It's called DEFLATION folks

[AllentownJake]

http://finance.yahoo.com/news/Productivity-up-sharply-labor-apf-1633677712.html?x=0

The Labor Department reported Thursday that productivity jumped at an annual rate of 6.9 percent in the fourth quarter, even better than an initial estimate of a 6.2 percent growth rate. Unit labor costs fell at a rate of 5.9 percent, a bigger drop than the 4.4 percent decline initially estimated.

In the real world this means:

Work harder and get more done.


Get paid less.


Suck it up, don't complain, or you're fired.
That's all.

And by the way, reduced pay per unit of work spells DEFLATION.

Now here's the problem: We have huge public-sector labor unions that are resisting this force. Yet this force is exactly what has to happen in order to bring the economy back into balance.

We have "advanced" promises made to these people - $200,000+ pensions and other similar obscenities - even though doing so is a ponzi scheme that is impossible to maintain. We have continually cow-towed and pandered to these unions, including educators, police and fire and all other manner of public sector employees with wage increases that exceed growth in aggregate output per-person when one counts both salary and benefits.

This, of course, cannot continue. It is yet another example of the expanding gap that opens up between two exponential functions - for those who have forgotten my favorite pair chart, here it is again:



I understand that everyone wants to avoid taking the pain. I understand that everyone claims that "its not fair!"

None of this changes the facts. You cannot continually offshore your better-paying labor to China for the purpose of being able to have a $30 DVD player, destroying the $40/hour skilled job base and replacing it with $7/hour burger flippers and espresso-shot-pullers, and maintain the ability to commit compound annual growth rates of 5, 6, 7% or more to public-sector employees. Doing so inevitably destroys the tax base necessary to meet those commitments, and once the destruction has occurred it cannot be un-done.

More at link

http://market-ticker.denninger.net/archives/2035-Its-Called-DEFLATION-Folks.html

[n2doc]

1. Arbeit Macht Frei

That's where we are all headed. While the 1% sits in their palaces and laughs at all of the serfs fighting over scraps of rotten food and cloth.

Fuck attacking the Unions.

[AllentownJake]

2. Something has to give

You have to have a tax base to support the municpal labor unions. Money has to come from somewhere.

So you either hit free trade, which Karl suggest, or we become serfs including the municipal workers.

[n2doc]

5. The money is there

But it is so much easier to get us to fight amongst ourselves for that 7% scrap they allow us, for now, to have.

[AllentownJake]

6. We tax income in this country

Not wealth or consumption, and the wealthy have a tendency to reside away from the peasant class in areas where we tax land and real estate holdings.

If your proposal is to move from an income tax to a wealth tax and a consumption tax, that is logical. Otherwise, it is only logical that the tax base as Karl suggest, does not exist to support the current system.

[n2doc]

7. We should 1, tax all income, 2, increase the estate tax back up to previous levels

There are all sorts of schemes to protect "income" from taxes. Eliminate them.

I didn't post the graph on how incomes have gone up for the 1%'ers but it is the same pattern.

[AllentownJake]

8. Fully agree

For instance for some reason, capital gains which require no labor are taxed lesser than regular income...seems quite silly.

[zipplewrath]

10. Actually, we tax alot of things

Income is a huge money supply, but we tax alot of things including tobacco and alcohol. And including the states, we tax property, both real and intangible. States also have alot of consumer taxes. And huge portions of the labor union driven pension plans are state level burdens.

[Hannah Bell]

37. the income is there too. in capital gains.

[Political Heretic]

45. We should tax consumption at least, if not wealth.

Would be so much better.

[Hannah Bell]

59. if you like regressive taxes, consumption taxes are great.

since the working class spends most of what they earn, while elites "invest" theirs. or put it into "foundations".

[melm00se]

61. breakdown of federal tax revenue

[raccoon]

32. Then the "right-to-work" states shouldn't have much of a problem.

There ain't no muni labor unions in SC.

But I wonder about our state pensions.

[Nordmadr]

34. I know lots of municipal workers. They don't make nearly what

most people seem to think.

[inna]

54. Hear, hear.

Unions are NOT the problem.

Unrecommended.

[xchrom]

3. Low priced products at the expense of any nations

Workers is going to damage that nation.

[Name removed]

4. Deleted message

Message removed by moderator. Click here to review the message board rules.

[BeFree]

9. Math is good

It is the belaboring the laboring class that goes down hard.

Who doesn't wish they had a government job with bennies, and a pension?
We all wanna ride that bus.

The math says we can't. And the practicality says we can't. But we all wanna ride that bus into the sunset.

As I see it, we either raise taxes, or do away with the bus.

Either way it is an equalizer. Either we all ride or we all walk.

[naaman fletcher]

11. Deflation is a good thing

The great scams that the banks and government are pulling on us is the idea that deflation is a bad thing.

DEFLATION IS GREAT! The price of stuff goes down!

Yeah, yeah, spare me the deflationary spiral crap. Prior to Keynes there were recessions and guess what? They ended, and usually quickly.

THE REAL REASON THEY THINK DEFLATION IS BAD is that the banks have lent massive amounts of money against assets. If these assets deflate in value, the borrowers will default on them.

Consequently, the government takes money (either through taxes, or through just printing it, which costs everyone) and uses it to "stimulate demand" i.e. prop-up asset prices.

That's it folks.

Hungry people need cheaper food, cheaper cars, and cheaper apartments. Instead they will get more expensive ones because of the great con that deflation is a bad thing.

[AllentownJake]

12. When the government is doing all it can to keep prices higher

on other things, no, deflation is not a good thing.

[naaman fletcher]

13. And why is the government doing things to keep prices higher?

It's to bail out the banks.

[AllentownJake]

15. Yep

Who created the problem in the first place.

[Better Today]

14. Not when jobs and wages are the only things deflating, daily prices

of daily goods, food, gas, utilities, insurance are still inflating.

I could agree with deflation being a good thing, but only if it effects all things, but with private and public subsidies and commodity trading keeping the prices of goods high, and only the jobs issues deflating. .. I don't understand how you think that is good.

[naaman fletcher]

16. and why do you think those are the only things that deflate?

Because the government is "stimulating demand" i.e. pushing up the prices of everything else.


Look: We all agree the banks caused this mess. Why is it everyone buys the notion (one which the banks agree with) that the government should be pushing up the prices of everything?

We are in a recession, so wages are going down, but the government is inflating the price of everything else.

It's the biggest fraud ever.

[Juneboarder]

24. Agreed...

gas here in San Diego did go down over the last mont to like $2.93/gallon; but this morning on my way to work gas was back up to $3.03/gallon. Yes, this is for the standard 87 Octane...

[Hannah Bell]

41. if prices are rising & wages are sinking, it's not "deflation". it's a war on the worker.

[laughingliberal]

17. It would seem that job growth and higher wages is the answer either way you look at it

It also seems to me we aren't going to see much of that. Public sector workers seem to take a lot of heat but, for the most part, their wages aren't that great. I only ever had one public sector job. It was a hospital in Texas that was state funded. As I recall the wages were about 20% lower there. Nurses who work for the state in Nevada are paid about 30% less than those in the private sector. Also, instead of SS deducted from my paycheck there was an amount that went into the state fund for pensions. I'm not sure I see how the pensions of public workers are responsible for the problems we see with our economy right now. Not disagreeing, as I'm not that well versed on this, but it seems to me there are other, more damaging forces at work.

edited grammar

[AllentownJake]

18. They generally get better pensions and healthcare in exchange

Which is essentially what is being taken away.

The government made promises to these people and is now going to have to revoke them because they didn't protect the economy that supported it.

[laughingliberal]

19. A question

Is this because the money paid into the pension funds were invested badly? I know from my brief time at a state hospital it is not free money. The workers pay in just like private sector workers do SS.

Also, would we see this same problem with SS if we privatized it?

[AllentownJake]

20. Well the politicians appoint the people who manage public pension funds

and the politicans appear to be very friendly to a certain subset of society that lives in Manhattan.

[laughingliberal]

21. Thanks! We need to remind people of this when the next push to privatize SS starts. nt

[AllentownJake]

23. A guy in a pinstripe suit will tell everyone that they can be rich like him

it's like the lottery, not that many people win, but the fantasy of it keeps people buying tickets.

[laughingliberal]

25. Seems to me people who bought this line of thinking have a lot to do with where we are now

I remember thinking, while watching my meager 401k stagnate and then tank, that I could do better at the Sands and have more fun doing it. Lol.

[Hannah Bell]

40. good thing you're not buying it, because it's nonsense. pernicious nonsense.

[leeroysphitz]

22. So living wages and retirement security are unmaintainable ponzi schemes?

Maybe it's time that those few little piggies at the top let the rest of have a access to the feed trough.

I mean since we are the ones who built the trough and we are the ones who keep it filled for them maybe the piggies could let us share in the wealth that WE helped to create and maybe if they don't some of those little piggies are going to end up with apples in their piggy mouths.

Pay me now or PAY ME LATER and if I have to ask twice for my fair share I'm gonna do it with a shotgun.

[Romulox]

26. Lot's of folks claim leaving massive debt to future generations is OK,

"because productivity will increase in the future!"

(Which is a shorthand way of saying that the kids will just have to get along with less. But it beats being honest, I guess.)

[AllentownJake]

27. Yeah.....they aren't getting their social security if they think that

There is about to be a tipping point where they represent a minority of the population. Which they weren't counting on, and the younger generation, does quietly blame them.

[laughingliberal]

36. Oh, well. I was looking forward to my salad days of <$1000 a month to live on.

We might be really rolling in it while my husband and I are both alive: $1900 per month.
:woohoo:

[pitohui]

33. it's a shorthand way of saying that there will be new technologies to increase the worlds wealth

you say: Which is a shorthand way of saying that the kids will just have to get along with less

i say-- that's absolutely ridiculous, maybe if the world were static, but it isn't, we do see people growing out of poverty ALL OVER THE WORLD (which seems to piss off many us citizens who think we should forever be "on top" instead of equals)

how are people being lifted out of poverty? well, technology, frankly -- we're seeing growing pains and bumps in the road but we have a global world because of the cheap ability to travel the planet, cheap ability to communicate w. the whole planet etc.

i believe -- and i think many people do believe -- that we'll continue to invent and create in the future, which means that the total wealth of the world will be greater in the future

why can't "productivity will increase in the future!" mean just what it says -- that robots will be doing a lot of work, in fact, i KNOW that's what it means, since my husband helps design such robot factories --

maybe in 100 yrs our whole concept of money will be meaningless because the world will be rich thanks to such creations, i think that's more likely than the common belief that we'll all be living in mud huts in 2300

[Romulox]

47. The capitalist's version of the miracle of fish and loaves. How come wages have DECLINED

for three decades if the march of technology invariably makes us wealthier?

"robots will be doing a lot of work"

Robots do a lot of the work now--this makes workers POORER, not richer. :hi:

[Hannah Bell]

38. it's nothing of the sort. why don't you go after the folks stealing the value of the productivity

gains instead of granny?

cause if she doesn't get ss, you're going to wind up supporting her anyway, or booting her into the street.

[Romulox]

48. Because I, like you, am powerless to do so. The "increased productivity means robot butlers!"

argument is still silly. "Increased productivity" means the workers are taking a pay cut. Just as they have for the past 3 decades. :shrug:

"if she doesn't get ss, you're going to wind up supporting her anyway,"

You pose a false dichotomy between a sustainable SS program and abandoning granny to her fate. And of course you ignore that today's young woman is tomorrow's grandmother.

[Hannah Bell]

49. no, robot butlers isn't what it's about.

People produce the goods people need to live.

As long as there are enough goods produced (& enough resources to produce them), people can live.

Increased productivity = more goods can be produced in fewer labor-hours.

i.e. more "value" produced in fewer hours.

But then the question of where the monetized value of the increased production goes.

If the owners lower wages & lay off workers, they're pocketing an increased share of this monetized value.

And indeed, that's what's been happening for the last 30 years.

They could have split the value of the increased productivity with workers. That would have meant workers got raises. But they didn't. Average wages have been flat for 30 years. *And* unemployment has risen.

When I say, why are you picking on old people instead of the people stealing the value of the productivity, I'm talking about the ownership class, who are not only impoverishing your generation, but setting you against your parents & grandparents.

Social Security *is* sustainable. And for 2/3 of the working class, it's the only thing keeping them from penury in old age.

And, contrary to the line the ownership class is feeding you, cutting SS benefits won't help your generation one bit. The difference will be pocketed by the ownership class, not you.

The only thing that's going to help is to stand up to the bastards.

That's just the way it is.

[Romulox]

51. No, no, no! Increased Productivity can just as easily mean the workers take a pay cut.

"Increased productivity = more goods can be produced in fewer labor-hours."

Nope. Cutting workers' wages in half doubles productivity just the same as if each worker produced double the output (or the same output in half the time.)

[Hannah Bell]

57. you're misinformed. wages, cuts or raises, have nothing to do with productivity.

Productivity is a measure of output from a production process, per unit of input.

For example, labor productivity is typically measured as a ratio of output per labor-hour, an input.

Productivity may be conceived of as a metric of the technical or engineering efficiency of production. As such, the emphasis is on quantitative metrics of input, and sometimes output.

Productivity is distinct from metrics of allocative efficiency, which take into account both the monetary value (price) of what is produced and the cost of inputs used, and also distinct from metrics of profitability, which address the difference between the revenues obtained from output and the expense associated with consumption of inputs.

http://en.wikipedia.org/wiki/Productivity


What's supposed to happen (in economic theory) is: as productivity rises, labor hours are reduced & wages rise.

What *actually* happens: unless workers fight, capital takes all the monetized value of productivity increases. Wages fall & unemployment increases. i.e. the rich get richer & the poor get poorer, & the owners scream:

"There's not enough *money* to take care of granny!"

But this is solely because the owners have taken the monetized value of productivity increases for themselves.

There *is* money -- they have it. There are goods -- we're drowning in them. There are houses, there is knowledge -- but people can't access them, because they don't have *money*.

In the midst of plenty, in the midst of the most productive infrastructure in the history of the world, granny must be kicked into the street, young people resigned to lesser lives, & the generations set against each other.

Solely because capital demands *everything.*

[Romulox]

60. Money is a unit of input, genius.

From the link you supplied:

"productivity is the amount of output produced relative to the amount of resources (time AND money) that go into the production"

Emphasis (and EXTREME CAPITALIZATION!) mine! :silly:

[KillCapitalism]

50. But productivity will increase in the future!

Instead of one person doing the work of 4, the next generation's workers will do the work of 8.

[taught_me_patience]

28. The government needs inflation or it's bankrupt

same with the banks. Thats why the treasury and FED are printing money hand over fist.

[raccoon]

29. What do the lines on the chart represent? nt

[Cali_Democrat]

30. Good post until you lost me half way through

A first you're obviously implying that American workers are increasing their productivity and wages are staying the same or even falling. That is outrageous. Of course this is happening while the pay for executives grows.

Now we have labor unions that are resisting this. They want to keep their pay high which is very noble IMO. But you are against this because the economy needs to be brought back into balance? :shrug:

[AllentownJake]

31. The article was civil labor unions

If the taxbase disapears you can't pay your civil servants what they were paid, before the tax base disapeared.

[Nordmadr]

35. I'm a civil servant (County) could make much more in

the private sector. I chose to be a civil servant for the stability. My pension is contributory. Historically, these things have become tiered so that people that have been around for a long time have far better benefits than newer hires.

[Hannah Bell]

39. the taxbase is disappearing because of deliberate changes in the tax code

which force the middle & lower classes to bear more of the burden.

to the delight of the folks at the top of the pyramid.

& denninger = winger.

[laughingliberal]

42. That would be a big part of it I would think

The little trick of raising the FICA tax and cutting the income tax on the wealthy has not helped much. We've been funding the shortages the tax cut created with our payroll taxes and now they want to tell me SS needs reform which I take to mean I've paid this tax all my working life and now will be screwed so the rich can keep their tax breaks.

[Cali_Democrat]

43. Oh sorry, I thought that you wrote that

I didn't see the link to the second article at the bottom.

[AllentownJake]

44. I disagree with certain points

However, the overall premise I agree with.

[Political Heretic]

46. Ah yes. This is the standard canard. The problem is "pampered western workers"

and their "luxurious lifestyles" as written by BusinessWeek clear back in the 1980s.

Every time there is an economic crisis caused by rich fuckup assholes in their stupidity and rampant greed, they then cry out that it is unions and workers who need to tighten their belts and get used to lower standards.

Privatized profits, socialized losses. This isn't the first time the rich have attempted to use a negative economic climate that they created in order to attempt to push labor down further by getting people to accept less standards of living.

You say that people want to say "its not fair" while not accepting the pain. That's because I reject the basic frame of this article. The "pain" shouldn't be accepted by the poor and not those who are breaking the system by their extreme greed.

Unions and their "outrageous" desires for "luxurious" lifestyles are not the problem. Here are the problems:







Figure 5: Share of capital income earned by top 1% and bottom 80%, 1979-2003 (From Shapiro & Friedman, 2006.)

[AllentownJake]

53. Karl pretty much says this

Read the article again.

Honestly, people have a hair trigger reaction. The tax base of middle class workers that supported the civil services has dried up. The only place to go it the top 1% or to cut the workers pay.

Borrowing money to cover this situation up, is no longer an option.

[Political Heretic]

55. Karl: "Now here's the problem:We have huge public-sector labor unions that are resisting this force"

Karl can fuck right off.

[Hannah Bell]

58. lol. karl didn't say anything like that. except in the general sense that capitalism

eventually results in the immiseration of the working class.

unless they resist.

[SoCalDem]

52. cow-towed...um ..should be kowtowed..unless you are towing a cow

and it's more the result of changing the economy to "service" oriented, rather than manufacture-based.

It's not going back either, so we are in for a HUGE lowering of standard of living..

UNLESS:

we start raising taxes on the richest

we go back to regulations that work

we tax the HELL out of corporations that make it overseas for pennies and still call themselves "american"

we eliminate "benefits" at our jobs, and incorporate them into our tax base ( as general rights for all citizens, regardless of where they work)

we institute term limits & outlaw lobbying except for non-profits

we make medicine..the occupation & delivery of care NON-PROFIT

we break up the giganto-corporations & banks

etc:)

[Arctic Dave]

56. I actually saw a sign today about voting to de-unionize.

I couldn't believe of all times, someone would think that that would be a good idea.