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alstry (35.70)

Wages Crashing....10% Paycut for EVERYONE????

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December 19, 2008 – Comments (6)

Pilots making a fraction of what they used to....same with flight attendants and mechanics.....real estate sales people, mortgage brokers, auto workers, Fed Ex workers, graphic artists ect......NOW THIS:

California Governor Arnold Schwarzenegger may force all state workers to take two days of unpaid leave each month to conserve money ... The practice would begin in February and would last through June 2010 ...

The executive order also would seek to cut the state’s workforce by 10 percent through firings if necessary and would freeze new hiring ...

The leave would amount to a 10 percent pay cut ...

http://www.calculatedriskblog.com/2008/12/schwarzenegger-may-force-unpaid-time.html

Wages crashing for many in many industries, business after business cutting 10% of workforce, then industry after industry, and now will it be state after state????????  My fools, we are already at about 7% reported unemployment........some say if we used the same methodology as in the  thirties, the reported rate would be closer to 15%.

Hmmmmmm.....10% paycut......does that sound like inflation to anyone???????

 

6 Comments – Post Your Own

#1) On December 19, 2008 at 9:18 PM, alstry (35.70) wrote:

Expect to see lots more wage cuts as the deflation process gains traction....

Motorola Inc., the second-biggest U.S. seller of mobile phones, will freeze U.S. pension plans and reduce executive salaries to help cope with the economic slump.

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#2) On December 19, 2008 at 10:25 PM, DemonDoug (98.73) wrote:

We start getting into some pretty serious discussions with serious implications about the behavior of government.

If there is one thing I've learned, and only one thing, it's that you CANNOT separate economics and politics.  They are one in the same.

As far as inflation/deflation, I've moved more towards deflation, solely because of oil.  Oil and gas are the #1 expense inputs after wages, however they fluctuate a lot more than wages.  Oil has gone up way more than wages over the past 50 years, and likely will continue to do so.

In the last thread, regarding the gold v. cash for money, I think that's a red herring.  Gold's rise is a symptom of systemic risk and inflation expectations.  In this I feel you are correct - gold doesn't have much value as a currency anymore.  However, your BEST inflation hedge, IMO is oil.  As long as oil stays down, there is NO WAY we will have inflation, and if it keeps going down into the 20's, I see further deflation ahead.

And this is what indeed I see.  Maybe my view is skewed by having a bias of seeing the world through oil covered glasses, but the "black gold" is the primary driver of all economic activity in the world today, and as long as it stays low, we will continue to have deflation or zero inflation.

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#3) On December 19, 2008 at 11:06 PM, DarkToast (90.71) wrote:

 DemonDoug

"However, your BEST inflation hedge, IMO is oil.  As long as oil stays down, there is NO WAY we will have inflation, and if it keeps going down into the 20's, I see further deflation ahead."

Somewhat agreed, but if oil goes into the 20's I will use whatever credit and leverage I can get my hands on to load up on oil. With oil in the 20's gold is an afterthought.

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#4) On December 19, 2008 at 11:24 PM, dwot (99.50) wrote:

I remember this kind of stuff happening here in BC in the early 80s, tons of cuts all over the place.

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#5) On December 20, 2008 at 10:48 AM, alstry (35.70) wrote:

DWOT,

In the early 80s, the average person in BC had no where near the leverage as they do today.....the same picture can be drawn here as and is especially relevant for Americans.

Demon,

I still can't find the inflation argument for oil either.  Draw a forty year chart of oil prices and overall prices havn't moved that much.  Sure there have been spikes here and there but for the most part it has been pretty much the same.

If you drew the same graph for my love to my wife and kids......it would be straight up, sure with a few bumps along the way......but overall up, now that would be inflation.

What you need to reconcile within yourself is the Alstrynomics principal where you can have monetary inflation and price deflation.....this is something they will teach in textbooks in coming years but I doubt they will attribute it to CAPs.  Remember,,,

money X velocity = economic activity. 

Right now velocity is contracting a lot faster than money is being printed. 

As far as Sinchiruna facinatioin with gold, I had a similar thing to a few actresses on the big screen, but in the end it was only fantasy in life and reality in my own mind.....and I can tell you this from first hand experience.....often the fantasy is way better than the reality.  It is just that you want to keep it in perspective to maintain a balanced life.

Is gold or oil going to go up in price......ultimately no one knows for sure.....but if the velocity of spending keeps slowing......I seriously doubt it.  Imagine a world where banks have all this printed paper and digital money sitting in their vaults and on their servers......what good does it do to the poor family in Peroria?

 

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#6) On December 20, 2008 at 6:18 PM, jgseattle (38.51) wrote:

obviously you are going to see the same pay cuts with the UAW.  You mentioned this witht he pilots and other BK industries that rengegociated contracts.

We have a floor called minimum wage, but who can live on that.

If we start to see large scale wage deflation this crisis will become huge.  I am ok with my mortgage now but if my familly takes a 15 -20% cut in revenues we would be in trouble, and think of number of people that could not pay their contracted commitments with even a smaller hit.

I think as unemployment goes up new position will be created with lower pay, and that will put pressure on all wages and wage increases.

 

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