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Post by jeffolie on May 4, 2009 10:45:38 GMT -6
For all of Krugman's glorified career, he has a way of restating the obvious. In this event, he points out 'falling wages'. I can not fault him on his focus because wages are falling. And, it can not be said too much that Americans are suffering while the rich are getting richer. What he calls 'stagnation', I call an economic tragedy for Americans. ================================================================ Krugman: Falling Wage Syndrome Paul Krugman writes in the NY Times: Falling Wage Syndrome Wages are falling all across America. ... ccording to the Bureau of Labor Statistics, the average cost of employing workers in the private sector rose only two-tenths of a percent in the first quarter of this year — the lowest increase on record. Since the job market is still getting worse, it wouldn’t be at all surprising if overall wages started falling later this year. ... Suppose that workers at the XYZ Corporation accept a pay cut. That lets XYZ management cut prices, making its products more competitive. Sales rise, and more workers can keep their jobs. So you might think that wage cuts raise employment — which they do at the level of the individual employer.
But if everyone takes a pay cut, nobody gains a competitive advantage. So there’s no benefit to the economy from lower wages. Meanwhile, the fall in wages can worsen the economy’s problems on other fronts.
In particular, falling wages, and hence falling incomes, worsen the problem of excessive debt ...
There has been a lot of talk lately about green shoots and all that, and there are indeed indications that the economic plunge that began last fall may be leveling off. ... the risk that America will ... face years of deflation and stagnation — seems, if anything, to be rising.
It sure seems many analysts suffer from a bipolar disorder. A few months ago it was depression, now it is "green shoots". As Krugman notes, it appears the pace of deterioration has slowed, and perhaps the economy will bottom sometime this year - but that is different from new growth. Stagnation is a real concern.
www.calculatedriskblog.com/2009/05/krugman-falling-wage-syndrome.html
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Post by waltc on May 4, 2009 11:34:30 GMT -6
Kruggie is spot on but most Republicans, biz schools and economists see falling wages as a good thing.
He won't make any friends in the economics community with such talk.
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Post by unlawflcombatnt on May 4, 2009 14:15:25 GMT -6
Krugman is stating an obvious truth at the macroeconomic level--that falling aggregate wages reduce aggregate consumer buying power and aggregate production demand.
This phenomenon is the major reason I started writing and posting online about economics-related issues.
If "necessity is the mother of invention", then "aggregate demand is the mother of production." (This was the central theme of John Maynard Keynes, which many seem to ignore.)
There is no production without demand for production. And there is no demand without the monetary means to purchase it.
People have unlimited wants. But those wants don't create any demand until people have the means to fulfill them. Wages provide the means.
The exact same thing applies to foreign outsourcing to reduce production costs and prices. It does American workers no good to have lower-priced goods available, when their wages have fallen more than the prices have fallen.
And that's exactly what happens with outsourcing. If the aggregate price of goods fell as much as aggregate wages, there'd be no increase in profits from outsourcing. As such, there'd be no outsourcing.
But then we know that aggregate prices are not falling as much as aggregate wages--thus making outsourcing profitable to the American free traitors who do it.
Hopefully Krugman will apply his stated realization about wages to the concept of free trade, which he is currently a proponent of.
It is not more "productive" to outsource jobs. It is only more cost-effective to the Globalist plutocracy. It enriches those at the top at the expense of everyone else.
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Post by jeffolie on May 4, 2009 15:03:56 GMT -6
"It is not more "productive" to outsource jobs. It is only more cost-effective to the Globalist plutocracy. It enriches those at the top at the expense of everyone else."
When will Americans take political notice of this crime against the US way of life? Where are the riots and protests? I do not see any serious political activities. Americans are too complacent with their everyday struggles to make a living, raise families and just maintain. Obama talks the talk about the rich and ignores his own actions that serve the corrupting banking class.
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Post by mdub on May 4, 2009 17:36:46 GMT -6
Outsourcing is fool's gold for corporations. It produces only short run gains, but the long term effect is to destroy the US consumer market. I think we are at this point now. Outsourcers were benefitting several years ago, when consumers had access to cheap and easy credit. Now many retailers are slashing prices dramatically to clear unsold inventory, in order not to take a total loss. In an effeort to save even more on labor costs because of declining sales, they are increasing outsourcing, thus continuing the cycle. MBG Information Services reports that 2008 was the first year with no inflation since '55. www.mbginfosvcs.com/
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Post by waltc on May 4, 2009 20:18:59 GMT -6
Jeffolie
Uhh most folks are against TARP(80% IMS) and destructive trade practices. The problem is, is that we have NO POLITICAL REPRESENTATION because both parties are whored out to Wall Street.
Voting Corruptocrat or Repugnut is just playing into their hands.
The good news is that people are beginning to get wise to the criminals and shot callers in D.C. you can see that with the Tea Parties across the country which can serve as a nucleus for a mass reform movement once in time once things really tank. And by tank I mean 20% and more unemployment and the states going on the warpath taxing homeowners into poverty to keep a bunch of worthless state employees and welfare types happy.
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Post by whoswho on May 5, 2009 9:14:12 GMT -6
One thing about it, they will ONLY learn the hard way.
Don't look to them for any kind of human empathy or kindness, because they don't have any. They will only pay attention when what they are doing doesn't work.
For some reason, they have absolutely no common sense whatsoever. When they make their plans, they don't use a realistic planning model. They don't seem to know any real people with real problems and real limitations. They screw us, and then think that we'll continue to perform as expected. I've often thought there must be a lot of dope smokers among them, because they don't have the judgement of a five year old.
Gonna have to learn the hard way, I guess.
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Post by judes on May 5, 2009 9:45:01 GMT -6
Yep, it's been a slow death to the American consumer, those that contribute to about 70% of the economic activity. ULC you nailed it, aggregate prices of crappy imports have not fallen anywhere near what aggregate wages have been falling, especially when you factor in all the newly under or un employed. Mish hasa great chart on his site, to give a good visual of the falling wage syndrome. This chart shows falling disposable income, and we know it's not due to tax increases. 4.bp.blogspot.com/_nSTO-vZpSgc/Sf1Gs5T5TyI/AAAAAAAAGCU/kbt8fkcfq5Q/s1600-h/Disposable+Income.png
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Post by unlawflcombatnt on May 5, 2009 10:25:08 GMT -6
For some reason, they have absolutely no common sense whatsoever. That's the crux of it, whoswho--no common sense. Keynes actually wrote about this, saying that economics of the time advocated theories that made no common sense to the average person. Though his "General Theory" is difficult reading, this particular point came through loud and clear.
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Post by judes on May 5, 2009 15:28:55 GMT -6
Not only do their policies not make common sense, they don't even seem to make well thought out reasoned sense based on any empirical evidence or any scientific data what so ever. : )
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