Jump to content
House Price Crash Forum
Panda

What Will Re-Connect Money Supply To A Wage

Recommended Posts

Money supply for X amount of time has been running at 14% per annum...............

Wage increments.................supply has been running at say at best for the last 12 odd years 2.5 to 3% per annum.................If you have a paying job?

The DIS ...........connect, we all know, but where now?

Will you ever have the power to earn/pay to live?

Share this post


Link to post
Share on other sites

Only politician ive heard mention this startlingly obvious problem is Vince Cable, in typical meek, mouse like fashion.

And in the other corner we have Balls, shouting over anyone else. Say what you want about Thatcher, she was obsessed with Money Supply, whereas i always got the feeling Brown didnt even know what it was.

Share this post


Link to post
Share on other sites

Strange. I was only thinking about this then I logged on and saw a thread.

I suppose there could be 50 answers to your question I'd expect something BIG to occur however that would precipitate such a change to the current modus operandi. I think there's a concerted effort by companies to depress wages, sometimes necessarily so at other times just because they can get away with it in these hardened times.

Share this post


Link to post
Share on other sites

Link money supply to production and all prices including wages will sort themselves out.

So long as some people (bankers) have the ability to flood the market with "money" based on promises of production which hasn't happened yet (and as has happened recently more promises than can ever possibly be met with production) then us poor chumps will forever be scratching to keep up with inflation.

Share this post


Link to post
Share on other sites
I think there's a concerted effort by companies to depress wages, sometimes necessarily so at other times just because they can get away with it in these hardened times.

Paying the lowest possible wage (without damaging the company) is what management is supposed to do- the argument being that if they pay over the odds their competitors will under cut them pricewise.

In reality though the increases in productivity relative to labour costs are not really resulting in lower prices that much, since the bulk of the gain is being shared out amongst the management and shareholders- hence the massive gap between the income of the top 5% and everyone else.

As long as we try to run the world using a price discovery mechanism as a brain this problem will only get worse because the simplistic supply/demand paradigm that lies at the root of wage arbitrage cannot incorporate the demand destruction this tends to create.

The market is not sophisticated enough as a model to deal with the blindingly obvious fact that employees and consumers are the same entities- and that reducing the income of the former also reduces the spending power of the latter.

We need a smarter model of wealth distribution that includes some form of profit share element- simply paying people based on their replaceability costs is no longer working in a globalised labour market and is creating a huge demand crisis leading to a depression.

Share this post


Link to post
Share on other sites

Consumers and workers are ultimately the same people, and if they aren't getting paid sufficiently to buy the goods being produced, then obviously there is going to be a problem at some point. However, at an individual company level the incentive of management is obviously to hold down workers wages as much as possible, making shareholders happy and of course allowing them to pay themselves more. "Let other companies pay their workers properly" is the attitude.

Steadily increasing levels of personal debt have been the means by which ordinary people have been able to access the increasing cornucopia of goods being produced; this papers over the problem for a while, and furthermore provides an opportunity for the sods who didn't pay their workers properly in the first place to make even more money by lending to the chumps. However ultimately the problem of low wages still remains, and we are pretty much there now I reckon.

Anyway, in contrast to the greedy ba5tards at the top nowadays, this is what Henry Ford said:

"There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible."

I would say he had the right idea - he knew who was ultimately buying his cars.

Share this post


Link to post
Share on other sites

I have two thoughts on how to do this. One is that the new money supply should come into existence given to every citizen equally. So say the new money supply was £300 billion this year. And there are 60 million Brits. Then each Brit should get £5,000. Basically £400 a month dividend cheque.

Right now that £300 billion of new money each year is going to a few private individuals who are getting stupidly richer than everyone else. Secondly even that might not be enough. So a strongly progressive income tax, with the money going to actual public works. It is effectively a wage increase if the people are getting these things for free.

I would also note the public sector in general has been getting wage increases. The 25% or so of the working population that works directly for the state is the new middle class and also consumer class of Britain. Like teachers, policemen, nurses, doctors, bureaucrats, etc..

A lot of plans I see are how to beat down the wages of public sector workers. But I think a better plan is to lift up millions of people in the private sector's wages. I think a lot of public sector workers only seem overpaid because their private counterparts have fallen so far.

Share this post


Link to post
Share on other sites

Paying the lowest possible wage (without damaging the company) is what management is supposed to do- the argument being that if they pay over the odds their competitors will under cut them pricewise.

In reality though the increases in productivity relative to labour costs are not really resulting in lower prices that much, since the bulk of the gain is being shared out amongst the management and shareholders- hence the massive gap between the income of the top 5% and everyone else.

As long as we try to run the world using a price discovery mechanism as a brain this problem will only get worse because the simplistic supply/demand paradigm that lies at the root of wage arbitrage cannot incorporate the demand destruction this tends to create.

The market is not sophisticated enough as a model to deal with the blindingly obvious fact that employees and consumers are the same entities- and that reducing the income of the former also reduces the spending power of the latter.

We need a smarter model of wealth distribution that includes some form of profit share element- simply paying people based on their replaceability costs is no longer working in a globalised labour market and is creating a huge demand crisis leading to a depression.

Tosh

The price variance of wages due to market pressure from employers (ignoring the reverse pressure from employees) pales into insignificance when cast against the growth in money supply. There's a hell of a lot more pounds out there than there used to be and someone has been printing them faster than production has been increasing for some time now so its no wonder they are worth sh1t all. The only reason they have any buying power whatsoever is that a bunch of virtual slaves "off shore" are, for some reason, prepared to accept them in return for a lifetime of sweat.

If allowed to find their own level prices (wages, goods, resources) might deflate but of course deflation is a Bad Thingtm especially in a credit based ecconomy. which is why Mr. AA3 will be somewhere on this thread advocating printing money and shoveling into people's pockets as if it will make them any richer. <_<

Compare the salaries of the heads and top teir of large productive organisations and the trading floor boys of the banks and it should be apparent even to you that it is not company largesse or capitalist position "above" the poor supressed worker which is the key to the distribution of money in our ecconomy(I deliberately don't say wealth) but proximity to the source of the "production" of that money.

All the while we gloss over the problem which you elude to in your last paragraph. What we are watching it the world begin to level out income distribution and there is nothing you can do to stop it. All this childish "well we'll just give each person more money" does nothing to address the fact that our current standard of living depends on the productive capacity of the east and we might hate that and I bet we're going to dream up all kinds of protectionist measures and monopoly money schemes to try and avoid the reality that we cannot keep our costs artificially high and expect people to pay them.

Share this post


Link to post
Share on other sites

I have two thoughts on how to do this. One is that the new money supply should come into existence given to every citizen equally. So say the new money supply was £300 billion this year. And there are 60 million Brits. Then each Brit should get £5,000. Basically £400 a month dividend cheque.

Right now that £300 billion of new money each year is going to a few private individuals who are getting stupidly richer than everyone else. Secondly even that might not be enough. So a strongly progressive income tax, with the money going to actual public works. It is effectively a wage increase if the people are getting these things for free.

I would also note the public sector in general has been getting wage increases. The 25% or so of the working population that works directly for the state is the new middle class and also consumer class of Britain. Like teachers, policemen, nurses, doctors, bureaucrats, etc..

A lot of plans I see are how to beat down the wages of public sector workers. But I think a better plan is to lift up millions of people in the private sector's wages. I think a lot of public sector workers only seem overpaid because their private counterparts have fallen so far.

Its not money if its given away at inception.

money is a means of exchange. there has to be value at both ends of the exchange.

Share this post


Link to post
Share on other sites

The market is not sophisticated enough as a model to deal with the blindingly obvious fact that employees and consumers are the same entities- and that reducing the income of the former also reduces the spending power of the latter.

This is a big problem , credit was used for the masses instead of wage rises , and now that has gone and needs to be repaid there is now a massive problem.

All the time now I hear more and more people moaning about how expensive it is to live , and not just those that have maxed out on credit and lived above their means.

Consumer tat has got cheaper and cheaper , but if you are strapped for cash you can forgo these items . However things that have to be paid each and every month, Fares to work, Petrol, Council tax, Insurance , Gas , Electricity , have just gone up and up , people are just starting to realize how expensive it is just to exsist.Wages have not kept pace with these increases and extra taxes on wages like the hike in NI a few years back from 10%-11% plus freezing of personel allowances are now really starting to bite.

Edited by miko

Share this post


Link to post
Share on other sites

An equity based (where the saver has 'skin' in the game, like limited purpose banking), rather than debt/credit based (where banks promise to return savers' money in full) banking system would help.

We need a system which can cope with deflation and then let it occur. Those mal-investing need to take a hair cut, not get a bailout. The rich would have a much harder time holding onto their wealth then, giving the poor a better shot at getting their hands on it.

EDIT: Added descriptions.

Edited by Traktion

Share this post


Link to post
Share on other sites

An equity based (where the saver has 'skin' in the game, like limited purpose banking), rather than debt/credit based (where banks promise to return savers' money in full) banking system would help.

We need a system which can cope with deflation and then let it occur. Those mal-investing need to take a hair cut, not get a bailout. The rich would have a much harder time holding onto their wealth then, giving the poor a better shot at getting their hands on it.

EDIT: Added descriptions.

The over leveraged, irresponsible, indebted companies and governments that live for now, spending what they haven't got require inflation to bail them out...the responsible hard working savers that plan ahead to try and protect their and their families futures would prefer their money to stay at a stable value or even grow....the reckless will endeavor to wreck the lives of the prudent. :ph34r:

Edited by winkie

Share this post


Link to post
Share on other sites

Too many pigs at the trough living off the work of others. To squeeze massive profits from their companies, boards have first frozen wages, more profit, then lowered quality, more profit, then passed on rises to consumers, more profit... only now there is nobody to buy their overpriced crap. Capitalism and modern management practices have raped the shop floor for a few more pennies, and sucked all the money away from the system into the fat pockets of a few. Less profit better wages.. it'll never happen in my lifetime.

Share this post


Link to post
Share on other sites

Money supply for X amount of time has been running at 14% per annum...............

Wage increments.................supply has been running at say at best for the last 12 odd years 2.5 to 3% per annum.................If you have a paying job?

The DIS ...........connect, we all know, but where now?

Will you ever have the power to earn/pay to live?

In order to find the right answer you need to start by asking the right questions. :)

The money supply has been increasing but the recipients of this extra cash havn't been workers, they've been home owners. The cash was never intended to be put to use creating wealth so there would be no reason why wages would increase at the same rate. You have to factor in the EU migrant workers effect too, which has held down wages at the lower end.

Fixed costs such as taxes and housing are much more relevant when it comes to purchasing power. It doesn't matter how much we earn, if agents such as the state and landlords are able to extract wealth from the population willy nilly poverty will always be unavoidable.

Lowered costs and static wages = an effective wage rise, there may not be much scope for the paying people more, but there's loads that can be done to ensure that they keep as much of their money as possible.

Edited by Chef

Share this post


Link to post
Share on other sites

Too many pigs at the trough living off the work of others. To squeeze massive profits from their companies, boards have first frozen wages, more profit, then lowered quality, more profit, then passed on rises to consumers, more profit... only now there is nobody to buy their overpriced crap. Capitalism and modern management practices have raped the shop floor for a few more pennies, and sucked all the money away from the system into the fat pockets of a few. Less profit better wages.. it'll never happen in my lifetime.

True, but it's not the capitalists' fault that the workers have little bargaining power. If people could tell them to stuff their minimum wages because they had the ability to create their own wealth capitalists would have to respond by making the prospect of work more attractive. But a cartel in land prevents this defence mechansim from occurring.

Share this post


Link to post
Share on other sites

In order to find the right answer you need to start by asking the right questions. :)

The money supply has been increasing but the recipients of this extra cash havn't been workers, they've been home owners. The cash was never intended to be put to use creating wealth so there would be no reason why wages would increase at the same rate. You have to factor in the EU migrant workers effect too, which has held down wages at the lower end.

Fixed costs such as taxes and housing are much more relevant when it comes to purchasing power. It doesn't matter how much we earn, if agents such as the state and landlords are able to extract wealth from the population willy nilly poverty will always be unavoidable.

Lowered costs and static wages = an effective wage rise, there may not be much scope for the paying people more, but there's loads that can be done to ensure that they keep as much of their money as possible.

I agree, in parts of europe house prices didn't rise as much as they did here in relation to average wages, therefore their economies are healthier because people have more disposable income to spend they also save a little more than we do.....very few in this country save anything at all...they pay for housing, debt and bills, the rest if it can stretch that far goes on fags, booze, cars, eating out and holidays...after that little lot the pot is empty. ;)

Share this post


Link to post
Share on other sites

This is a big problem , credit was used for the masses instead of wage rises , and now that has gone and needs to be repaid there is now a massive problem.

All the time now I hear more and more people moaning about how expensive it is to live , and not just those that have maxed out on credit and lived above their means.

Consumer tat has got cheaper and cheaper , but if you are strapped for cash you can forgo these items . However things that have to be paid each and every month, Fares to work, Petrol, Council tax, Insurance , Gas , Electricity , have just gone up and up , people are just starting to realize how expensive it is just to exsist.Wages have not kept pace with these increases and extra taxes on wages like the hike in NI a few years back from 10%-11% plus freezing of personel allowances are now really starting to bite.

From what I'm seeing things are about to get much worse. Large employers (I know of a couple) are cutting overtime to Zero and suddenly losing all non-contract hours. These are companies that are doing well, making good profits but are 'panicking first' as they can see what's coming. The actions taken will even result if damage to their business, can't quite see the logic of that but maybe they see it as a war where they are prepared to lose in the short term but will survive and dominate in the future. The problem with this of course is that this might be a once in 200 year change which could take a generation to play out.

So far we've seen people having to pay out more money from the same income. A change into second gear will see people having to pay out yet more money but from a declining income.

Share this post


Link to post
Share on other sites

From what I'm seeing things are about to get much worse. Large employers (I know of a couple) are cutting overtime to Zero and suddenly losing all non-contract hours. These are companies that are doing well, making good profits but are 'panicking first' as they can see what's coming. The actions taken will even result if damage to their business, can't quite see the logic of that but maybe they see it as a war where they are prepared to lose in the short term but will survive and dominate in the future. The problem with this of course is that this might be a once in 200 year change which could take a generation to play out.

So far we've seen people having to pay out more money from the same income. A change into second gear will see people having to pay out yet more money but from a declining income.

They are panicking because all the ones that fail will be eaten up by the others creating even larger monopolies that will lead the way with pay policies and consumer prices.

Share this post


Link to post
Share on other sites
Tosh

The price variance of wages due to market pressure from employers (ignoring the reverse pressure from employees) pales into insignificance when cast against the growth in money supply. There's a hell of a lot more pounds out there than there used to be and someone has been printing them faster than production has been increasing for some time now so its no wonder they are worth sh1t all. The only reason they have any buying power whatsoever is that a bunch of virtual slaves "off shore" are, for some reason, prepared to accept them in return for a lifetime of sweat.

If allowed to find their own level prices (wages, goods, resources) might deflate but of course deflation is a Bad Thingtm especially in a credit based ecconomy. which is why Mr. AA3 will be somewhere on this thread advocating printing money and shoveling into people's pockets as if it will make them any richer.

Compare the salaries of the heads and top teir of large productive organisations and the trading floor boys of the banks and it should be apparent even to you that it is not company largesse or capitalist position "above" the poor supressed worker which is the key to the distribution of money in our ecconomy(I deliberately don't say wealth) but proximity to the source of the "production" of that money.

All the while we gloss over the problem which you elude to in your last paragraph. What we are watching it the world begin to level out income distribution and there is nothing you can do to stop it. All this childish "well we'll just give each person more money" does nothing to address the fact that our current standard of living depends on the productive capacity of the east and we might hate that and I bet we're going to dream up all kinds of protectionist measures and monopoly money schemes to try and avoid the reality that we cannot keep our costs artificially high and expect people to pay them.

I think the consensus at present is that most of the newly conjured money has yet to find it's way into the wild.

The point is that the previous linkage between increased productivity and increased wages has been severed in the last couple of decades- with wages standing still while productivity has gone up about 70% due to technology advances. Add to this the ability for capital to globally arbitrage wages and conditions and you wind up with a broken wealth distribution mechanism.

The same thing will happen to Chinese labour as they try to increase their wages- they will soon hit a point where automation and outsourcing to even cheaper locations become viable and the arbitrage game will start again.

I recently heard this simple account of what happened that makes a lot of sense:

1) Technology increased productivity, but also weakened labour and combined with globalisation to break the link between productivity and wages.

2) As a result most of the profits went to the top 1%, whose wealth saw huge increases over the same period.

3) This glut of wealth at the top creates a situation where a lot of capital is chasing too few viable investments- the fabled 'wall of money' roaming the world in search of yield..

4) Enter the Bankers. They see the opportunity and a new era of financial engineering begins as they create synthetic investment opportunities for the rich in the forms MBS ect. (All with fat fees for themselves thrown in of course)

5) As more and more derivatives are piled on top of the base of underlaying assets the bankers lose their heads and start to eat their own cooking exposing themselves to massive risk.

6) The housing market falls, destroying the banks and endangering the system.

So we can see that there is a connection between the excess earnings at the top and crisis-the same sorts of income imbalance was seen in the 20's before the crash then.

The problem is not inflation at present, the problem is demand, or lack of it- but this lack of demand is structural, caused by a failure of the wealth distribution mechanism that led to stagnant earnings for the majority, and huge gains at the top.

I don't think it's 'childish' to suggest that workers gain a greater share of the wealth they create, it's a vital aspect of capitalism that labour earns enough to create demand for goods and services.

How this is achieved is the question; we could for example introduce a citizens wage, financed in part by taxing the top 1% and maybe a tobin tax on the banks, to claw back some of the wealth that has migrated upward.

Or we could be more radical and consider abandoning the employee/employer paradigm in favour of a more partnership style system in which profits are shared amongst the workforce as well as management and shareholders.

Share this post


Link to post
Share on other sites

From what I'm seeing things are about to get much worse. Large employers (I know of a couple) are cutting overtime to Zero and suddenly losing all non-contract hours. These are companies that are doing well, making good profits but are 'panicking first' as they can see what's coming. The actions taken will even result if damage to their business, can't quite see the logic of that but maybe they see it as a war where they are prepared to lose in the short term but will survive and dominate in the future. The problem with this of course is that this might be a once in 200 year change which could take a generation to play out.

So far we've seen people having to pay out more money from the same income. A change into second gear will see people having to pay out yet more money but from a declining income.

If the company I work for had followed my advice and slashed costs two years ago by binning contractors, stopping non essential projects etc... we would be sitting on something of a war chest to get us through the tough times which have just hit us.

As it is we are making people redundant. Not me ... yet.

Ho hum.

Share this post


Link to post
Share on other sites

I think the consensus at present is that most of the newly conjured money has yet to find it's way into the wild.

The point is that the previous linkage between increased productivity and increased wages has been severed in the last couple of decades- with wages standing still while productivity has gone up about 70% due to technology advances. Add to this the ability for capital to globally arbitrage wages and conditions and you wind up with a broken wealth distribution mechanism.

The same thing will happen to Chinese labour as they try to increase their wages- they will soon hit a point where automation and outsourcing to even cheaper locations become viable and the arbitrage game will start again.

I recently heard this simple account of what happened that makes a lot of sense:

1) Technology increased productivity, but also weakened labour and combined with globalisation to break the link between productivity and wages.

2) As a result most of the profits went to the top 1%, whose wealth saw huge increases over the same period.

3) This glut of wealth at the top creates a situation where a lot of capital is chasing too few viable investments- the fabled 'wall of money' roaming the world in search of yield..

4) Enter the Bankers. They see the opportunity and a new era of financial engineering begins as they create synthetic investment opportunities for the rich in the forms MBS ect. (All with fat fees for themselves thrown in of course)

5) As more and more derivatives are piled on top of the base of underlaying assets the bankers lose their heads and start to eat their own cooking exposing themselves to massive risk.

6) The housing market falls, destroying the banks and endangering the system.

So we can see that there is a connection between the excess earnings at the top and crisis-the same sorts of income imbalance was seen in the 20's before the crash then.

The problem is not inflation at present, the problem is demand, or lack of it- but this lack of demand is structural, caused by a failure of the wealth distribution mechanism that led to stagnant earnings for the majority, and huge gains at the top.

I don't think it's 'childish' to suggest that workers gain a greater share of the wealth they create, it's a vital aspect of capitalism that labour earns enough to create demand for goods and services.

How this is achieved is the question; we could for example introduce a citizens wage, financed in part by taxing the top 1% and maybe a tobin tax on the banks, to claw back some of the wealth that has migrated upward.

Or we could be more radical and consider abandoning the employee/employer paradigm in favour of a more partnership style system in which profits are shared amongst the workforce as well as management and shareholders.

I will consider and give you a full response but I'm mid rogan josh.

But I wanted to point out that your initial statement refers to new money not making it into the wild yet. This makes me think that you are considering only the recent blatant printing QE, whereas I am refering to the decades long inflation of the money supply via fractional reserve. If we are talking at cross purposes that may explain our disconnect.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 259 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.