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Is This The Real Reason That Minimum Wage Hikes Are The New Black?

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With both the US president and UK chancellor abandoning the Neo Liberal consensus and calling for a raise in the minimum wage- not to mention Japans almost hysterical appeals to it's employers to get wages up- could it be that this sudden concern with the living standards of the low paid has less to do with compassion and more to do with the increasing evidence that deflation might be winning out- despite all the QE?

The time has come. The Automatic Earth has been talking about the inevitability of deflation for years, but the concept only now goes mainstream. Which is a shame, because a lot could have been done to try and mitigate the damage it’s going to do.

Although it’s as inevitable as the laws of thermodynamics, the notion that record debts will always lead to record debt deflation is hardly discussed; you have Steve Keen, Mike Shedlock, and Nicole and yours truly here at The Automatic Earth, and that’s about it (I’m sure I miss one or two, apologies, but I can’t think of any). And although put together we have a reasonable readers base, blogs and websites are still no more than fringe sources compared to the main media where everyone lacks either the intelligence or the courage or both to even think about the notion, no matter how close its certainty may be to that of thermodynamics. They won’t have their world view disturbed by reality.

And moreover, the only way they think they can now see deflation is in consumer prices, which are nothing but a consequence of what deflation really is: a drop in the combination of money and credit supply, multiplied by the velocity of money.

Whether we talk about Europe or the US or Japan (where wages have been falling even faster than prices – the true sting of deflation -, for many years): when people buy less stuff, there is less need for workers to produce it and sales(wo)men to sell it to them. So they will be out of work and have less money to buy stuff, which creates even less need for workers and sales(wo)men, and so on. Deflation really is, sorry but there is no better word, a bitch. And as Japan can tell you, one that’s very hard to get rid off. Deflation is a bitch that really makes herself at home. And Japan has had the luck until 5 years ago that they were suffering deflation in a world where there was still demand for their products. Europe and the US obviously won’t be so lucky.

read the rest here;

http://www.theautomaticearth.com/deflation-stay/

Maybe it's finally dawning on the elites that trickledown is never going to get the job done? At least giving money to the poor ensures it will get spent into the economy- and perhaps a nice wage increase spiral will be kicked off once the plebs work out that the janitor is moving up the income ladder?

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After 5 years of conspicuous non-recovery even Bernanke must have half a clue that the ZIRP/QE experiment isn't going to work out as planned.

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Increasing the minimum wage by the rather minmal amount suggested is not going to do much.

what should happen is the QE money destined for the banks and invested in teh stock market should be diverted into a QE for jobs programme. there's plenty of work that needs to be done, such as upgrading and reinforcing the national grid and power generation. Such an action would also be an investment in our future rather than that of the Chinese or whoever is producing the consumer goods we buy.

Of course, if Osbo suggested this, the bankers would probably ensure that an awful accident would befall the Chancellor.

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Maybe it's finally dawning on the elites that trickledown is never going to get the job done?

They have just stared into the abyss, and their sphincter is now twitching.

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With both the US president and UK chancellor abandoning the Neo Liberal consensus and calling for a raise in the minimum wage- not to mention Japans almost hysterical appeals to it's employers to get wages up- could it be that this sudden concern with the living standards of the low paid has less to do with compassion and more to do with the increasing evidence that deflation might be winning out- despite all the QE?

read the rest here;

http://www.theautomaticearth.com/deflation-stay/

Maybe it's finally dawning on the elites that trickledown is never going to get the job done? At least giving money to the poor ensures it will get spent into the economy- and perhaps a nice wage increase spiral will be kicked off once the plebs work out that the janitor is moving up the income ladder?

One and one reason only -

http://www.iol.co.za/business/international/davos-forum-warns-on-income-inequality-1.1632648

London - The gap between the rich and the poor is the most likely threat to the global economy in coming years, the World Economic Forum said Thursday in a risk assessment ahead of the gathering of political and business leaders in the Swiss ski resort of Davos.

The Forum, which hosts the annual gathering, said income disparity in the wake of the global financial crisis is the “most likely risk to cause an impact on a global scale in the next decade” and warned of a “lost generation” of young people that could stoke tensions in society.

“The generation coming of age in the 2010s faces high unemployment and precarious job situations, hampering their efforts to build a future and raising the risk of social unrest,” the Forum said in Global Risks 2014, which was compiled with contributions by 700 global experts.

The warning from the Forum comes amid signs that the global economy has finally gotten over the worst that the financial crisis has thrown at it. The U.S. has begun to rein in some of the extraordinary monetary policies it put in place to get the economy out of recession and avoid a repeat of the 1930s. The countries that use the euro currency are past the worst of their debt crisis. The World Bank, in a report this week, went so far as to say the global economy has “turned a corner.”

However, the costs of the global financial crisis, which has left its mark on all corners of the world, are not expected to disappear overnight, and next week's meeting is likely to face criticism from groups campaigning against poverty and globalization.

Adrian Monck, who is the head of communications for the Forum, defended the gathering, noting that inequality and wealth gap were now on the agenda for discussion.

“It's important that people have that brought to their attention and that we mobilize people around those issues,” he said.

Philip Jennings, General Secretary of the labor group UNI Global Union, said the risk report “should act as a wake-up call” to those attending Davos.

“These are global issues we can do something about: we can twist the global economy back into shape - this includes a new commitment to create jobs, address income inequality and falling living standards,” said Jennings, whose organization represents 20 million workers from over 900 unions.

“Since the global financial crisis it's been a race to the bottom in jobs, wages and living standards,” he said.

John Veihmeyer, chairman and CEO of KPMG's Americas division, said it's “absolutely understandable” that income inequality was revealed as a major risk and that fixing and improving education systems around the world is a key, if not sole, way to narrow the differences.

In large parts of the developed world, the imbalance between government spending and tax-based revenue will likely mean budget restraint for years to come at a time when economies are trying to gain traction.

“Many young people today face an uphill battle,” said David Cole, chief risk officer at Swiss Re, a reinsurance firm that contributed to the Forum's risk assessment. “As a result of the financial crisis and globalization, the younger generation in the mature markets struggle with even fewer job opportunities and the need to support an aging population.”

In a number of countries, particularly in those at the forefront of Europe's debt crisis, youth unemployment has risen to extremes. Greece and Spain have nearly 60 percent of their under-25s out of work.

As well as creating uncertainty in households and stifling consumer spending, sky-high youth unemployment also denies workers skills and experiences, depressing an economy's long-term potential and increasing tensions in society and between generations.

Those tensions have come to the fore in recent years, leading to many Western governments getting the boot at the ballot box, but have so far been largely contained.

And though the developing world has been spared much of the economic pain that befell the advanced economies, Swiss Re's Cole said they too have big issues, particularly a lack of skills in the workforce, which has to be tackled by governments and business alike.

In the developing world, pent-up tensions have led to the overthrow of regimes, most notably in the Arab world. However, popular protests have also erupted in fast-growing economies like Brazil and Turkey, highlighting how governments need to be mindful of the demands in society at a time when money appears to be plentiful.

“People are just not going to stand for it anymore,” said Jennifer Blanke, chief economist at the World Economic Forum. “It's really eroding at the social fabric.”

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Increasing the minimum wage by the rather minmal amount suggested is not going to do much.

what should happen is the QE money destined for the banks and invested in teh stock market should be diverted into a QE for jobs programme. there's plenty of work that needs to be done, such as upgrading and reinforcing the national grid and power generation. Such an action would also be an investment in our future rather than that of the Chinese or whoever is producing the consumer goods we buy.

Of course, if Osbo suggested this, the bankers would probably ensure that an awful accident would befall the Chancellor.

Absolutely, this is such common sense I can't understand why they would do anything other than this (even with the awful accidents, we could stand to run through a chancellor or two). This is actually what I thought Keynesian economics was when I was a kid, largely due to the edited version of the New Deal I was taught in school. Needless to say totally horrified by QE as it has been in practice.

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It's an attempt to create a feel-good factor in the run up the General Election.

It's also in response to the continued drain on the poorest because of inflation in prices caused by currency debauchery.

The initial prong of the plan was to try to maintain asset (property) prices via inflation in the currency.

Since we don't have a relatively closed economy like the 1970s any more when wage rises more naturally followed prices as the value of the pound fell, this is an attempt to force wages up.

The "trickle up" effect, if you will. Ignore "the top" and start instead at "the bottom".

"We'll continue with our currency debauchery strategy and force those wretched wealth creators to give up more."

The poorest tend to spend all their income back into the economy anyway, so it's also an attempt to boost GDP.

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Increasing the minimum wage by the rather minmal amount suggested is not going to do much.

what should happen is the QE money destined for the banks and invested in teh stock market should be diverted into a QE for jobs programme. there's plenty of work that needs to be done, such as upgrading and reinforcing the national grid and power generation.

Given house prices and many companies executives/valuations have been protected by 0.5/SMI/QE, I'd rather it have gone into building new houses, yet even that I'd prefer to leave to pure capitalism, rather than the state.

Into the national grid. Its very basic form may have been started by the state, but it's long been a private company(s). I'd rather leave it to capitalism. That's what capitalism is. Money from many hands seeking a return, able to invest massive investment, if they are convinced of potential returns to make it worthwhile.

There are fewer such opportunities as the world has moved along, and many more opportunities requiring less capital intensive investment.

Minimum wages lower living standards, cost jobs, bring loads of expensive bureaucracy, makes politicians look legitimate, and in my opinion, has only seen wage gap increase. Organisations/states without profit motive, clear and identified plans for what they seek to achieve and profit from, are too often so wasteful with money.

Almost £100 million spent here, on a fanciful project, and which as I remember it, a few years later, at least one independent company elsewhere in the world produced their own version, their technology systems available to rent/licence cheap to media companies around the world for the purpose intended (well much cheaper than multi-millions to create your own.) If build plot land wasn't so expensive, I'd be looking to build a house which was practically energy self-sufficient, with solutions from the market, not QE created state money bunged to companies who later go under and money and the jobs all gone, like in the US.

Lets all cheer the minimum wage, and the closing of the gap (below), and probably landlords and others wanting to whisk the increase away.... rather than allowing proper correction, clear out all the rot, and allow good money back in at a lower price level.

BBC 'took too long to realise DMI project was in trouble'

Report finds flaws in tech project could have been identified two years before it was shut down in May at a cost of almost £100m

Wednesday 18 December 2013 14.47 GMT

...This was because John Linwood, the BBC's chief technology officer who ran DMI and remains suspended from his £287,000-a-year job, attended the committee to provide expertise.

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Nope. Its just todays 'conservatives' couldnt debate their way out of a paper bag, let alone win an argument in the face of 20 years of pro-NMW propaganda. Increasing it hasnt made any difference over the last 15 years, why would it now?

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It's an attempt to create a feel-good factor in the run up the General Election.

It's even more cynical than that. It's just an attempt to cut-off a Labour election strategy.

High-cost of living -> look we done a minimum wage increase.

Party of the rich -> look we done a minimum wage increase.

Wages are falling -> look we done a minimum wage increase.

It's a clever move, but then it's not by accident that a party whose existence is damaging to 99% of the population, manages to sustain through the introduction of democracy.

Edited by (Blizzard)

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It's even more cynical than that. It's just an attempt to cut-off a Labour election strategy.

High-cost of living -> look we done a minimum wage increase.

Party of the rich -> look we done a minimum wage increase.

Wages are falling -> look we done a minimum wage increase.

It's a clever move, but then it's not by accident that a party whose existence is damaging to 99% of the population, manages to sustain through the introduction of democracy.

Your'e not wrong- there is an element of electioneering going on- but it's more than that. We see the same call for higher wages in the US and Japan and even in Germany were it was always strongly opposed.

To me it smacks of a degree of desperation on the part of the Elites who have finally accepted that the fabled 'wealth effect' of QE does not actually trickle down.

The problem is that having spent two decades creating a deflation machine called globalization they have no real idea how to turn that machine off or how to alter it's course- and soon technology will take on the role previously played by wage arbitrage to keep the deflationary party going.

The best part is that their orgy of cheap QE will come in handy to supply the cheap capital required for investment in labor saving technology just as companies come under pressure to increase wages.

It's a mess so comprehensive it's almost elegant. They spend decades destroying the earning power of the workforce while loading them up with debt to keep consumption going- and when it all blows up they create even more debt in a desperate attempt to patch things up- now the whole thing is likely to come crashing down they suddenly discover the virtue of the minimum wage? :lol:

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