It is a big part of what I try to teach – that the future is unknown and all decisions are made before the consequences of those decisions can be known. So people take inferences wherever they can, and in this case the inference is that McDonald’s tells us why the market will collapse. It seems to tell us more than just what is happening to the market:

We had, essentially, very poor sales from McDonald’s. Now, McDonald’s is a very good indicator of the global economy. If McDonald’s doesn’t increase its sales, it tells you that the monetary policies have largely failed in the sense that prices are going up more than disposable income, and so people have less purchasing power.”

Faber has long argued that the policies of the Federal Reserve and other central banks simply increase asset prices and create inflation rather than actually stimulating the economy. But while the long-predicted inflation has not come to pass, Faber says that the McDonald’s results reflect the fact that inflation is rising faster than income, reducing the amount that individuals can spend.

Who can be in any doubt that the cost of living is rising around us? But whatever else, very few of us are able to maintain our living standards, with plenty of shifts in expenditure patterns to accommodate the harder going. I was reading The Senior the other day and its front page was on “Living in ‘energy poverty'” with the subhead, “Disconnections up: more seeking hardship plans”. The example given was of a 77-year old woman who received a $1500 gas bill. Not that long ago such a notion would have been impossible. Now we are all being careful of this and so many other things.

Our living standards are being chiselled at in countless ways, only some of which show up as a rise in the price level. It’s not just monetary policies that are failing but the entire range of policies which divert resources away from value adding production and into the usual low-productivity nonsense aimed at by governments. The wonderfully whimsical headline in this morning’s AFR captured it all:

Abbott to pick winners not losers

No doubt this will appeal to everyone, a political winner. One can only hope that those who are promoting the policy understand it can never do anything but waste money so will be very restrained in following up on this:

Federal cabinet has approved a “competitiveness agenda” that will lead to government support for parts of the economy where Australia is strongest and require greater collaboration between businesses, schools, universities and training colleges.

Mercantilists all.