Investors Should Prepare for a Bumpy Ride– Capitalism Is In Crisis
Several things have now become very clear. First, as has been argued here many times here, the international monetary system is in dire need of reform. Since the US’s abnegation of fiscal and monetary responsibility in 1971 and its termination of the quasi gold standard Bretton Woods system, the international monetary system has dumped excess liquidity on the world and enabled bubble after bubble.
Second, the fiat international monetary system has allowed numerous countries – China being the latest – to hold down (I would never use a word like “manipulate”!) the value of its currency and export its way to prosperity. This export model has been at the expense of the US worker. Remember the real US unemployment rate, the U6 rate which includes discouraged and part time workers, is 17.3%. The American consumer is in a debt deflation mode. The US oriented export model is dead. Only a massive devaluation of the US dollar against Asian currencies will allow America to compete globally. The US has to become the exporter. If that doesn’t happen, protectionism looms.
Couldn't a massive reduction in wages help America compete globally? If they can reduce us to third world wages, they don't have to worry about third world governments. They've already bought this one. It's not like anyone can afford to hold out for more money.
Except bankers, of course.
4 comments:
It's not the wages, and hasn't been for a long time.
The US competitiveness issues are in overhead. Health costs, executive compensation, the security state, sprawl.
Bring those under control & we'd have a huge cost advantage over Europe. Cut wages more & you just crush demand & increase the costs of the security state (the military, prisons, police, security guards, bag scanners, video cameras etc)
CEOs are saying most demand is from overseas anyway. Continue privitizing security. Continue to provide meaningless outlets for social unrest (tea parties) and social shaming for poverty (McArdle etc).
Wages in China might go up too.
"Since the US’s abnegation of fiscal and monetary responsibility in 1971 and its termination of the quasi gold standard Bretton Woods system, the international monetary system has dumped excess liquidity on the world and enabled bubble after bubble."
Yep, those were unilateral U.S. decisions with no basis in reality. No negotiation at all, no consensus among the other countries, and most especially no strengthening of currencies--looking at you, Swiss Franc--that had been kept artificially weak.
That someone with a Ph.D. in Economics published such complete twaddle is depressing.
I like the way he said the monetary system provided excess money supply, as if people weren't involved.
And that the bankers are hard working and must endure grueling machismo. Like Gladiators, only with cell phones.
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