I can’t now find the interview I heard today on the BBC about the prospects of deflation in the euro-zone. I have a feeling it was Gillian Tett. But whoever it was talked about the underlying psychology of deflation.
She put it down to apathy. People have to break out of the condition, not just the economic elements but the psychological elements as well.
I was fascinated by this. I’ve often suspected that economic misfortune was just the other side of the coin from a kind of collective psychological issue. In deflation, it is that nobody can face economic activity because it is so uncertain. You may end up with far less income than you planned. It seems hardly worth planning in the first place – oh, what’s the point?
The underlying psychological pathology behind full-blown depression is so obvious that it even has the same name. For recession, well Franklin Roosevelt named that one in his inaugural address in 1933 – “we have nothing to fear but fear itself”.
But what about inflation? What pathology forces up prices? What is the underlying condition of society which causes these economic phenomena?
The moment you put the question that way, the answer is clear. Inflation is greed. It is even driven by greed.
Because that is the real issue here: is it the economic or the psychological manifestation that comes first? Which causes which?
Economics is ensconced in its own fantasy that it drives the rest of the world. But just for a moment, let us doubt that, shall we? Let us act as though it is the social pathology around us that drives the money, and see if the solutions might be easier if we assumed that from the start.