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Declining Wages



July 25, 2008 – Comments (12)

Robert Reich has a post today where he basically says the heart of the issue of America taking on so much debt is declining wages in real terms.

I would suggest that that is just one part of the problem, and it is a huge problem.  When a government artifically lowers rates you are also going to get harmful asset bubbles all over the place regardless of wages.   When you fail to adequately regulate that which creates money, as in all these new financial instruments, you are going to have a problem.  When you fail to adequately regulate insurable lending standards you are going to have a problem.  

Yes wages have been declining, but asset prices did not because of idiotic and short term analysis of interest rates.  In the short term and early in the artifically declining interest rates it was good for the economy, but you have to be a moron to not see that each new decline has declining "benefit" and is actually increasingly hurting an increasing demographic group. 

Without interest rate manipulation asset prices ought to follow wages.

But, back onto the subject of declining wages, a major complaint of mine as I would suggest that here in BC wages have been declining for getting onto 30 years now.  Reich says that a man in his 30s makes 12% less in real terms than in the 70s.  Well, my father made $30-35k in the mid 70s and the 2 bedroom condo my mom bought was $32k.  That condo now goes for about $400-500k.  I would guess that wages in his occupation have doubled in "good" jobs but their are probably lots still working in the exact wage range as the 70s.

I would also suggest that other demographic groups have been harder hit by declining wages.  Simple observation tells me that when there is a competition for a job males in that age range win the competition more often over other demographic groups.

Real wages have declined, but the dire problems from it have been quite hidden by loose monetary policy.  


Something completely unrelated to the markets here, technology is killing me.  I was thinking about all the things I used to easily be able to do and now I find highly challenged.  For example, I used to be able to turn on the TV and watch a show.  Now I can't figure out how to get past the menu system that come up so I get to watch a menu.  I used to be able to work the remote.  I used to be able to buzz someone in when answering the buzzer, now I have to run down and let them in cause I can't figure out how to let them in through the phone.  I used to be able to watch a dvd, but that darn menu and remote...  I used to be able to see who had called on my call display.  I can't find the call display.  I used to be able to listen to a message on the answering machine, clueless as to how this one works.  Technology is leaving behind...

12 Comments – Post Your Own

#1) On July 25, 2008 at 10:35 AM, dwot (29.24) wrote:

Thump....  There goes copper....  It has completely evaded common sense that copper has continued to trade in the high $3 dollar range rather than in the $2 range.  Watch for it...

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#2) On July 25, 2008 at 11:31 AM, mandrake66 (74.09) wrote:

Hmm, wonder why Freeport (FCX) is up today? I've been watching for an entry point there, looks like it's still a bit in the future.

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#3) On July 25, 2008 at 1:10 PM, dwot (29.24) wrote:

Watch Freeport.  I am willing to bet earning absolutely plummet and with that the share price over the next year.  It will probably 4th quarter of 2008 before you see earnings go down and then a full year for them to completely work into the data.

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#4) On July 25, 2008 at 1:14 PM, abitare (30.10) wrote:


Good post. People, who are talking about inflation ignore the deflation in real terms of labor. We are in a global market and Asia provides more competive labor, which is deflationary to Western labor rates.

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#5) On July 25, 2008 at 1:42 PM, dwot (29.24) wrote:

I knew this moron named Harper had destroyed Canada federal budget, but I had no idea how bad.  The economy was turning so leaving well enough alone probably would still have resulted in a federal deficit for Canada.  I am really upset that we have such a moron Prime Minister and that HE'S DESTROYING EVERYTHING CANADIANS WORKED TO CHANGE. 

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#6) On July 25, 2008 at 1:44 PM, dwot (29.24) wrote:

My god, extrapolate that and you get a $6 billion deficit.  Stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid, stupid a$$.

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#7) On July 25, 2008 at 6:39 PM, DemonDoug (31.30) wrote:

I was thinking about all the things I used to easily be able to do and now I find highly challenged.

This is why AAPL has done so very well in the past few years.  Ipods are so easy to use.  Iphones are a breeze.  I hate Mac OS, but for people who are completely tech-tarded, they work great.  You hear about how in Japan and Korea all these neat gadgets come out, but the problem is that oftentimes they are toooo complicated.  Part of future technology is giving people more powerful computers and remotes but with easier interfaces.  The companies that make the best-working devices based on human factors as opposed to the best technical ones will be the ones that profit the most.  You can also see this in how well Nintendo has done v. sony and microcrap.

Looks like that loonie might not be such a great investment after all.  Might have to buy gold, or silver, or copper, all hard currencies, oh wait that's bullish for metals isn't it?  Wanna make a friendly wager?  Copper goes over 4 before it goes under 2.50?

Bottom line, it's a combination of governmental incompetency with no political will to do what is right, there are so many more Chris Dodd's for every Jeff Flake, Ron Paul, or Jim Bunning out there.  Even if you wanted to vote in a fiscal conservative for PM/President, you can't, because there is no way politically for a fiscal conservative to become president.  Just look at Jesse Ventura and Schwarzenegger - Ventura gets run out of office despite trying to bring spending under control, and Arnold, doing the best he can, gets lambasted from all sides when he tries to reign in spending. It's unfortunate that we haven't had a true fiscal conservative in office since Eisenhower - the 1950s!!!

I find it kind of funny though - 6B over budget and you are getting up in arms.  California's alone is projected to be 20B!!!!  300B for ag bill, 160B for economic stimulus, 300B for housing bill... that's almost a trillion right there.  And guess what?  That's all neeeeeeeeeeew money.  Iiiiiiiiiiiinflation.  Bailouts of WM, NCC, CORS, DSL, and others will also mean the printing presses are being fired up.

It is a bad trend though.  I'm pretty sure you have enough gold in the northwest territories to pay off creditors though if it comes to that.  Also, I'm pretty sure a populace of people who are tough enough to drive freakin big haul truckers on an ice road in -40° can pull themselves together again.

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#8) On July 25, 2008 at 7:54 PM, Imperial1964 (94.13) wrote:

"Watch Freeport.  I am willing to bet earning absolutely plummet and with that the share price over the next year."

Yeah, I just bailed out of my FCX (for a good profit).  I think you're right, though FCX's cost of copper production is fairly low.  I like FCX as a company, but China is headed down and copper is going with it.  Hopefully oil will follow too.

I'm no "peak oil" theorist.  Peak oilers may be right or not.  But I'm not basing my investments on a "this time it is different" thesis.  Cyclicals are cyclical.  Commodities are still dependent on consumption.  China is still dependent on the US.  Decoupling is a fantacy.

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#9) On July 25, 2008 at 8:11 PM, rudolphsteiner (< 20) wrote:

It amazes me that right wing politicians seem incapable of balancing a budget, ever. Nice debt clock on your website D.

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#10) On July 25, 2008 at 8:36 PM, dwot (29.24) wrote:

Ok DougDemon, lol.  So, how come when I was trying to listen to autobook on my ipod it started on Chapter 1 then went to chapter 28...  Over and over I went back to chapter one and over and over it decided I could decifer the story by listening to it random....

I used to know how to change the time on my watch too....

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#11) On July 25, 2008 at 8:48 PM, dwot (29.24) wrote:

Dorfish Harper has implemented all kinds of tax cuts.  Out GST has gone from 7% to 5% and it is BS to be reducing taxes and creating a deficit. 

For a while in order to get a handle on our debt our taxes had to go way high, way, way, way high.  If you had an income over $80k you were paying 54.9%.  I think the top braket is now 45% and then all the goods and services taxes have been reduced.  

Our debt is still about half per person compared to the US, but it only takes a little while in office with morons like Bush and Harper to destroy the future by heaping on the debt.

True, at one point our deficit was $40 billion per year, but Harper's an idiot.  He thought our surplus would go to just a couple billion.  I knew what he was doing would cause a deficit, but what an idiot, to go from a $13 billion surplus to a $6 billion deficit.

California's population is about the same as all of Canada.  I think we've got about $400 billion of debt already, maybe $450 billion.  But in 24 years we only managed to shave off a fraction from the peak of $600 billion.   Our debt is down so we should be able to hit it harder.

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#12) On July 28, 2008 at 4:49 PM, lquadland10 (< 20) wrote:

Thanks Dwot. You are right and say it so well. When you said Well, my father made $30-35k in the mid 70s In 1970 to now did you know that if it was in the U.S. he would need to make according to the U.S. labor department just to have the same buying power now as then he would have to make 169,186.86 to 197,384.66 just to break even? I made 1.85 hr in 1976 plus tips. Texas is a right to work state. Now If I was still a waitress  I would be making  4.85 an hour plus tips at the same job. Harper sounds like Bush. Did you ever think that both of them did this to join us into the North American Union with the Amero as the currency? Just a thought. In the coming years you will see more clearly how they did this. Obama will be the next President and further seal our fate of being 3 separate country's. Mexico is part of this for the cheep labor and Canada for your recourses. Stay safe. Fool On.

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