Heard (but not understood) On the Street: The WSJ and Deflation

By William K. Black

A brief update is in order after my three part series on how the troika (the ECB, EU, and the IMF) was acting contrary to its stated policies on deflation, Mario Draghi’s (the head of the ECB) confession that he favored deflation in the eurozone periphery because he wanted these nations to have lower prices and wages so that they could increase exports, and the disgraceful reporting of the subject in the New York Times and the Wall Street Journal.  The WSJ’s “Heard on the Street” feature is out with an April 3, 20014 story on deflation that epitomizes each of these defects.  The title of the article foreshadows the analytical black hole that follows: “Inflation, Euro Test Draghi’s Resolve at ECB.”

The first sentence of the article floats the meme that Draghi is trying to follow the famous British slogan during the blitz: “Keep Calm and Carry On.”

“The European Central Bank stuck with plan A Thursday: hold steady and wait for inflation to gradually pick up. But President Mario Draghi and his colleagues are being forced to talk loudly about plan B, including the possibility of quantitative easing.”

The far better metaphor is that the troika does not simply fiddle while Rome, Madrid, and Athens burn, but that the troika-trolls fiddle with these economies through austerity – pouring accelerants on the flames of massive unemployment.  During the blitz, the firefighters and rescue workers fought the flames and risked their lives to save the victims.  “Keep Calm and Carry On” did not mean “ignore the victims” and it certainly did not mean blame the victims.  The WSJ confuses the troika-trolls’ “indifference to the plight of the victims of austerity” with “resolute” and “calm.”  People who are indifferent to the suffering that they cause are sociopaths – not “resolute.”

We need to review how the WSJ deals with nine critical issues.

1. Draghi’s claim, in contravention of stated ECB policy, that deflation in the periphery would be ideal
2. The fact that Spain, Italy, and Greece (roughly one-third of the eurozone’s total population) are suffering Great Depression levels of unemployment
3. The admission by the EU’s leading austerity acolyte (Olli Rehn) that under austerity it will take Spain 10 more years to escape the “crisis” phase – much less recover fully
4. The fact that deflation has already arrived in Spain (contrary to stated ECB policy)
5. The fact that the same thing – insufficient demand – that is causing massive unemployment is causing the inflation rate to fall well below the ECB’s purported target
6. The IMF’s admission that fiscal stimulus has proven highly effective where used
7. The fact that the problems posed by deflation begin well before the inflation rate turns negative
8. The fact that it is insane to wait until the economy is near deflation before acting to supply the inadequate private sector demand
9. The fact that even the ECB admits that it is dubious that monetary policy is an effective means of ending the Great Depression levels of unemployment in the periphery

My readers know the answer.  The words “unemployment,” “demand,” and “fiscal” never appear in the article.  The dog that doesn’t bark is telling.  The WSJ listens to “[Wall] Street” – and the victims of Wall Street and its assault through austerity disappear.  The troika-trolls ignore the victims and the Street hears no evil and speaks no evil about the Street.

What is Draghi’s purported “resolve?”  The real “resolve” is shown by unemployed parents in the periphery who desperately seek work in order to care for their children.  The WSJ is channeling the worst of UK financial journalism’s fawning treatment of the “resolve” of Sir Charles Trevelyan in 1847 for ignoring what the rapidly mounting death toll that soon reached roughly a million Irish through starvation, exposure, and related diseases and his “resolve” in continuing to inflict the UK’s murderous response to Ireland’s “Great Hunger” (an Gorta Mór) as the corpses of our relatives choked England’s first colony.  Another two million Irish took to the “coffin ships” to emigrate to try to escape the murderous workings of Trevelyan’s oxymoronic and malignant “all-merciful [divine] Providence.”  Of course, he wasn’t “Sir Charles” then – the UK later knighted him for his “resolve” in implementing its genocidal policies in Ireland.

There is something intolerably obscene to see the WSJ praise the troika-trolls “resolve” in ignoring the victims while literally causing their victims to disappear from the pages of the WSJ.  Terrible economics invariably generates spectacularly immoral policies and attitudes toward the victims of those economic dogmas, but journalists do not have to sink to the level of the troika-trolls and praise the sociopaths for their radical lack of empathy for the suffering they cause to the poor.

I urge a campaign to confront the “journalists” who regurgitate so faithfully the troika-trolls’ malignant memes.  Please call them out publicly through social media and privately through email on any article that ignores unemployment, Draghi’s devotional to the joys of massive wage cuts driven by deflation, inadequate demand, and the alternative of using fiscal policy to fill the inadequate demand.  Let’s see whether they can be embarrassed into doing the right thing.  Educating them through our columns has failed so far, though our offer to teach a two-day seminar for journalists who want to cover economic and financial issues still stands.