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Why We're Poorer: Inflation And Deflation Are Now Globalized

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

We're being hit with a double-whammy: Wages are under deflationary pressure, and almost everything else is exposed to inflationary pressure.

As correspondent Mark G. observed in Globalization = Permanent Instability, it's impossible to understand inflation and deflation now except in a global context.

Now that prices for commodities such as oil and grain are set on the global market, local surpluses don't push prices down. If North America has record harvests of grain, on a national basis we'd expect prices to fall as local supply exceeds local demand.
 
But since grain is tradable, i.e. it can be shipped to other markets where demand and thus prices are much higher, the price in North America reflects supply and demand everywhere on the planet, not just in North America.
 
If we put ourselves in the shoes of a farmer or grain wholesaler, this is a boon: why sell your product for 1X locally, when it fetches 2X in other countries? You'd be crazy not to put it on a boat and get double the price elsewhere.
 
As the share of the economy exposed to digitization increases, so does the share of work that can be done anywhere on the planet. When work is digitized, it is effectively commoditized, meaning that it no longer matters who performs the work or where they live.
 
If people in countries with low wages can perform the work, why on Earth would you pay double to have high-wage people do the work? It makes no sense. Taking advantage of the differences in local pay scales is called labor arbitrage, as the employer is trading on (i.e. arbitraging) two sets of prices.
 
It's not just labor that can be arbitraged: currency, interest rates, risk, environmental regulations, commodities--huge swaths of the global economy can be arbitraged.
 
The basic idea of the global carry trade is to borrow money cheaply in a currency that's weakening and use the money to buy low-risk, high-yield assets in currencies that are gaining in relative value.
It's a slam dunk arbitrage: not only does the trader earn an essentially free return (borrowing yen at 1%, for example, converting the yen to dollars and buying Treasury bonds paying 3%), but there is a bonus yield on the dollar strengthening against the yen: a two-fer return.
 
Global labor is in over-supply--one reason why wages in the U.S. have been declining in real terms, i.e. when inflation is factored in. The better description is purchasing power: how much can your paycheck buy?
 
Here is a chart reflecting the decline in purchasing power of U.S. earnings since 2006:
 
Courtesy of David Stockman, here is a chart of inflation (i.e. loss of purchasing power) since 2000:
 
Whatever isn't tradable can skyrocket in cost because, well, it can--since there's little competition in healthcare and school districts, both of which operate as quasi-monopolies, school administrators can skim $600,000 a year: Fired school leaders get big payouts:
 
A former Union City, CA superintendent took home more than $600,000 last year, making her the top earner on a new online database tracking salary and benefit information for California public school employees.
 
Since healthcare is only tradable at the margins, for example, medical tourism, where Americans travel abroad to take advantage of treatments that are 20% the cost of the same care in the U.S., healthcare costs can rise 500% when measured as a percentage of wages devoted to healthcare:
 
Note that this doesn't mean that healthcare costs rose along with wages--it means a larger share of our earnings is going to healthcare than ever before. Other than a brief period in the 1990s when productivity gains drove wages higher, healthcare costs have risen faster than earnings every decade. The consequence is simple: the more of our earnings that go to healthcare, the less there is for savings, investments and other spending.
 
In a way, we're being hit with a double-whammy: whatever can't be traded, such as the local school district and hospital, can charge outrageous fees and pay insiders outrageous sums for gross incompetence, while whatever can be traded can go up in price based on demand and currency fluctuations elsewhere.
 

Meanwhile, as labor is in over-supply virtually everywhere, wages are declining when measured in purchasing power. Wages are under deflationary pressure, and almost everything else is exposed to inflationary pressure. No wonder we feel poorer: most of are poorer.

 

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Thu, 10/30/2014 - 11:53 | 5393903 mtndds
mtndds's picture

I wish housing would be in a deflationary run!!

Thu, 10/30/2014 - 12:12 | 5393929 Anusocracy
Anusocracy's picture

How about we are poorer because cost of government went from 10% of the economy 100 years ago to 50+% now?

Thu, 10/30/2014 - 12:18 | 5394027 PT
PT's picture

Like I've mentioned before, in my neighbourhood, in the time it took my wages to increase by 40% (due to me getting more skills - not everyone got that increase), the price of real estate went up by 400%.  Totally swamped everything else.  I don't think I ever saw those numbers officially published, but that is what I saw in the real world.

Thu, 10/30/2014 - 12:35 | 5394158 max2205
max2205's picture

PFE makes $1 billion in profits Each Month

Thu, 10/30/2014 - 12:21 | 5394057 XAU XAG
XAU XAG's picture

No SHIT sherlock

 

Captin obvious

 

Thu, 10/30/2014 - 12:49 | 5394250 PT
PT's picture

PONZI FINANCE ALLOWS PRICES TO RISE WHILE INCOMES STAY THE SAME.

Ponzi Finance will wipe you out first.

Govt cannot take more than 100% of your income unless Ponzi Finance is involved.  Real Estate can not take more than 100% of your income unless Ponzi Finance is involved.

Where is the Ponzi Finance right now?

Thu, 10/30/2014 - 12:57 | 5394344 Alhazred
Alhazred's picture

Time to invest in the 3 Bs

Bullets

Body armor

Bribery tokens  (i prefer 5 gram gold bars for that purpose.  the pamps look like they are larger because they are so thin and the card hides the

Thu, 10/30/2014 - 11:57 | 5393930 i_call_you_my_base
i_call_you_my_base's picture

Soon enough.

Thu, 10/30/2014 - 12:18 | 5394023 KnuckleDragger-X
KnuckleDragger-X's picture

And soon is getting closer every day....

Thu, 10/30/2014 - 12:45 | 5394223 tempo
tempo's picture

blacks, whites, Hispanic , young and old are slaves to Visa who borrow money from the FED at zero interest and loan it to the people at 15-20% interest rates plus fees. Its immoral. When will people understand how much your
Govt screws you and want to take away your freedom.

Thu, 10/30/2014 - 13:08 | 5394403 sandhillexit
sandhillexit's picture

cash.  ask to pay cash.  paying without a signature is a freedom we shouldn't give up so easily.  call it the Lieberman-experiment in honor of our almost VP, friend of usury.  

Thu, 10/30/2014 - 11:54 | 5393904 LULZBank
LULZBank's picture

Fuckflation Bitchezz!!

Thu, 10/30/2014 - 11:55 | 5393917 maskone909
maskone909's picture

inflation and deflation...

whats the difference when the majority of the population is dependent on government handouts?  those two words might as well be meaningless.

Thu, 10/30/2014 - 11:57 | 5393926 Bryan
Bryan's picture

You got a point there.  The FSA cares nothing about those meaningless words, as long as their Stuff is still Free.

Thu, 10/30/2014 - 14:08 | 5394788 PT
PT's picture

Some of their stuff they get free.  Other stuff comes with strings attached.  They get some stuff "free" because they can't be bothered reading the fine print.  As long as govt can screw enough from taxpayers, they may never need to bother with that fine print.  But it is there.  Waiting for the magic day ...

Some poor people choose not to join the FSA because they are scared of the fine print.  But for the dare-devils, they are succeeding for now.

Thu, 10/30/2014 - 12:02 | 5393951 Bell's 2 hearted
Bell's 2 hearted's picture

read an interesting article on ACA and the poor.

 

Though they may qualify for subsidies that pay most/all of premium ... they don't have the $$s for deductible ... and therefore won't/can't use

 

not sure they wanted to draw it up that way 

Thu, 10/30/2014 - 12:04 | 5393954 i_call_you_my_base
i_call_you_my_base's picture

Makes sense.

Thu, 10/30/2014 - 12:16 | 5394010 PartysOver
PartysOver's picture

That whole thing is a bureaucratic cluster fuck.  Therefore the gov't is operating at its optimal level.

Thu, 10/30/2014 - 12:21 | 5394050 KnuckleDragger-X
KnuckleDragger-X's picture

The ACA was written behind closed doors with the direct input of lobbyist. Health care will collapse and interesting times will arrive.

Thu, 10/30/2014 - 13:20 | 5394468 JRobby
JRobby's picture

Agree. Correct in my opinion.

We are currently in the "gouging profit" phase of ACA. However, it will be interesting to see how long those "reserves" last.

Insurance accounting is fun as most of the liability side of the balance sheet is an "actuarial estimate".

 

Thu, 10/30/2014 - 14:06 | 5394776 JohnG
JohnG's picture

 

 

"not sure they wanted to draw it up that way "

 

Of course, that's the point.  Have the taxpayer pay for "care" that will never be delivered.  This is exactly how the insurance companies wrote the law.  Pure skim profit.

Thu, 10/30/2014 - 16:58 | 5395450 roadhazard
roadhazard's picture

So nothing has really changed, not worse just a different FUBAR.

Thu, 10/30/2014 - 12:04 | 5393957 MidwestJester
MidwestJester's picture

That's easy to say, but when the government uses it's own measure of inflation to give out 'cost of living' increases to the FSA, but real inflation is hitting a much higher rate, it will start to matter soon enough, and not just for working schmucks.

Thu, 10/30/2014 - 12:12 | 5393997 maskone909
maskone909's picture

they will jsut increase the limits on those snap cards and or fix prices.  i wish markets mattered but there are too many hands in the cookie jar

Thu, 10/30/2014 - 12:26 | 5394094 Bemused Observer
Bemused Observer's picture

A better cookie jar metaphor would be that our markets are like a cookie jar with all of us on line, awaiting our turn. But now we're all standing here while some asshole discovers he can't get his hand OUT of the jar unless he lets go of a few of the cookies he's trying to grab. But he just won't do it...and until the genius puts two and two together, nobody gets ANY cookies, and everything grinds to a halt while we all wait...

Thu, 10/30/2014 - 11:58 | 5393923 Bell's 2 hearted
Bell's 2 hearted's picture

US the caboose of global economies

 

will import deflation as the cars ahead on the track go off the rails (and devalue their currency to "compete")

 

King Dollar

Thu, 10/30/2014 - 11:59 | 5393925 SethDealer
SethDealer's picture

Free Shit Army   FSA.... Live FREE or Die !

Thu, 10/30/2014 - 12:01 | 5393941 Miffed Microbio...
Miffed Microbiologist's picture

All the baby boomers I work with used to bombard me with their tales of fabulous retirements they had planned. It's been six years now and all of them remain and the stories are gone. Funny, for such rabble rousers in the sixties they are strangely quiescent and humble. Just keep their heads down and work. I guess the dreams didn't mesh with reality.

Miffed

Thu, 10/30/2014 - 12:08 | 5393970 I Write Code
I Write Code's picture

If they are still working at all it is for less money than they expected, and yet they are the lucky ones.

Thu, 10/30/2014 - 12:25 | 5394097 PT
PT's picture

I knew my retirement was fucked the instant superannuation contributions were made compulsory.  What else did you need to know?  The most fundamental competition - the ability to opt out - was taken away.  The money has to go somewhere whether or not returns are available.  It doesn't take too many brain cells to figure that out.

MSM and Salesmen were running around saying, "Most people your age will be retiring at 55."  I knew it was bullshit 20 years ago.  Shame I was too polite to tell them to their face.  Oh well, sometimes I still gotta learn the hard way.

Thu, 10/30/2014 - 12:48 | 5394179 Mediocritas
Mediocritas's picture

The funny thing (well not so funny really) is that savings for retirement before compulsory superannuation were higher than they are now.

Compulsory super was always designed as a gift to banksters. Captive money for banksters to gamble with, taken from wage earners by law. The helpless wage-earner shoulders all the risk for bad performance while the manager pockets any handsome gains and flips a small part of it through to the wage-earner. An obvious scam, no doubt lobbied for strongly by banksters and marketed as help for the little guy, never mind the fact that costs to employers are passed to employees via lower wages and fewer jobs.

As savings flowed out of term deposits and into super funds, the traditional banking system predictably lost market share (total loan generation) to the shadow banking system. We know what happened next. Then when the shadow banking system went and blew itself up, surprise surprise, we find that the % for compulsory super is going to be ramped up (a bailout that only a few people recognise as such).

Scrap compulsory super immediately. It provides no benefit to wage earners whatsoever. Put the money going into compulsory super straight back into peoples' paychecks and let them decide what to do with it, as they did before.

Thu, 10/30/2014 - 12:53 | 5394300 PT
PT's picture

Funny thing is that industry was doing quite well before compulsory super came along.  So where is all that money REALLY going?

Thu, 10/30/2014 - 12:56 | 5394335 PT
PT's picture

I guess - instead of industry borrowing the money that was in term deposits at interest rates high enough to encourage people to save, they now issue shares to pension funds that don't care about returns - the owner of the money won't notice it is missing until 40 years later!

Thu, 10/30/2014 - 13:48 | 5394543 Mediocritas
Mediocritas's picture

It's the investment banks driving it. All that money tied up in traditional deposits where they couldn't get their grubby, gambling addicted hands on it.

Now when you allocate to the "safety" of cash in a super fund and think you're parked in something like a term deposit, it turns out you're actually feeding the international money markets and are participating in a housing Ponzi finance bubble, exposed to foreign bank (in)stability and exchange rate volatility, all for the privilege of a shitty return that's barely above inflation if you're lucky. The shadow system internationalises and magnifies risk. At least before, the term deposits only back-stopped domestic lending.

Allocate to the "safety" of bonds and you're in the international repo markets, feeding a rehypothecation chain through London, resulting in 30 other parties holding a claim to the same bonds and, thanks to the small print somewhere, you somehow being the most junior party.

All the while handing over fat commission and fees to managers - who don't give two shits about performance because they get paid either way - and getting constantly skimmed by HFT bots that love the bottom-of-the-barrel, ETF-loving fund managers who have unsophisticated order routing and can't even outperform the index.

Fuckin' financial "innovation", ain't it grand? Fire the bloody lot of them and make them look for jobs doing something useful in the real economy instead of gambling in a zero-sum game for winners and losers.

An economy that's allocated itself 40% to a poker game needs its ass kicked back into reality.

Thu, 10/30/2014 - 15:35 | 5395195 Miffed Microbio...
Miffed Microbiologist's picture

Well said. When the government advocated a MyRA for retirement and scissors for personal protection, my doubts about my direction for my future strangely vanished.

Miffed

Thu, 10/30/2014 - 19:18 | 5395905 Mediocritas
Mediocritas's picture

In oz they rolled out "MySuper": http://en.wikipedia.org/wiki/MySuper

They don't even TRY to hide the fact that they're all getting orders from the same banksters masters do they?

Thu, 10/30/2014 - 19:57 | 5396014 Miffed Microbio...
Miffed Microbiologist's picture

You are right. This is not funny. It is criminal. This only works due to compulsory contributions. They have created their own legal monopoly shackling the individuals in hope of return but in reality, a dim future. Tax deferment is the hook. We fell for this as well and noted the disastrous consequences of so much money being plowed into these vehicles led to no accountability as was once for individual shareholders. We escaped and are on our own trying to save for ourselves in this terrible environment. It is hard to know what to do but I know the bottom line is never place my trust in anything advocated by government.

Miffed

Fri, 10/31/2014 - 00:52 | 5397027 Mediocritas
Mediocritas's picture

Better to never place your trust in ANY group with more power than you, be it public or private.

I know ZHers like to focus on criticizing the government, but it's the invisible, private powers, so powerful that they don't have to go through the indignity of elections or face public exposure, that are the greater threat. Sometimes, just hinting at their existence is enough to get you shut down.

Easy to NOT criticize them, or inadvertantly trust them, because they can't be seen.

Thu, 10/30/2014 - 12:06 | 5393967 ejmoosa
ejmoosa's picture

Who the hell is paying $1.08 per therm for natural gas?  I am at .52 and have been for two years.

WHile I agree with the summary for the most part, glaring errors like that make me suspect.

Thu, 10/30/2014 - 12:23 | 5394082 KnuckleDragger-X
KnuckleDragger-X's picture

It varies by state and region just like the electricity prices in California are driven by government meddling instead of true cost.

Thu, 10/30/2014 - 12:12 | 5393971 LawsofPhysics
LawsofPhysics's picture

Somewhat correct.  Here's the rub;  in a global market it certainly is possible for a small island country to create paper receipts from thin air for real goods in order to get back on track.  However, if structural reforms are never made, then they must go bankrupt.

 

Furthermore, the entire planet cannot engage in such behavior.

All stimulus (paper claims) are fungible bitches...   ...at least until it's imossible to take delivery.

Thu, 10/30/2014 - 12:09 | 5393974 THE DORK OF CORK
THE DORK OF CORK's picture

 

For the average person who depends on wage and income – this looks and sounds like inflation – because it is. (his buying power is decreasing)
For the guy on the top of the heap with a huge stock of tokens this of course appears as a deflation – but it is not.

The problem is of course the corporate nature of governance which attracts huge amounts of rentier flows upwards into dead zones.
In return these dead zones can only give us back concentrated products that we cannot afford to use.(typical bank credit centric products)
Any increase in fiscal debt adds to wealth concentration (a small amount of people and institutions holding a huge stock of debt money) and thus causes the instability we see today.

The only solution is of course to add a clause free debt free income to citizens while outlawing hyper inflationary bank credit creation.
The objective should be to effectively destroy the top down system of production and demand management.
People will then no longer have to visit that discount store with absurdly long supply chains.
Exchange will again become localized as people generally prefer to engage in communal activity if they can afford to do so.
Real leakage of wealth will decrease.
This means no more wealth dead zones.
Then it will be time to get on with the business of living.

Thu, 10/30/2014 - 12:24 | 5394076 LawsofPhysics
LawsofPhysics's picture

Eventually the affects of creating infinite paper/digital claims on real fucking assets runs its course.  This has been the case for 40+ years, what has been overlooked are the underlying exponential equations that determine the eventual day of reconing and severity of the outcome.

Thu, 10/30/2014 - 12:42 | 5394188 Anusocracy
Anusocracy's picture

Government organizes and operates each society it exists in solely to transfer wealth - it does not operate to create wealth.

For all its recorded existence its behavior has been to transfer wealth chiefly to those running it and their cronies, whatever their field of endeavor happens to be.

It is working as designed and the rulers and their cronies are benefiting as designed.

The only way to end that upward wealth transfer is to get rid of it.

Thu, 10/30/2014 - 12:08 | 5393977 imapopulistnow
imapopulistnow's picture

All of this can be traced to the mercantile economic policies of China and their 700 million plus labor force.  The trend will continue until they develop domestic demand and stop devaluing their currency.

Thu, 10/30/2014 - 12:27 | 5394108 KnuckleDragger-X
KnuckleDragger-X's picture

Not gonna happen. They aren't anywhere near having a broad internal market for goods and the global economy will implode before they can develop one.

Thu, 10/30/2014 - 12:17 | 5394013 Bunghole
Bunghole's picture

Thanks Matt Drudge.

Keep up the good off topic work.

Thu, 10/30/2014 - 12:38 | 5394167 Bill of Rights
Bill of Rights's picture

Thanks Shithole Ill do that whats wrong I touch a nerve?...good

Thu, 10/30/2014 - 13:30 | 5394537 JRobby
JRobby's picture

Bunghole taking a pounding. Film at 10:00

Thu, 10/30/2014 - 12:10 | 5393985 I Write Code
I Write Code's picture

Although I agree with this, I'm not quite sure what conclusions we're supposed to draw.  Is there something *wrong* with globalized markets?  What is the fix?

The theory and textbooks apparently need major updates.

Thu, 10/30/2014 - 12:43 | 5394194 PT
PT's picture

The theory and textbooks have been simple propaganda for a long time now.

Start:

"Debt" is NOT "Affordable".
Ponzi Finance is NOT affordable.
Earnt money must not be forced to compete with debt money because debt money will inflate prices to the point where earnt money simply can not compete.

Lately I have been continually repeating the story of how real estate prices increased by 400% in the time it took me to grow my wages 40% ( which not everyone got because I was increasing my skills at the time).  Earnt money simply could not compete.  My wages could not compete.  Increasing productivity could not compete.  At that time, the only game in town was to jump on the debt / real estate bandwagon.  Everyone else was crushed - unless they could increase their income by 400% in the same timeframe - and the reward for that risk was to simply be left standing still.  Production lost to Ponzi Finance.  Production is what makes us rich - not debt, not money.  Money makes you rich at the expense of someone else.  Productivity lifts all boats.  Easy debt and Ponzi Finance for real estate / existing share speculation destroys production.  Just think of all the physicists and mathematicians who went to work for Wall St.  What would they have produced if they were in private industry instead?

Thu, 10/30/2014 - 13:05 | 5394390 Mediocritas
Mediocritas's picture

Great comment!

Thu, 10/30/2014 - 13:19 | 5394460 I Write Code
I Write Code's picture

You're pretty much talking like Piketty here, but he doesn't say "debt" he says "capital".

I think it may be different than that and simpler than that, and it's really all about globalization.  The banksters and vulture capitalists have simply sold America to foreigners and pocketed a fat arbitrage fee.

This was not necessary, nor was it a good thing, but it explains the lowered wages.

Now, even without globalization automation also contributes to the devaluing of labor, but I think to a much smaller and less critical degree.

Finally the US government drifted into socialism, incompetence, and farce, and that does nobody any good.

Thu, 10/30/2014 - 13:59 | 5394717 PT
PT's picture

You're crushed between first world real estate prices and third world wages.
First world corporations need to keep those real estate prices / share prices high in order to pretend that their assets exceed their liabilities.  The only way to keep real estate prices high while wages are low is to use Ponzi Finance.

Automation means we can produce more with less human labour.  It should lead to prosperity - if one man can do the job of ten then either we can produce ten times more or we only have to work 4 weeks per year instead of 40 weeks per year for the same amount of production.  There are a number of reasons why people have to work so hard despite automation-productivity gains.  I think the number one problem is that all the increased gains have been buried in the ground - i.e. higher real estate prices.

Thu, 10/30/2014 - 16:31 | 5395391 TheGreatRecovery
TheGreatRecovery's picture

And if what POTUS planned to do in office was to start wars, which history screams runs up inflation to maximum pain limits, then history also told him that one thing he might try, to keep voters from voting him out of office, is to give them a real-estate boom.  That's where I think Alan Greenspan came in, making it easy for voters to borrow for real-estate.  Voters who felt nervous about war inflation could nevertheless tell themselves, "yes, I KNOW war inflation always end up in much weeping and gnashing of teeth, but if my McMansion doubles in "value", at least I MIGHT get through it without losing MY family's savings.

Of course, some did, and some didn't.  In a Great Recession, one loss of employment might be all it takes for the bank to repossess your McMansion.

Now we seem to be in "withdrawal" from overbuilding real-estate, overbuilding, in this case, meaning, not "too much" real-estate, but "too expensive" real-estate.  No citizenry of any nation was ever able to afford McMansions.  So building them was malinvestment, and I suppose is now a part of the grinding friction prolonging the Great Recession.

The pain may worsen.  Realtors don't seem to ever give up, and everywhere we see municipal, county, and State "fees" on everything imaginable, increasing rapidly, in what might be desperate attempts to lower millage rates and therefore ad valorem bills, to make the overbuilt, malinvestment "hole in the ground" McMansions appear to be actually "necessities", not "unaffordable luxuries".

Thu, 10/30/2014 - 19:14 | 5395894 Mediocritas
Mediocritas's picture

Eventually everyone's a renter (not just of housing either) then they're crushed between first world rents and third world wages. Labour share of income has been utterly crushed relative to capital share of income, delivering us a classic rent-seeking society.

Might as well call it neo-feudalism and stick a fork in it. Historically, it's the default.

Thu, 10/30/2014 - 19:18 | 5395908 The_Prisoner
The_Prisoner's picture

That's certainly how I see it playing out.

I haven't been able to find a way to beat it which does not involve joining the ones turning the screws.

So far I have only been able to find ways to delay the crunch by slowly reducing the rent.

Suggestions welcome.

Fri, 10/31/2014 - 00:44 | 5397014 Mediocritas
Mediocritas's picture

Increasingly more people (especially younger people) seem to get it, but there's seemingly no drive to aggregate into a collective to challenge it. That's a shame because the internet provides a mechanism for coordinated global aggregation like never before.

Then there's the huge mass of people who get it, but don't want to change it, like all the boomers with their negatively geared investment properties. Their political influence means that nothing changes until they die out. Problem is that the kids who resist the system now will change their stripes as soon as they inherit their parents assets.

Only way I see it changing is the way it has always changed in the past. Things get SO bad that the system collapses into an orgy of violence. Then it's a gamble as to whether what order forms from the chaos is either better than or worse than what preceded it (usually worse).

The peaceful way to change it (assuming political will could be found) is remarkably easy. Increase labour share of income and reduce capital share. Land tax, import taxes, etc.

Why the hell should capital income be taxed less than wage income? After all, one could argue that wage income IS capital income (the capital is the talent of the person).

Thu, 10/30/2014 - 13:32 | 5394547 JRobby
JRobby's picture

Thank you for summing this up neatly.

END THE BANKSTER PONZI!

Thu, 10/30/2014 - 12:14 | 5394005 Billy Sol Estes
Billy Sol Estes's picture

lol movie ticket

Thu, 10/30/2014 - 12:17 | 5394018 Bemused Observer
Bemused Observer's picture

One good thing that might come of all this is the probable death of globalism for quite some time. The failures have become so obvious, the level of disgust and contempt for the system has gone global too. Should the system experience a catastrophic collapse, I think it will be nearly impossible for TPTB to pick up the pieces. And any attempts might be met with savage resistance by the very pissed-off survivors. Globalists could end up on the run, hunted down, instead of welcomed.
We could find ourselves in a much smaller world, with many markets. Some big, some small, some open, some completely sealed-off. But ALL self-protective and fiercely independent. A world where an entrepreneur can do well in his local market, but can't become so large as to dominate the whole system. Where local markets could adjust their policies according to their own self-interests for a change.
But if this system goes down, I doubt we'll be dealing with globalism for the foreseeable future.

Thu, 10/30/2014 - 12:42 | 5394199 Monty Burns
Monty Burns's picture

I hope and pray that you're right...

Thu, 10/30/2014 - 14:44 | 5394973 Bemused Observer
Bemused Observer's picture

Well, seeing how things go historically, I wouldn't be surprised to see the pendulum swing the other way for awhile. We NEED that...
I'd also like to see something similar happen with all our technology. For public opinion to shift away from all the social-networking and 24/7 connectedness, and towards a demand for more privacy and quiet.
Then maybe that technology can be allowed to grow and develop along useful lines. As long as the public sees this stuff as toys it will be used for entertainment, and all development will be geared towards that.
The geeks must be expelled from Wall Street, and sent back to their garages and college laboratories so they can get back to work.

Thu, 10/30/2014 - 12:22 | 5394070 khakuda
khakuda's picture

All you need to know is that if there had been little/modest inflation in the cost of living relative to wages over the past decades as claimed, then interest rates wouldn't need to be kept at zero to allow people to finance things they can't afford.  Down payments wouldn't have had to be lowered to 3%, yet again.  Obama would not have had to pass the 10 or 20 year tuition forgiveness program.  48 million people wouldn't need foodstamps.  Global credit wouldn't be $100 trillion, up from $70 before the SHTF.

Some of it is inflation and some of it is that people want a higher standard of living they can't afford (iphone vs landline).  Either way, it is an economy based on more debt which can only happen via low rates, lower down payments and/or defaults, real or via inflation.

Thu, 10/30/2014 - 12:57 | 5394330 madcows
madcows's picture

how much of that jump from 70 to 100 trillion is attributed to companies borrowing to buy back their own stock?  I'm guessing its about 90%.  I'm betting that normal people are trying shed debt, while companies and governments are loading up.

Thu, 10/30/2014 - 12:27 | 5394083 ejmoosa
ejmoosa's picture

if this were the case and I were POTUS, I would be taking the steps necessary to allow MY nation to become as competitive as possible.  

Trillions housed offshore?  Bring it home tax free and put it to work.  

Regulations slowing down your development of new products and services?  It's time to streamline and reduce those encumberances.  

 

You need to hire more people but cannot afford it?  Suspension of minimum wage laws for the next five years, and people can accept the jobs if they choose to.  For those that accept jobs below the minimum wage-no taxes withheld at all.  Work as hard as you are willing to get ahead.  We will not take your earnings.

Note to Congress:  Anything that crosses my desk that is unconstitutional or generates more rules and regulations will be vetoed.  Override if you can, but then you'll answer to the voters in two years.  And believe me, I will be reminding them of who voted to violate their rights and increase the regulations.  I do not play golf, so I will have plenty of time to do so.

 

That's just for a start.

 

Thu, 10/30/2014 - 12:28 | 5394118 LawsofPhysics
LawsofPhysics's picture

Without allowing bankruptcies to occur and debt/wealth to be lost, your proposals would only insure massive and quick hyperinflation as all those paper claims on real goods and services came home. People/corporations must be allowed to FAIL and go bankrupt in earnest!!!!!

Thu, 10/30/2014 - 12:33 | 5394133 ejmoosa
ejmoosa's picture

Absolutely...Malinvestment is at the heart of our lack of competiveness.

I should have added that businesses will be allowed to fail.  

I'll hold a spot for you in my administration, as long as you are willing to disagree with me when needed, and keep me on track.  

 

Thu, 10/30/2014 - 12:48 | 5394239 world_debt_slave
world_debt_slave's picture

thus my handle

Thu, 10/30/2014 - 13:03 | 5394381 jacship
jacship's picture

hOW YOU LIKEN

N-W-O

JUST WAIT UNTIL THEY ADD

30 M UN-DOCK.

Thu, 10/30/2014 - 14:08 | 5394779 bugs_
bugs_'s picture

and its World Deflation Day in the Deflationists Lounge - half price bottles of pure Detroit water $9.95 till 6pm.

Ladies bring your unemployed boy friend or unemployed husband and get in free!

Thu, 10/30/2014 - 15:08 | 5395100 limacon
limacon's picture

The wrath of unintended consequences .

"Sheeple wear Wolfskin !"

they just shot themselves in the foot with negative interest rates.

See

 

https://www.academia.edu/9031355/The_Were-Sheeples_Almanac

http://andreswhy.blogspot.com/2014/10/were-sheeples-almanac.html

Thu, 10/30/2014 - 15:21 | 5395149 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

My business was destroyed by the 'cartel pricing of SEARS' in conjunction with cartel pricing for materials, cartel pricing for advertising, cartel pricing for taxation by government, and the motherfucking competition that had

black-market sources of funding for advertising so they could beat out the competition. Inflation and hyperinflation have destoyed my business systematically over time just as other forces have contributed. Corporatists, and their corporations, destroy our business opportunities and our businesses through systematic 'cartel pricing' schemes whereby the small business owner cannot game the system in the same fashion.

Monopolistic practices create wealth for the few at the expense of the many

and that is why most are poor today. Small business was killed off during the BIG-box store building era. After 2008 the BIG-box cartel pricing scheme has fallen apart and numerous retailers have gone bankrupt. We now have SUPER-Banks [which are really hedge funds]

and the BIG-box stores are in M & A each business quarter ad infinitum.

Being 'poorer' is better than you think if the masses are about to make the 1% fall on their swords en masse. Poverty is not a way of life for anyone other than the 1%. Let them eat GMO.

Thu, 10/30/2014 - 15:59 | 5395269 TheGreatRecovery
TheGreatRecovery's picture

Imagine a game of Monopoly in which one of the players, and only one, is awarded 6% of everything everyone owns each time he passes Go.  He keeps everything he has, plus is given the extra 6%.  No other player gets that 6%; just him.  Imagine who will win the game. 

If each time that person reaches Go is one year, and that person is Mr. Central Banker, then I believe the game is more or less the one that all citizens of alll nations within the Debt Curtain of the International Central Bankers have been playing.  Citizens don't have a chance.

The 6%, of course, is the "debt" money-created-out-of-thin-air that Mr. Central Banker creates, and then "loans" at the discount window to himself.

In addition, there is the long-term pernicious problem of overpopulation  As someone above said, "wealth is resources".  Divide the Planet's resources among 1 billion people, and you get one number.  Divide the Planet's resources among 10 billion people, and you get 1/10 of that number.  Massive unemployment, continually decreasing salaries when measured in purchasing power, misery, and resulting crime and war are the inevitable result.  For instance, the Philippines has 10 times the population density the USA has, and 1/10 the average income.  Math is not mysterious; it is straightforward.  What "Keynesian economists" seem to spend most of their time doing is pretend that there is mystery, and if their employers own the media, "Keynesian economists" can continually invent new mysteries, like "QE" or "stress tests", to pretend that the things we see going on are mysterious, when in fact the only things that ever go on are simple and easily understandable.

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