Higher Wages or Bubblenomics: What's it gonna be?

[Crewleader]

:hi: Merry Christmas DUers!

Economics / Recession 2008 - 2009 Dec 24, 2008 - 03:27 PM

By: Mike_Whitney

Economics

Wages, wages, wages. It all gets down to wages.

A strong economy must be built on a solid foundation of steadily rising wages. If wages don't keep pace with production, the only way the economy can grow is through the expansion of debt, which leads to disaster.


Consider this: the US economy is 72 percent consumer spending. That means the Gross Domestic Product (GDP) cannot grow if salaries don't keep up with the price of living. Low Income Families (LOF)--that is, any couple making less than $80,000--represent 50 percent of all consumer spending. These LOF's spend everything they earn just to maintain their present standard of living. So, how can these families help to grow the economy if they're already spending every last farthing they earn?

They can't! Which is why wages have to go up. The cost to short-term profits is miniscule compared to the turmoil of a deep recession which is what the world is facing right now. The present crisis could have been avoided if there was a better balance between management and labor. But the unions are weak, so salaries have languished while Wall Street has grown more powerful, stretching its tentacles into the government and spreading its anti-labor dogma wherever it goes.

http://www.marketoracle.co.uk/Article7953.html

[Fovea]

1. What's the next big thing?

It better be pretty damn big, no?
I think we are out of magick bullets.
The soap is not in the bottle anymore.
No more bubbles.

The question is whether the American lifestyle is able to be saved.
I think the vision of the American Dream circa 1950 is over.

The new American Dream is not to be bankrupted by debts or healthcare.
The new American Dream is going to be working one full time job to afford a
town home in the city right by the rail line.


The new American Dream is doable.
The old American Dream of 2000sqft in exurbia with two cars and an rv is dead.

Long live the new American Dream.

[Trajan]

2. If one were to search DU for 'Wages Wages wages'

They would find this thread, and numerous posts from Trajan ...

Wages wages WAGES ! ...

It lies at the CORE of the current economic debacle : IF wages had maintained parity with REAL inflation all along these last 3 decades, we would not be in the state we are in ...

The economy has ALWAYS been bottom up, and without the spending of POOR and MIDDLE CLASS workers and their families: NO man will get rich ....

The economic engine needs fuel, and that fuel is the stimulus provided by WAGES WAGES WAGES !

[OHdem10]

3. Wages have gone down as a result of Globalization and Trade

Policies. This has been the plan all along. You cannot have
one country (U.S.) with very high salaries and many countries at
slave labor wages. Higher Salaries mean we cannot compete. Other
countries cannot afford to buy our products. Equalization is goal
of Globalization.

[Citizen Number 9]

5. Whether it's a plan or not, I don't know

It does appear to be where the trends are leading, however.

I think we're beginning to run out of opportunities we support in order to keep Americans foremost in the world.

Within America, there appears to be a growing divide between those who can and will take opportunities and those who can't or won't.

It appears that the gap is being filled from abroad.

[mrreowwr_kittty]

4. Can't have an economy based on growth and consumer spending

Without the wages that make that possible. It's really not that difficult to figure out.

[notesdev]

6. Wages don't need to rise per se

They just need to not keep losing ground to inflation. Rising productivity can increase prosperity by making goods available for less, so that a constant wage can buy more and more over time.

[Danascot]

7. Wages are the key

There simply won't be a recovery until wages (along with confidence in the financial system) are restored.

Great find - thanks for posting.

More from the article:

"The Fed wants to stimulate demand by slashing the price of money to 0% while pumping trillions of dollars into the financial system (quantitative easing). But the millions of foreclosures, credit card and student loan defaults, indicate that the underlying economy is rapidly contracting and cannot support such an oversized system. Something's gotta' give. Homeowners and consumers are poorer than they were a year ago. They're focused on paying down their debts not creating new ones. Attitudes towards spending have changed; people are hunkering down. That's why Bernanke's radical liquidity experiment is doomed. There's no way to reflate a bubble if consumers refuse to spend.

"If the Fed is serious about fulfilling its mandate, it should abandon its serial bubblemaking altogether and return to basics; productivity, good wages and sound money. The country's future rests on its workers. They don't need a bailout, just a raise."