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Don't Wages Need To Rise Before Qe Can Really Work

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I can see how printing lots of money will inflate the money supply, but without corrosponding increases in wages would this strategy not quickly hit a wall were the price of imports caused a cutback in spending? Unless wages also inflate to keep pace with prices.

So for QE to work we would need to see wages going up- is this likely in a high unemployment period and a workforce that has little or no collective barganing power?

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I can see how printing lots of money will inflate the money supply, but without corrosponding increases in wages would this strategy not quickly hit a wall were the price of imports caused a cutback in spending? Unless wages also inflate to keep pace with prices.

So for QE to work we would need to see wages going up- is this likely in a high unemployment period and a workforce that has little or no collective barganing power?

As people start feeling the pain they would start fighting (figuratively) for wage rises: riots, activism at the office, strikes, perhaps a return of unions who knows. Wages would follow price inflation to a certain extent but I would expect standards of living to fall somewhat.

With sterling falling (definitely part of the PTB's plan IMO) UK labour would remain competitive.

With UK companies being competitive on world markets, and with money sloshing in the system wage rises would probably be agreed to. I am sure Grodon Brown will be happy to raise public employee wages in response to price rises, and blame the whole thing, inflation and increased budget deficit, on the US or something outside his control.

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I can see how printing lots of money will inflate the money supply, but without corrosponding increases in wages would this strategy not quickly hit a wall were the price of imports caused a cutback in spending? Unless wages also inflate to keep pace with prices.

So for QE to work we would need to see wages going up- is this likely in a high unemployment period and a workforce that has little or no collective barganing power?

Oh it'll work alright.

As long as the population can be beaten into living like it's the late 18th century again.

Sky high prices + you earn nothing.

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For many people it is borderline on whether to work or claim benefits. If inflation takes off then a heap more people will be far better off on the dole, riding out the storm, and doing a bit of ebay on the side.

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The older population on fixed income will be wiped out first, very, very quickly in terms of cashflow.

Forced sales of houses all over the shop and extreme cutbacks in discretionary expenditure across millions.

Those stretched on debt (helped somewhat by rammed low mortgage rates) would quickly succumb to the same income / expenditure crunch.

Again, forced sales of houses all over the shop and extreme cutbacks in discretionary expenditure across millions.

Those who measure growth in terms of money supply have yet to figure this out.

The rest of the world is not going to suddenly start being generous with the amount it pays for work to be done here - you'd have to absolutely trash sterling to be anything like competitive and in doing that you would trash what remains of the functional parts of the financial services sector, regardless there is not the supply of factory space and skulls any more to make a transfer to production viable, 30 years and in particular the last 10 years have made many sectors non-viable - there is not support structure in terms of skills, components, materials processing.

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The older population on fixed income will be wiped out first, very, very quickly in terms of cashflow.

Forced sales of houses all over the shop and extreme cutbacks in discretionary expenditure across millions.

Those stretched on debt (helped somewhat by rammed low mortgage rates) would quickly succumb to the same income / expenditure crunch.

Again, forced sales of houses all over the shop and extreme cutbacks in discretionary expenditure across millions.

Those who measure growth in terms of money supply have yet to figure this out.

The rest of the world is not going to suddenly start being generous with the amount it pays for work to be done here - you'd have to absolutely trash sterling to be anything like competitive and in doing that you would trash what remains of the functional parts of the financial services sector, regardless there is not the supply of factory space and skulls any more to make a transfer to production viable, 30 years and in particular the last 10 years have made many sectors non-viable - there is not support structure in terms of skills, components, materials processing.

They don't need home-grown skills. The government allows corporations to hire from anywhere on the planet. That's why immigration is so high.

We saw investment in the UK in the 1980s under the Thatcher government - the likes of Honda and Motorola had very large investments here albeit relying on skills which were left over from what was left of the British car industry and electronics.

Nowadays they just ship people in from India, China or wherever they can find the right people.

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They don't need home-grown skills. The government allows corporations to hire from anywhere on the planet. That's why immigration is so high.

We saw investment in the UK in the 1980s under the Thatcher government - the likes of Honda and Motorola had very large investments here albeit relying on skills which were left over from what was left of the British car industry and electronics.

Nowadays they just ship people in from India, China or wherever they can find the right people.

Still won't work. Cost of living means that is unattractive for people with lots of skills to live here, well enough to run modern manufacturing plants, the sweat shop model simply will not work, well not unless houses are 30K a pop or less. Besides there's no money to buy the land, build the factories and spend hugely on the equipment - that has been sent abroad already, crated up and gone. The financial whizzes who have steered the economy to this point can't even not make a mess of their chosen sector - zero chance of doing a bit of command and control in re-launching manufacturing.

yellerKat, freudian slip.

Edited by OnlyMe

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This is a very good question...because certain people on here just react by shouting PRINT PRINT...HYPERINFLATION...AAAAAARGGHHHHHH

When it would probably be far more constructive to take a more rounded view.

Would wages go up, would interest rates rise or (as seems to be the case) will we all just wake up sometime next month with all our collective savings having the purchasing power of a value medium sliced loaf (currently 40p :rolleyes: )

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As people start feeling the pain they would start fighting (figuratively) for wage rises: riots, activism at the office, strikes, perhaps a return of unions who knows. Wages would follow price inflation to a certain extent but I would expect standards of living to fall somewhat.

Or we could just have abject poverty.

No reason for wages to rise, there's nothing that we do that can't be done cheaper in china.

And yes that includes selling houses to each other!

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I can see how printing lots of money will inflate the money supply, but without corrosponding increases in wages would this strategy not quickly hit a wall were the price of imports caused a cutback in spending? Unless wages also inflate to keep pace with prices.

So for QE to work we would need to see wages going up- is this likely in a high unemployment period and a workforce that has little or no collective barganing power?

The velocity of money is, I would guess, is falling like a stone.

E.g. if you had an economy with £1m in it whizzing around, but then printed a billion but stuck it in a hole I don't think the billion is going to make much difference.

Edited by MrNobody

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If they do print money I'm expecting none of it to reach or benefit normal people. If this new money is used to scrape the $hit of bank balance sheets I can't see what benefit normal people will see?

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Or we could just have abject poverty.

No reason for wages to rise, there's nothing that we do that can't be done cheaper in china.

And yes that includes selling houses to each other!

Exactly, that's why it is a little different this time around. In the last big crash in the 70s, wages rose due to union pressure and a captive workforce going on strike. These days, most jobs can be outsourced or the equipment moved offshore very very quickly. Strike in the private sector ? You are having a laugh !

And as for all those low skilled jobs that are out there just waiting to be filled........things can't be that bad yet if they are still vacant. Maybe when we see City workers sending their CV's to Starbucks, then we'll realise the deep doo-dah the country is in ? (this happened in the 30s depression where former city and Wall Street bankers ended up as door to door salemen trying to eek out a living). The media might be flapping and printing scare stories, but we are quite a long way off from real Depression.

Not to say that it won't happen.....but scare stories sell papers and rarely reflect reality.

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Strike in the private sector ? You are having a laugh !

I did once. I took my hardware team and we all walked out. We weren't happy that our pensions contributions were being held in company accounts rather than with the pension company.

The CEO met up with me a couple of days later, paid up in full and we went back the next day. Pensions were paid to my team as salary from then on, no other staff were to know about it.

VMR.

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I did once. I took my hardware team and we all walked out. We weren't happy that our pensions contributions were being held in company accounts rather than with the pension company.

The CEO met up with me a couple of days later, paid up in full and we went back the next day. Pensions were paid to my team as salary from then on, no other staff were to know about it.

VMR.

Good on you Sir !

My experience was a somewhat different. The company I was with in early 2000's hinted they might close our site down. Lock, stock and barrel. It was an IT site for a large manufacturing and s/w company. We went on a 1 day strike. Few months later, they announced we'd close before the end of the year. We went on another 1 day strike. Result? They closed us down 2 months earlier than predicted ........................... :o

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Guest sillybear2

productive output = savings

savings = capital for investment

capital investment = more productive output

Rinse and repeat.

There is no short cut to the above, devaluing the currency, beggar thy neighbour policies and hyperinflating are not viable as they don't involve the only thing that makes an economy grow and improve living standards, namely productive output. Anything that doesn't work to that end is a sure fire way to destitution and third world status.

Seriously, if any of the proposed bull$hit worked, and I don't mean that lightly, if any of this intellectually bankrupt bull$hit worked then Zimbabwe would be the richest country on Earth.

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Guest eight
regardless there is not the supply of factory space and skulls any more to make a transfer to production viable,

Is this a typo or a new, somewhat derogatory, term for unskilled manual workers?

eight

Edited by eight

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productive output = savings

savings = capital for investment

capital investment = more productive output

Rinse and repeat.

There is no short cut to the above, devaluing the currency, beggar thy neighbour policies and hyperinflating are not viable as they don't involve the only thing that makes an economy grow and improve living standards, namely productive output. Anything that doesn't work to that end is a sure fire way to destitution and third world status.

Seriously, if any of the proposed bull$hit worked, and I don't mean that lightly, if any of this intellectually bankrupt bull$hit worked then Zimbabwe would be the richest country on Earth.

What does Mugabe care? Keeps his missus in £60,000 Gucci rhino horn glasses. Same for Brown and co. If it keeps this crap system stuttering on for a while longer they will, regardless of the consequences. They look after their interests, not ours.

Hence why I won't be surprised if the idiots in power step on the same rake, it will be us who feels the pain not them.

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productive output = savings

savings = capital for investment

capital investment = more productive output

Rinse and repeat.

There is no short cut to the above, devaluing the currency, beggar thy neighbour policies and hyperinflating are not viable as they don't involve the only thing that makes an economy grow and improve living standards, namely productive output. Anything that doesn't work to that end is a sure fire way to destitution and third world status.

Seriously, if any of the proposed bull$hit worked, and I don't mean that lightly, if any of this intellectually bankrupt bull$hit worked then Zimbabwe would be the richest country on Earth.

The purpose of this would not be to make the economy better, but purely to address the curnt national priority: to reduce debts relative to income.

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Exactly, that's why it is a little different this time around. In the last big crash in the 70s, wages rose due to union pressure and a captive workforce going on strike. These days, most jobs can be outsourced or the equipment moved offshore very very quickly. Strike in the private sector ? You are having a laugh !

And as for all those low skilled jobs that are out there just waiting to be filled........things can't be that bad yet if they are still vacant. Maybe when we see City workers sending their CV's to Starbucks, then we'll realise the deep doo-dah the country is in ? (this happened in the 30s depression where former city and Wall Street bankers ended up as door to door salemen trying to eek out a living). The media might be flapping and printing scare stories, but we are quite a long way off from real Depression.

Not to say that it won't happen.....but scare stories sell papers and rarely reflect reality.

I think most of the jobs that could be outsourced already have. You're forgetting VCs, PE Firms, Hedge Funds and Banks have been very actively involved in offshoring everything that could for the last 20 years now. All that's left is services and construction and a few more 'sticky jobs' that can't be so easily offshored.

A few riots and demonstrations, together with the approach of the election in the UK could suffice to change the laws re. offshoring and immigration IMO. Some protectionism will be demanded and granted I think.

Edit: should have said consumption, not services

Edited by williamdb

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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