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July 05, 2010 – Comments (7)

I started to write something on this yesterday and the computer crashed in the middle.  Yves has a post with a couple graphs from the depression and then today.  I keep going on about the lack of foundation in the economy and it is the huge debt that prevents what I consider a foundation.  I am going to requote:

The final debt-driven collapse, in which both wages and profitability plunge, gives the lie to the neoclassical perception that crises are caused by wages being too high, and the solution to the crisis is to reduce wages.

What their blinkered ignorance of the role of the finance sector obscures is that the essential class conflict in financial capitalism is not between workers and capitalists, but between financial and industrial capital. The rising level of debt directly leads to a falling worker share of GDP, while leaving industrial capital’s share unaffected until the final collapse drives it too into oblivion.

 That reduced share of GDP is also that lower "consumer liquidity" I referred to earlier. Consumer's buying power is declining --> a falling share of GDP?

So, if that wasn't enough on my reading list, there was also 20 Questions with Robert Prechter.  He's also predicting debt deflation coming up.

It will be interesting to see where the economy heads now that governments around the world and all thinking about controling debt at the same time.  It seems to me that the "recovery" was more about massive government spending around the world then anything sustainable.

7 Comments – Post Your Own

#1) On July 05, 2010 at 10:29 AM, dbjella (< 20) wrote:

It will be interesting to see where the economy heads now that governments around the world and all thinking about controling debt at the same time.

When I actually see reduced spending, then I will believe it.  Right now, it is just posturing.  No spending has been cut.  

Gov'ts answer will not be reduced spending, but inflation.  I am betting some printing of real world wide dollars soon.  Just my two cents. 

 

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#2) On July 05, 2010 at 1:15 PM, FleaBagger (29.28) wrote:

Massive government spending is sustainable in both notional terms and as a percentage of a country's wealth. Also, every incentive for politicians still points toward inflation, which is within government's power.

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#3) On July 05, 2010 at 1:41 PM, portefeuille (99.60) wrote:

cheer up a little. and quit reading the nonsense from all those "Sam over at ...", "Patricia in her great blog ...", "Karl from ..." guys, hehe ...

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#4) On July 05, 2010 at 6:26 PM, dwot (51.50) wrote:

That is one sweet graph portefeuille.

What does it look like for the US and Canada?  I also wonder how big of an impact when you consider we've exported so many manufacturing jobs.

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#5) On July 06, 2010 at 12:22 AM, edbbear (< 20) wrote:

Of all the countries in the Western World the Germans seem to know what the heck they're doing.  They regretted approving the Greece bailout right after it happened. 

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#6) On July 06, 2010 at 8:43 AM, JakilaTheHun (99.93) wrote:

Porte,

You talk about Germany exports a lot, but that's actually one of the reasons for all the instability in Europe.  The flawed design of the Euro benefits Germany, the Netherlands, Finland, and Austria.  It severely harms Greece, Spain, Ireland, and Portugal. 

By artificially weakening the German currency, German exports improve.  By artificially strengthening Spanish currency, Spanish exports suffer. As the German economy improves, Germany is able to pay lower interest rates on bonds.  As the Spanish and Greek economies suffer, they are required to pay higher interest rates on bonds.  

Essentially, the Euro is a transfer of wealth and that's why Europe is in such rough shape right now.  Germany isn't going to save it. Germany's economy is improving much more than the rest of Europe primarily because of the imbalances created by the Euro. 

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#7) On July 06, 2010 at 11:57 AM, portefeuille (99.60) wrote:

You talk about Germany exports a lot

do I?

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