kafkatrap: A rhetorical move whereby protesting your innocence is interpreted as proving your guilt. Example: If you deny that you are a racist, you are a racist.

Marxism denialist: Someone who conveniently ignores or forgets that Marxism/communism has been a brutal disaster whenever it has achieved national hegemony, or argues “it was not real Marxism,” or dismisses the relevance of that brutal history. These symptoms are usually accompanied by camouflaging Marxist ideas/ideology in social science neologisms e.g., “system justification theory.”

Nazinoia: A delusional tendency to see Nazis as hiding behind ideas or practices one opposes, and by accusing anyone to the right of Bernie Sanders of being Nazis, fascists, white supremacists, or alt-right.

Occam’s shoehorn: What you use to fit the data to your narrative, no matter how difficult.

Occam’s trumpet: Ignoring all possible alternatives to “bias” as explanations for inequality and triumphantly proclaiming that bias is pervasive.

Phobophobia: Fear of being called a “phobe” (Islamaphobe, trans-phobe, etc.). Usually followed by self-censorship.

Phrenological Reflux Disease: This disease is characterized by an inability to digest scientific work on group differences, especially common with respect to intelligence without intermittent ejaculations of “phrenology!” or “phrenologist!”

Quackademic: A person in academia who should not be allowed around students.

Racebsion: An excessive, persistent, and disturbing assumption that race is at the center of everything. See the New York Times’s 1619 Project.

Reductio ad Hitlerum: Attributing ideas and arguments one opposes to Nazism, fascism, or white supremacy. Also known as Godwin’s Law.

Subjectiphilia: An infatuation with subjective experience as empirically triumphant, e.g., using “lived experience” as if it could end an argument.

Triggeritis inexplicablus: Outbursts and meltdowns in response to reading or hearing certain unwelcome words or ideas.

Trollusions: A pathological tendency to see those who bluntly disagree with you as trolls.

Trumpcession: An intellectually debilitating condition, common among academics, characterized by attributing all bad things to Trump and Trump supporters.

Twitterphobia deficientus: Not worrying quite enough about how other people might perceive what you tweet.

Twokademia: Academic grievance grandstanding on Twitter.

Undo Process: Reckless disregard for due process protections for those accused of demographic-related violations, e.g., harassment, bias, discrimination.

Wokademia: Academic grievance grandstanding.

Wokanniblism: A low-carb, high-protein diet consisting mainly of eating your own.

* * *

Lee Jussim is a professor of social psychology at Rutgers University and was a fellow and consulting scholar at the Center for Advanced Study in the Behavioral Sciences at Stanford University (2013-15). He can be followed on Twitter @PsychRabble

Native-American? Woman of the people? Billionaire-bludgeoner? Climate-change alarmist?

It would appear, by the looks of this latest clip catching Senator Elizabeth Warren exiting a private jet, that not everything she says is true (allegedly)!

By far the most entertaining part of the brief video is her camera-evasion techniques once she realizes she is being filmed, finding refuge behind one of her staff…

Well we know at least one person who is going to be very disappointed in you lizzy…

pic.twitter.com/B3tfgTJxIa

— GrantB911 (@GrantB911) February 4, 2020

But the hypocrisy goes even deeper. As Fox News reports, Warren, who funds her trips with campaign cash, tweeted as recently as last Thursday about Trump administration officials using private aviation on the taxpayer’s dime. She specifically referenced former Trump Health and Human Services Secretary Tom Price, who still owes the U.S. government over $300,000 in travel expenses, according to an Inspector General report.

Between June and September, Warren paid over $150,000 to “Advanced Aviation,” a private jet charter service, according to FEC filings. Last week the Washington Examiner reported she had spent over $700,000 total on private aviation.

With Democrats on the back-foot following the twin catastrophes of the Iowa Caucus and their unsuccessful push to call John Bolton as a witness in Trump’s Senate impeachment trial, which is expected to end Wednesday with a resounding acquittal and Trump’s approval rating at record highs.

With stocks near record highs and all of Trump’s geopolitical rivals on the back foot, this will be the first SOTU for Trump that won’t be overshadowed by government shutdown-related shenanigans or the Russia collusion narrative.

It’s also important because it’s the last SOTU of Trump’s first term. Trump never really stopped campaigning, though he officially launched the 2020 campaign with a major speech in Florida last year. With a second term hanging in the balance, expect Trump to luxuriate in his rivals’ many mistakes and unforced errors.

Tuesday night’s speech is only Trump’s third state of the union, since the big speech he delivered after inauguration day back in 2017 wasn’t technically a state of the union.

The address starts at 9 pm ET. Readers can watch it live below:

Since the gist of the speech is typically leaked to the press before Trump starts speaking, online betting markets are focused on the length of Trump’s speech, as well as the number of times he’ll say certain words, like “China” or “Democrat”.

Here’s a roundup of SOTU-related Over/Unders, courtesy of Sports Betting Dime.

A few years ago, researchers at the Constitution Center put together this ‘State of the Union’ bingo board the reflects topics reliably mentioned by both Republican and Democratic candidates.

While Democrats like to complain about President Trump’s frequent errors of grammar and spelling, the grade-reading level of the (typically) annual address has declined in recent decades, a trend that started long before President Trump rode that Trump Tower escalator to glory.

If you’re curious about what to expect, the Hill has a primer on five topics to watch, including China, impeachment, his message to Democrats and any big new legislative proposals (Trump will reportedly call on Congress to support previously announced policy plans, possibly including his long-awaited ‘bipartisan’ infrastructure bill, though White House advisors have been tight-lipped this year about what’s going into the speech).

Former Goldman Sachs partner Andrea Vella has been barred from the industry over his involvement in the Malaysian investment fund scandal known as 1Malaysia Development Berhad (1MDB), a press release from the Federal Reserve said Tuesday. 

Vella, a former the Goldman Sachs’ co-head of investment banking for Asia Pacific, was placed on leave in 2018 after he neglected to tell compliance about illicit activity in 1MDB bond offerings conducted by the bank in 2012 and 2013. 

“Goldman arranged bond offerings in 2012 and 2013 for 1Malaysia Development Berhad (1MDB), Malaysia’s state-owned development and investment company. The consent order states that Vella failed to escalate Low Taek Jho’s involvement in the bond offerings. Low was a person of known concern to Goldman, and his involvement indicated heightened potential underwriting risks. 

Low and two former Goldman employees, Tim Leissner and Roger Ng, have been criminally charged by the Department of Justice for participating in a scheme to divert proceeds of the bond offerings from 1MDB for their personal benefit and bribing certain government officials in Malaysia and Abu Dhabi,” the press release stated. 

Bloomberg noted that Vella was able to negotiate with the Fed to leave the industry without admitting or denying wrongdoing. 

A Goldman spokesperson said Vella exited the firm several days ago.  

The Fed’s release noted Vella was barred from the industry and “fined $1.42 million for his role in the scheme to divert bond proceeds.” 

Goldman continues to negotiate with the Department of Justice on a settlement for its role in the 1MDB scheme, where Low had siphoned over $4.5 billion from the state-owned wealth fund from 2009 to 2015. 

And what we have here is another example of how a top Goldman banker gets a slap on the wrist for one of the biggest frauds in history. Nevertheless, it also shows how these bankers were given mega deals thanks to kickbacks. 

Authored by Mike Shedlock via MishTalk,

Economic contagion due to the coronavirus is underway. Hyundai halted production. Sony, Apple, and Ford issued warnings.

If you can’t get parts, you can’t build cars.

And due to a coronavirus-related manufacturing halt in China, Hyundai to Shut Down Some Production.

Hyundai, the world’s fifth-largest carmaker, announced Tuesday that it was suspending production lines at its car factories in South Korea, one of the first major manufacturers to face severe supply-chain issues because of the coronavirus.

Many auto plants in China have already shut down because of the virus, including factories run by Hyundai, Tesla, Ford and Nissan. Hyundai plants in South Korea would be the first to shut down lines outside of China, and comes as Hyundai has ramped up production in China over the past two decades.

Economic Contagion

The Wall Street Journal comments on China’s Economic Contagion

More than 20,000 coronavirus cases have been confirmed worldwide—an eight-fold increase over the last week—and experts say hundreds of thousands may not yet have been diagnosed. Two dozen or so countries have reported cases, and many have restricted travel from China to limit the contagion. Companies are evacuating employees from China.

U.S. manufacturers such as Ford, Apple and Tesla have temporarily halted production. One-sixth of Apple sales and nearly half of chip-maker Qualcomm’s revenues come from China. So do 80% of active ingredients used by drug-makers to produce finished medicines. Because China is the world’s largest manufacturer and an enormous consumer market, the economic freeze will disrupt supply chains and reduce corporate earnings.

China’s GDP growth was already almost certainly lower than the official figure of 6%, and it is likely to fall by a third or more.

It’s probably too much to ask Mr. Trump to lift his tariffs on Chinese exports, though it would help. At the very least he could give Beijing more latitude to meet its promise to buy $200 billion more in U.S. products over the next two years. The last thing the President should want when campaigning for re-election is an economic pandemic.

Coronavirus Menace

The New York Times reports SARS Stung the Global Economy. The Coronavirus Is a Greater Menace.

Apple, Starbucks and Ikea have temporarily closed stores in China. Shopping malls are deserted, threatening sales of Nike sneakers, Under Armour clothing and McDonald’s hamburgers. Factories making cars for General Motors and Toyota are delaying production as they wait for workers to return from the Lunar New Year holiday, which has been extended by the government to halt the spread of the virus. International airlines, including American, Delta, United, Lufthansa and British Airways, have canceled flights to China.

Companies Warn On Impact

MarketWatch discusses the Earnings Impact.

• Wynn Resorts Ltd. has among the highest China exposure, as the company derived about 75% of total revenue from Macau over the last 12 months, according to estimates based on FactSet’s proprietary algorithm.

• Sony Corp. CFO Hiroki Totoki, said the fallout from the coronavirus slowdown on the company’s manufacturing, sales and supply chain operations could wipe out its revised guidance for 2019.

• BP said current demand for the year is between 300,000 and 500,000 barrels a day, not the 1.2 million it had anticipated for the year. “There is no question coronavirus, I suspect, will impact demand this year,” a BP executive told investors.

• Jewelry retailer Pandora said it’s already struggling in China in 2020 but the virus is presenting other threats. “China is currently also challenged by the coronavirus that have left streets empty and forced store closures,” Pandora CEO Alexander Laxik said. “China is the biggest jewelry market in the world and we’re not going to walk away from this.”

• Royal Caribbean Cruises Ltd. estimated that cruise cancellations and itinerary modifications as a result of the coronavirus will have a 25-cents-per-share impact on earnings. The company has already canceled eight cruises out of China.

Known Disruptions

Major disruptions include Ford, Apple, Tesla, Qualcomm, Hyundai, Wynn resorts, Sony, BP, Pandora, Royal Caribbean, GM, Toyota, Nike, all the airlines, and many drug makers.

If it’s “Made in China” there will be an economic hit.

This is on top of the Trump-sponsored manufacturing slowdown. Trump’s steel tariffs have started a Rolling Cascade of Downstream Pain

Freight shipments have collapsed: Cass Year-Over-Year Freight Index Sinks to a 12-Year Low

And GDP Internals show business investment contraction: Ignore the Headline, Real GDP is Much Worse Than It Looks

So forget about Trump’s Trade War Ceasefire with China. All that did was halt escalations.

Due to the coronavirus China cannot possibly honor commitments. And it’s highly doubtful they could have or would have anyway.

Macy’s announced Tuesday that it had adopted a three-year plan designed to stabilize profits and continue company growth. The new plan calls for a radical $1.5 billion cost-cutting program that will axe upwards of 2,000 jobs and shutter 125 stores across the US.

The retailer, which operates 680 stores under the Macy’s and Bloomingdale’s brands, said the closure represents an 18% reduction in its brick and mortar footprint. The layoffs of about 2,000 corporate jobs will account for 9% of its workforce. There’s also a plan to close several offices. 

Macy’s said the cost savings would generate about $600 million in 2020 and $1.5 billion annually by 2022. 

“We are taking the organization through significant structural change to lower costs, bring teams closer together, and reduce duplicative work. This will be a tough week for our team as we say goodbye to great colleagues and good friends. The changes we are making are deep and impact every area of the business, but they are necessary. I know we will come out of this transition stronger, more agile, and better fit to compete in today’s retail environment,” Macy’s CEO Jeff Gennette said in a statement.

Gennette said the company’s “least productive” stores would be cut first. There are already 30 stores in the process of closing, he added. 

Under the consolidation program, Macy’s NYC will become the company’s sole corporate headquarters. Offices in San Francisco, Cincinnati, and Lorain, Ohio, will be closed within the next three years. 

“We will focus our resources on the healthy parts of our business, directly address the unhealthy parts of the business and explore new revenue streams,” Gennette said. “Over the past three years, we have shown we can grow the top-line; however, we have significant work to do to improve the bottom-line. We are confident the strategy we are announcing today will allow us to stabilize the margin in 2020 and set the foundation for sustainable, profitable growth.”

The retailer will be testing smaller storefronts called Market by Macy’s and concentrate more on e-commerce. 

Amazon’s blowout Q4 earnings highlights how it has forever changed the retail industry, as legacy retailing giants have been reduced to nothing more than a fraction of their size in a decade. 

Over 9,000 retail department stores closed their doors last year. With 2020 underway, Macy’s latest cost-saving ploy suggests the retail apocalypse will drag on.

Authored by Alasdair Macelod via GoldMonmey.com,

The benefits of a deflation of prices brought about by a combination of sound money and markets free from government intervention have been demonstrated to be the best economic environment, the denial of which in favour of inflationary financing has led to repeated monetary and systemic failures.

This article explains how this has come about and puts the record on deflation straight. The development of macroeconomic theory had to deny the benefits of a deflation of prices, unbelievably telling us we need higher prices to stimulate our consumption.

Deflation and investment funded by savings is a far better, natural economic environment than the false gods of easy debt and money printing. There can be no return to the stability of gentle price deflation without seismic shifts in economic thinking and government responsibilities.

Introduction

Talk to any macroeconomist and he will tell you his greatest fear is deflation. He or she may have read Irving Fisher’s account of how in the 1930s deflation forced banks to liquidate loans by selling collateral into falling markets, driving asset prices lower still, accelerating further selling, undermining collateral prices even more, forcing banks to liquidate yet more collateral, driving prices lower still…

Deflation cannot be permitted, for fear of it developing into a self-feeding maelstrom. And to just to make sure, we must have inflation running at a positive 2%, and any dip below is a cause for concern. But is this actually true?

The answer is to be found in the vested interests in a modern economy. Today, critics of deflation are believers in intervention as a means of preserving jobs, convinced that the cause of failure is irrational free markets. Before interventionism took hold, economic failures were associated with cycles of bank credit. In those times, roughly before the early 1920s, deflation was widely understood to be a natural cleansing of past excesses, since they were always preceded by undue optimism and overt speculation. In England, Overend Gurney moved from the staid discount market into mismatching short-term finance into longer maturities, lending into the rail boom before collapsing in 1866. The failure of the City of Glasgow Bank in 1878, followed by Barings in 1890 established a twelve-year cycle of bank credit at that time. We may care to note that it is now twelve years since the Lehman crisis, giving a certain urgency to the current situation.

Banks have never been properly held to account for credit inflation and always resisted attempts to be so. Consequently, addressing the true cause of periodic deflationary slumps has always been ruled out. That left picking up the pieces after a credit-induced boom morphs into catastrophe as the only practical solution. And of course, this bailing out in the so-called public interest was what banks increasingly lobbied for, particularly in America.

The last cleansing deflation in the old-fashioned sense followed the First World War: in America it was brutal but short. It was the last time the US government refused to interfere, the gold standard at $20.67 to the ounce remained intact, and the roaring twenties ensued. But at the end of that decade, President Hoover had a different, hands-on approach.

Illustrating the difference of perspective, his predecessor President Coolidge said of Hoover, “That man has given me nothing but advice, all of it bad.” While Coolidge was unfortunately ignorant of what the Fed was doing with money, he was the last of the genuine free-trade presidents and Hoover the first interventionist. The change in policy was marked by the Wall Street Crash in 1929 and the subsequent years when the slump turned from being a short sharp correction into a prolonged depression.

A new breed of economists evolved with it. From a careerist’s point of view, there was no money nor influence to be gained in being a non-interventionist when your paymaster and the paymaster for your alma mater is an interventionist government. Classical economists who had argued for sound money and Say’s law were out in the cold. Rather like the climate change movement today, where objective, qualified meteorologists have been side-lined by a mixed bunch of science opportunists, an interventionist movement gained control of the economic agenda.

It was this movement that denounced deflation as the ultimate horror, supposedly brought about by a restrictive gold standard. Money now had to be flexible to manage the economy and avoid a repeat of the depression. Targeting prices, first implemented as a policy in the early 1920s by Benjamin Strong at the Fed, along with full employment have been written in stone as objectives for economic and monetary policies ever since. The consequence is debt has taken over from savings as the driving means of economic advancement. Today, the world has an estimated one quarter of a quadrillion dollars of debt, and we can now see this association of both money and debt creation accelerating both further and faster.

For practical purposes, debt is the other side of money-printing. With welfare-driven governments facing escalating commitments and static tax revenues, deflation appears to have been banished for ever.

Deflation and Humpty Dumpty

To think deflation is a danger at a time of accelerating monetary inflation appears to be preposterous. But Irving Fisher was right in one respect, and that is the cycle of bank credit ending in a tendency for credit to contract is always a problem, leading to regular systemic and banking crises in the manner he described. But today, this is counteracted by aggressive expansion of base money, with this cycle in anticipation of a bank credit crisis. So overall, deflation of aggregate money is simply a myth.

An additional problem is modern economists subscribe to the Humpty Dumpty school of definitions: “When I use a word it means just what I choose it to mean – neither more nor less”. They apply deflation mostly to prices, though correctly applied it is of the quantity of money. Google it, and the former comes up.

The error here is to describe the symptom and not the cause. Prices can fall for a number of reasons, monetary deflation being only one. The other principal causes, which are discussed below, are changes in savings behaviour and the effect of technology and competition.

Sticking with the price definition of deflation raises a further problem due to the immeasurability of changes in the general price level. Econometricians have progressively banished price rises by various means, so little or no inflation is recorded. If the price of a good rises, it is assumed consumers will find cheaper alternatives, so the price rise can be ignored. Technological improvements are the excuse to modify prices to take account of them. According to the US Bureau of Labor Statistics, in the twenty-two years from 1997 to 2019 the index value of a new vehicle rose by only 0.6%, while over the same period the average car price rose from $16,400 to $36,718, an increase of 124%. With tricks like this it is easy to see why independent analysts, such as Shadowstats.com and Chapwood Index estimate annual price inflation to have been running at roughly 10% in recent years while the official CPI rises by a goal-seeking 2%.

With statistical manipulation, official figures could even report price deflation when monetary or price inflation is significant. Unfortunately, it is the official CPI statistics that are accepted as the truth even though they are demonstrably incorrect. A narrative that condemns deflation and uses statistical manipulation permits the government and its licensed banks to use monetary expansion as an increasingly important means of funding and for the replenishment of bank reserves, despite consumers being progressively impoverished through higher prices without compensating increases in income.

Today, empirical evidence is ignored

Sound money, that is to say money which expands and contracts at the public’s bequest and not that of the state and its licensed banks, tends over time to lead to falling prices, not that the general level of prices can actually be measured and should remain no more than an economic concept. The clearest example is found in the extraordinary success of free markets in the nineteenth century, spearheaded by wise government in Britain.

Following the Napoleonic Wars the gold sovereign was introduced in 1817 and became the sheet anchor of Britain’s monetary system. Despite the disruption of cycles of bank credit, demand for them and the Bank of England’s gold substitutes in the form of its note issue was a matter for commerce and the public, crystallised in the 1844 Bank Charter Act. Sound money, with the state’s hands firmly bound by the gold standard, saw a small nation of some 27 million (1851) become the most prosperous and influential on earth by the end of the century in a price-deflationary environment.

Food prices fell. A four-pound loaf of bread, which was the food staple in 1810, cost over a shilling, falling to less than ten pence, or by over 20% by the late 1880s. Proceedings at the Old Bailey recorded that prices of manufactured goods fell significantly, particularly clothing. If hedonics had been applied to these prices, as is the custom today, they would have fallen even more due to the massive improvement in overall living standards and production processes from technological innovation.

The fall in prices was even more remarkable, given the gold discoveries at Sutter’s Mill in California in 1848, Australia in the 1850s and later, and in South Africa in the 1890s. Goldmoney estimates that above-ground gold stocks grew from 4,105 tonnes in 1816, when the Coinage Act declared the new sovereign as the sole standard of value and unlimited legal tender, to 23,685 tonnes at the outbreak of the First World War, an increase of 477%. The Californian gold rush produced a doubling of estimated annual mine output, which then remained generally steady until 1891, after which South African production doubled it again in the 1890s. While it would be an error to assume the only use for gold was monetary, there can be no doubt that the increased availability of gold represented significant potential for monetary inflation in the second half of the century.

Despite an inflation of gold stocks, the greatest economic progress ever recorded was in Britain during a period of continual price deflation. An important reason for this dichotomy was it was up to the public to determine the quantity of monetary gold, not the government, and the public only used what was actually needed for its circumstances.

For much of the time Britain was the only significant country on a gold standard, bimetallism with silver or silver standards predominating elsewhere until about 1870. At the outbreak of the First World War, over 80% of world shipping afloat had been constructed in Britain bearing testament of Britain’s economic prowess. And now we are told to believe deflation is bad for us.

Savings

There are a number of reasons the nineteenth century marked a significant improvement in economic conditions and living standards. Tax was low. The Income tax Act of 1842 reintroduced it at 2.9% on annual incomes over £150, equivalent today to about £50,000 measured by gold sovereigns. Ordinary people were permitted to accumulate wealth. But probably the most obvious consideration influencing future prices was an accumulation of savings.

Compared with today’s debt-driven economies, which are fuelled by monetary expansion and government intervention, the savings-driven economies of the nineteenth century required borrowers to bid up for investment capital from savers. Even if he managed to obtain loans for investment and working capital, a borrower with a poor business reputation would end up paying a high interest rate, putting himself at a competitive disadvantage.

Consequently, in a savings-driven culture a debtor’s behaviour of necessity becomes considerably more responsible towards savers’ funds than when debt is available through monetary inflation. Being funded through savings, industrial investment proceeded on the basis that borrowings must be repaid. A knowledge that the purchasing power of gold could rise over time was a further incentive to repay borrowed capital as quickly as possible. Mr Micawber’s Dickensian aphorism about spending within one’s means to avoid misery certainly applied.

Savings had two primary influences on prices. To the extent that they were immediate consumption withheld, in increase in savings lowered potential demand for consumer goods, thereby reducing the general level of prices compared with that at a lower savings rate.  Furthermore, savings were the feedstock for industrial and business investment, which improved quality and reduced unit costs.

Despite the inflation of above-ground gold stocks and therefore the availability of gold sovereigns and gold substitutes, the fact that prices fell is testament to the power of an unfettered free market economy to deliver benefits to the general public. It required a benign government strictly limiting its own drain on free markets to appreciate their importance, and nineteenth-century Britain had this in spades.

Britain’s pro-competitive government

Rather than record the entire economic history of the nineteenth century, it is sufficient to focus briefly on the principal actions of two prime ministers, Lord Liverpool and Robert Peel.

Lord Liverpool (1770-1828) navigated Britain back onto the gold standard in 1821, following its suspension during the Napoleonic Wars. At the time of the decisive parliamentary debate in May 1819, money in circulation consisted of almost entirely paper, which before the war in 1792 (five years before the gold standard was suspended in 1797) consisted of £30 million in gold and £20 million in paper. In 1819, despite trade having almost quadrupled it was still £50 million. While more efficient settlement systems and an increased use of discounted bills allowed money to circulate with greater ease, gold had virtually disappeared as circulating money, because as well as its inconvenience for settling trade gold had developed a premium in its value, driving it from circulation.

As Prime Minister, Liverpool oversaw the return from this situation to the pre-war gold standard. He was motivated by three considerations. First, while monetary inflation had enabled the government to finance the war, it could not be a permanent part of the economic system, the need for inflationary financing having passed. Second, the management of the currency should remain with the Bank of England, because it was not a matter to be entrusted to Parliament. And third, with gold having fallen from a 30% premium to paper to only 3%, it appeared eminently possible, if gradually done.

It would require a deflation of paper notes relative to gold to get the old standard to stick. The return to gold having been agreed is attributed to a decline in prices between 1819 and 1821. A six-month recession was recorded in 1819, commencing at the time of the parliamentary debate. But it is a mistake to attribute these conditions entirely to a return to the pre-1797 gold standard when the preceding post-war euphoria is taken into account, which lead to a brief boom. Whether these events or Liverpool’s policies are the reason, the reintroduction of the pre-1797 gold standard provided a background of monetary stability that lasted over ninety years.

Robert Peel was important in two respects. He oversaw the introduction of the Bank Charter Act, which reformed the banking system so that the note issue became the preserve of the Bank of England, which would only be expanded with the full backing of physical gold. While the Act was designed to reinforce the gold standard, sadly it neglected to address the issue of unbacked bank credit.

His second act, the repeal of the Corn Laws in 1846 led by 1860 to the repeal of nearly all other tariffs, producing substantial economic benefits. It meant lower prices for food staples, giving factory workers, who previously had more or less only subsistence-level wages, free money to buy other things. In turn, this led to an expansion of manufacturing activity, lowering production costs even further. The abolition of tariffs was so successful that other countries, such as France, and the German-speaking states on the Continent followed suit.

The reintroduction of the gold standard in 1821 and the Bank Charter Act were designed to remove the temptation of inflationary financing from government, in accordance with Lord Liverpool’s policy. Peel’s removal of tariffs led to lower prices for goods. Together, they ensured a general deflation of prices that lasted until the First World War. It was a period of enormous success for Britain and her trading partners, not just in the Commonwealth and colonies, but it stimulated business in America and Europe as well. And all this from economic policies regarded today to be the greatest threat to the global economy.

Conclusion

The evidence from the past is that deflation of prices offers substantial benefits to consumers, businesses and savers. This article has very briefly shown why this is so by drawing on the experience of Britain in the nineteenth century, and there is no reason to believe that a similar deflationary situation would be any different today. Instead, one of the more obvious contemporary deceits which is paraded as a universal truth is that consumers benefit from higher prices because of the stimulant to business.

On every level this is plainly wrong. The inflationist argument has demolished both savings and personal wealth, leaving the average consumer worse off. It transfers wealth from producers to non-producers, notably the government, its licensed banks and speculators. The fact of the matter is inflationists seek to justify inflationism.

Today’s inflationism has its roots in the ebb and flow of bank credit, a problem unfortunately not addressed by the Bank Charter Act of 1844. More than any other error it led through successive credit cycles to the development of central banks and their attainment of the levers of monetary policy. It required the denial of classical economic theory and its replacement by a new breed of macroeconomist educated to justify the state’s increasing management of money and credit. In the process, reasoned economic theory was discarded in favour of the socialisation of money, and much else besides. Deflation had to be vilified to justify this new macroeconomic world.

It has led to our current situation, where without further monetary inflation governments would have to deliberately rescind most of the welfare provisions introduced since President Hoover became the first interventionist in 1929. Without further monetary inflation, the global banking system would face liquidity pressures likely to collapse it: in fact, these strains have already appeared in the US monetary system, forcing the Fed to inject large amounts of liquidity on a daily basis through repurchase agreements.

Without further monetary inflation, interest rates will immediately rise, bankrupting indebted businesses and consumers alike, who have become used to easy money never to be repaid.

All that further inflation achieves is to defer these outcomes, not stop them. There can only be one outcome from this macroeconomic fairyland, the collapse of unbacked fiat currencies. A return to sound money, free markets and prices set by the deployment of genuine savings will require shifts of seismic proportions.

A proper respect for the benefits of falling prices might have avoided the looming monetary and economic crisis.