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lquadland10 (< 20)

This artical made me think of dwot and her articals about wages. The coming depression is due to low wages.

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August 07, 2008 – Comments (18) | RELATED TICKERS: FSLR , AUY , GLD

The Heart of the Economic Mess

By Robert B. Reich, Robert Reich's Blog. Posted August 4, 2008.


Most Americans can no longer maintain their standard of living. And the core problem isn't the housing crisis or rising oil and food prices.   Excerpts from this artical.    The Federal Reserve Board's "beige book" for June and July offers a clear explanation for why the economy has slowed to a crawl. It shows American consumers cutting way back on their purchases of everything from food to cars, appliances and name-brand products. As they do so, employers inevitably are cutting back on the hours they need people to work for them, thereby contributing to a downward spiral.    The heart of the matter isn't the collapse in housing prices or even the frenetic rise in oil and food prices. These are contributing to the mess, but they are not creating it directly. The basic reality is this: For most Americans, earnings have not kept up with the cost of living. This is not a new phenomenon, but it has finally caught up with the pocketbooks of average people.This underlying earnings problem has been masked for years as middle- and lower-income Americans found means to live beyond their paychecks. But they have now run out of such coping mechanisms.   If you look at the earnings of nongovernment workers, especially the hourly workers who comprise 80 percent of the work force, you'll find they are barely higher than they were in the mid-1970s, adjusted for inflation. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago. Per-person productivity has grown considerably since then, but most Americans have not reaped the benefits of those productivity gains. They've gone largely to the top.      So Americans turned to a second way of spending beyond their hourly wages: They worked more hours. The typical American now works more each year than he or she did three decades ago. Americans became veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese.       But there's also a limit to how many hours Americans can put into work, so Americans turned to a third coping mechanism: They began to borrow. With housing prices rising briskly through the 1990s and even faster from 2002 to 2006, they turned their homes into piggy banks by refinancing home mortgages and taking out home-equity loans. But this third strategy also had a built-in limit. And now, with the bursting of the housing bubble, the piggy banks are closing.    As a result, typical Americans have run out of coping mechanisms to keep up their standard of living. That means there's not enough purchasing power in the economy to buy all the goods and services it's producing. We're finally reaping the whirlwind of widening inequality and ever-more-concentrated wealth.    I say IF Fortune 500 companies did the right thing and cut their pay and raised the pay of middle and low pay workers we wouldn't  have a depression just a recession. I wish they would but they won't so depression it is.  

18 Comments – Post Your Own

#1) On August 07, 2008 at 6:20 PM, GS751 (27.54) wrote:

good post pretty accurate.

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#2) On August 07, 2008 at 6:51 PM, Donnernv (< 20) wrote:

psst..it's spelled "article".

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#3) On August 07, 2008 at 7:14 PM, lquadland10 (< 20) wrote:

psst.... no spell check in the the title area.

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#4) On August 07, 2008 at 7:24 PM, nuf2bdangrus (< 20) wrote:

He is right.  The problem is, government is not the proper force to change it.  And thus, the age old question.  How do you force corporations to get less greedy and pay their workers more?  I am a conservative republican, but I must say that unfettered greed from  a post Christian capitlaist society is going to destroy us.  Just look at Tyco (Kozlowsky)  He represents the worst of what we can be.

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#5) On August 07, 2008 at 7:54 PM, awallejr (81.44) wrote:

Well that is one of the main reasons why the Fed hasn't jumped up interest rates, despite the clamoring for the same by Larry Kudlow and many of his regulars. When looking at inflation the Fed keeps energy/food separate from the "core" which does include wages.  We just aren't seeing inflationary pressure from them. So when you hear those nuts at CNBC crying for the good old days of Volcker pumping up interest rates to control inflation, they just don't seem to realize that back then you did have a wage/price spiral.

I give Bernanke alot of credit for staying steady and dealing with crisis as they come instead of listening to the armchair quarterbacks. 

This issue also plays into the current housing situation.  Prices got way ahead of average income. Eventually it will all settle back down, it is mainly a question of when.  Being in the real estate business, I am predicting 2010 at the latest as the real bottom, provided the Fed doesn't pump up rates.

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#6) On August 07, 2008 at 10:51 PM, lquadland10 (< 20) wrote:

nuf2bdangrus Unions but because we are now global they are gone.That is the simple or short answer. awallejr The real question is why is the dollar gaining strength? Let me delve deeper. Aha. The answer is clear. Inflation is not so bad because Canada and Australia and a few other countries are trying to help us out. When we buy stuff from them like oil Canada and other stuff from other country's then instead of exchanging it back in to their currency the gov. of those country's are holding it. This helps Ben LOOK good when in fact I call this World Wide government market  manipulation.  And all this just before an election. What happens when they start exchanging the dollar again? Oil $200.00? I call the bottom in 2015 because Ben says the new housing and banking rules go into effect in Oct. 09. The industry is still using instress only loans and partial payment loans wrapped up in a fix rate account.  This is a bad mess. In 1998 my house was 80k and now it is in 10 short years 162k Taxes double insurance cost more to cover the value and pay is no where double. Labor department says it is about 7.5 mill but all the people who went from full time to part time were not counted.Nor were the people who stopped looking for the year. The real figure is about 10mill. and counting and if they do find a job it is for a lot less. The banks have put back the 2nd lien defaults on prime lenders back for 2 mos so when that hits the fan and also credit card defaults it will be bad out there.  Don't forget the law suits that will flood the banks and trading houses. When you add in 144 THOUSAND mall store closing from the international council of shopping malls. 1.5 million sub prime arms resets in 09. Double the alt a. Don't forget the lier loans that are still out there.   SO  Buy silver and gold. I like plain rings because I can sell them later. It's bad out there and the news cartels don't want us to know.  Congress should mandate that  the Central Bank ( you know just like the one England has.)  just deal with inflation. Congress could do that. Now the Fed has more power. Own some hard gold and silver diamonds. Pay cash get out of debt as fast as you can.

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#7) On August 08, 2008 at 12:26 AM, LordZ wrote:

Get a job and cut your hair all ya damn pot smoking hippies... LMAO,,,,

get a chinese job....

or work like that 10 job comedy skit...

oh pleae not a SUSIE ORMAN U TUBE>>>>>

or someone reco in silver and gold coins...

the best way to avoid this mess is to not be poor...

also dont spend more than you can afford...

gut check time....

 

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#8) On August 08, 2008 at 12:27 AM, LordZ wrote:

FYI stop thinking about DWOT>>>>>

personally I would use my imagination for far greater purposes...

 

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#9) On August 08, 2008 at 2:31 AM, Donnernv (< 20) wrote:

psst...then learn to spell yourself so you don't destroy your entire thesis by looking like a brain-damaged seventh grader.

When any borderline intelligent person sees that you can't spell a common seven letter word, how can you expect him to take your analysis seriously.

This is half the reason this country is so F'd up.

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#10) On August 08, 2008 at 9:32 AM, Gingerbreadman55 (26.47) wrote:

I'm sorry but Unions are part of the problem here.

Yes they work for higher wages, but in many cases those higher wages prevent the company from being competitive.

Just look at GM. I work as an engineer at a large aerospace company, and our union is killing us just as badly as the auto industry. When we pay these unskilled laborers twice what a school teacher makes, costs become exorbant.

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#11) On August 08, 2008 at 1:15 PM, dwot (65.40) wrote:

Good post.  I look at European countries as actually being more "mature" in their policies which actually protect workers and jobs.  What I mean by mature is the countries are older and more densely populated.  They didn't have this massive opportunity to spread out and exploit their natural resources this last century the way America did, and they already went through the consequences of exporting their jobs and not having the same natural resources to help them out.  America is now going to experience the flaws of letting capitalism run amok, and find out that capitalism doesn't work so well when workers have no disposible income.

This is a story about a conversation I had with a guy here who is about 15 years older than I am.  He makes about 90k per year with a high school education and strong union that has protected him for life.  He completely fails to appreciate or realise the degree to which he has been lucky in his demographic group and the occupation he fell into.  He was complaining that he estimates his buying power has declined by about $500 after tax dollars per week since 1971.

That would have given him a before tax buying power of about $140k as a high school educated person in his early 20s.

It is no wonder that when I was growing up I developed a belief and an expectation that most people had their homes paid for by about age 40, and that was with raising a family...

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#12) On August 08, 2008 at 1:17 PM, dwot (65.40) wrote:

And you actually got to do things with your life instead of just pay mortgage...

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#13) On August 08, 2008 at 1:24 PM, dwot (65.40) wrote:

I understand how all the pieces fit to so destroy lifestyle here in Vancouver, declining wages from two sources, our massive immigration, our loss of manufacturing jobs.  The immigration was largely wealthy immigration and they bought up our housing.  So we also had skyrocketing housing costs.  We also had strong policy to limit urban sprawl, which really slowed down the ability to increase housing.  It push for more condo also increased the price of housing because the construction costs for that type of housing is significantly more expensive.

And then in this perfect storm that worked against local people, the super city belief garbage started.  Vancouver is a super city that will be immuned to price declines...  The news out this week is that prices are down 6% over last month.  We've finally peaked here and on the downward slide.

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#14) On August 08, 2008 at 4:15 PM, LordZ wrote:

Theres much more to life than just working

and talking about money or how much or how little your paycheck is or isnt

some of the happiest and most rounded people have never fallen in this trap about more money more money, many are by many standards poor.

You are not your Khakis

You are not your bank account. You are not the cloths you wear. You are not the contents of your wallet. You are not your bowel cancer. You are not your Grande Latte.

 

 

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#15) On August 08, 2008 at 4:16 PM, lquadland10 (< 20) wrote:

Dwot you are so right. Canada is holding USA dollars for oil. That is why you see the dollar strength and the devaluation to yours. It will be bad for you for a while and when your country starts selling our dollar again you will see the change. Why did the Fed stop doing the M 3 report?    

It is no coincidence that the M3 went up an annualized 9.4% in the last three months and an annualized 17.2% in December alone and now the FED wants to stop tracking it!

Why bother tackling a problem of this magnitude when you can just bury the evidence? Who wants to leave a "smoking gun" laying around? A 9.4% increase in money supply should translate into a 9.4% inflation rate (if GDP produces exactly enough to counteract obsolescence).When the Government starts hiding data the problem is big!

We are now in housing at the depression era of 1929 and 6 more years to go. Ben the Fed stops (maybe) bad housing practices ( yea right I will believe it when I see it.) in Oct. of 09  I have to hand it to globalists and keeping wages low.Gingerbreadman55  Oh I see.  Only here is one small fact. A person making  10.00 an hour  gets a pay raise of 2.5%  goes from 20,800 a year to 21,320 a year.Gas goes up a dollar and wipes out any pay raise and you are in the hole again. On the other hand a person making 5 mil. a year and a 2% pay raise is now 5,800,000.00 a year and gas could go to $10.00 a gal and he won't feel it. I think that if we have a global work force we need a global union. (Just a thought) How can you compete with someone earning 3.00 a day and still maintain your standard of living? Donnernv      Albert Einstein flunked math and yet look at what he did. If you can't get over a misspelled word then your loss. Why you are so angry I have no Idea but I do recognize a bully when I read your reply. Resorting to name calling tells me that you need to put others down to feel better about yourself. Good Luck  Donnernv. Oh LordZ  you bring sunshine to  my day. You can always make me laugh. But someone will  always be poor because who then would do life's dirty  jobs. Garbage removal, sewer cleaning, cleaning your office or house, repairing bridges and just the small things that make your life comfortable. You are so right about don't spend more than you can afford and to bad that children as well as adults were not taught that and listen to the banks and advisers to buy more and  keep up with the Joneses.

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#16) On August 08, 2008 at 4:29 PM, lquadland10 (< 20) wrote:

LordZ Theres much more to life than just working. you are so right. news flash. Keep going ben and hope that countries keep holding our money because we will end up like this country.
Zimbabwean Hyperinflation Officially Estimated At 2.2 Million Percent

By Blessing Zulu
Washington
16 July 2008

Zimbabwe's central bank governor made known on Wednesday that inflation has reached an annual rate of some 2.2 million percent in the first official disclosure of such data since the country's Central Statistical Office announced a rate of 165,000% for February.

Reserve Bank of Zimbabwe Governor Gideon Gono offered the estimate during a speech at the launch of a program the government said would make food and other basic commodities available to vulnerable segments of the population being hammered by hyperinflation.

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#17) On August 08, 2008 at 4:44 PM, russiangambit (29.37) wrote:

US wages will continue to decline because of the global competition. Have you seen the stats on the US education ? 30-40% don't even graduate from high school and then they expect livable wages? In the rest of the world if you don't have education then you cannot expect to make a livable wage unless you work 3 jobs. In our time there is over supply of untrained labor from third world countries and high demand for highly skilled labor, so it drives down the blue collar wages.

I can't beleive the way the people in the US squander the oppportunities around them all because they are LAZY, that is it.  They have no clue what kind of hardship the rest 90% of the world population faces each and every day, And I know a perfect cure for them, sponsor them to live for 3-6 months in a third world country, may be they then appreciate what they have and will heple themselves instead of waiting for uncle SAM to solve their problems.

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#18) On August 11, 2008 at 1:19 AM, lquadland10 (< 20) wrote:

russiangambit True on the education part now for some labor slight of hand. Labor report says 8.5 unemployed but not all are counted. The actual amount in around 10 mil. Now factor in the amount of non citizens working is 10 to 20 mill. and they also don't have the education you were talking about. So... that would lead me to conclude that if the non citizens without documentation left then we would mysteriously have full employment with benefits. What then would happen? Health Care would come down because at least 10 mil people using gov. health care leave the country. Another 10 mil people would start to work and apply for workers health care and at the same time take the burden of 10 mill other people off the gov health care. That would lower the cost for you and me. I would love a world where we could have a 20 mil person drop in government spending that could save us trillions over the years. More people covered so health care cost go down. But will the government fix it. No.

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