Maintaining The Rate of Interest
To encourage more interest in economic growth, central bankers maintain a low interest rate, and a low rate of interest is just what we’ve got!
There is no paradox here. The ambiguity of “the interest rate” expresses as an arguable ambivalence. While it is public policy to encourage growth, which creates jobs, low rent for money is being used to create deflation of the middle class income.
Middle-class income has been declining since the 1970s. So, what is the objective reality here? Is this something that just happens spontaneously, like the weather, or is this a deliberate detriment applied in the name of maintaining free-market mechanics?
Shifting Income Share and Declining Purchasing Power
As the market share of upper-class income is rising, the middle-class share is falling. Correlating that with the current commodity crush, for example, signals a strengthening deflationary trend while many mainstream analysts maintain that falling prices will weaken its strength.
We are seeing both a shift in income share and declining purchasing power. These two factors together explain the commodity price crunch. It is a clear deflationary signal.
The middle class is now the smallest in number. That means, by the numbers, it has both less economic and political power; and when commodity prices fall 40% in a month, that big number means purchasing power has been reduced well beyond any arguable benefit at the going rate of deflation, which measures the probable rate of default, and a shrinking middle class.
The deflationary signal also appears in maintenance of the dividend.
To maintain dividends (i.e., the real rate of interest), TBTF corporations cut labor and other capital expenses, which (you guessed it!) is deflationary. It just happens to be, doing maintenance surpluses labor value, resulting in declining income share and purchasing power.
It also just happens to be, all that deflationary pressure (and all the maintenance it requires) is caused by big government, capitalists say, and in order to keep TBTF corporations from failing under all that pressure, they have to consolidate even more. TBTF corporations get even bigger (Dow merges with Dupont, for example, which is really really big!) leaving everybody else on the short side in a really big way!
The real rate of interest, being maintained to have a mechanical, ontological, free-market attribution, makes it look like the free market is inherently inefficient. Naturally, then, the right thing to do is consolidate the risk, which then supports the risk to be avoided. Doing this builds-out the pathology of fundamental attribution error–doing the wrong thing over and over, appearing to be ontologically derived, having cause without purpose, providing for the Available Ambiguity and Arguable Ambivalence that transacts the interpretation (the objective identity) of the model being used to legitimately apply the risk in a TBTF dimension.
The result is a mechanically dysfunction, organized psychopathy that accumulates error into “bubbles” called “the big risk”–and it just happens to be the noble obligation of the elite to protect us from it, which forms the apparent necessity (the TI) of the social contract.
It just happens to be that the middle class is progressively losing the numbers needed to resist the social contract and maintain The Declaration of Independence.