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wonderpup

Wage Inflation Does Not Seem To Have Read The Script

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Leaving aside the ironic spectacle of the neo liberal globalist fraternity scanning their deflationary landscape of wage arbitrage for hopeful signs of inflating wages, the signs are that this is not going to happen any time soon anyway.

First in Japn we have wages at 16 year lows, even as new consumption taxes are about to be introduced- now we have this from the US;

Less than a year ago, David Rosenberg fundamentally shifted his thesis from deflationary to stagflationary at first, and then to outright inflationary, aka from bearish to bullish, based on one simple thesis: labor costs, and thus wage inflation - that all important harbinger of broad economic inflation - have nowhere to go but up. Unfortunately, they also have another direction they can go: down.

As today's "Productivity and Costs" report from the BLS confirmed what many already know, namely those who collect a regular wage, wages are not going up. In fact, in the fourth quarter, unit labor costs plunged by 1.3%, the most since the second quarter of 2010, and prove that not only is the Fed's QE not being "trickled down" into wages, but that anyone who bet on a simple reflation thesis (not to be confused with the runaway inflation that would result from unlimited currency debasement which as everyone knows is the Fed's Plan Z) based on an expectation that wages will revert to the mean, has been proven wrong.

http://www.zerohedge.com/news/2014-02-06/what-wage-inflation-unit-labor-costs-have-biggest-annual-drop-2010

There are some wage pressures in places like China but they have automation now breathing down their neck- plus the mother of all housing busts about to vaporize their 'wealth'- so it's hard to see a big surge in demand from that source either.

Perhaps they can do more QE in the hope that the 1% will be driven to a wild orgy of spending and save the day?

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Real wage rises in Germany.

When wage rises finally kick in I suspect CBs are going to remain (intentionally) behind the curve for some time.

That's where they're trying to get to after all.

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Everyone who has been here for a long time knew what would happen.Wages were always going to suffer due to the globalisation of labour situation.That wouldnt of been a problem if we had then had the falling prices to go with it.Level wages and deflation at 2% a year is great for workers.

Of course that would also mean asset prices falling and the rentiers taking a big hit to their leveraged assets.It also means governments would have to face up to their huge deficits.

They simply left all the structural problems in place and bailed out the top 1% (or more like 5%).

Of course due to them failing to reform welfare it is now a no brainer for a huge amount of people to leave the labour market and claim,or more, as is happening, work 16 hours to avoid the jobcentre and claim tax credits and HB.

That is why the benefits bill is still rising even though employment numbers are going up.

The good old social housing providers keep putting their rents up as well way above wage increases so more and more end up no better off than not working.

I really wouldnt want to win the next election.

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Everyone who has been here for a long time knew what would happen.Wages were always going to suffer due to the globalisation of labour situation.That wouldnt of been a problem if we had then had the falling prices to go with it.Level wages and deflation at 2% a year is great for workers.

Of course that would also mean asset prices falling and the rentiers taking a big hit to their leveraged assets.It also means governments would have to face up to their huge deficits.

They simply left all the structural problems in place and bailed out the top 1% (or more like 5%).

Of course due to them failing to reform welfare it is now a no brainer for a huge amount of people to leave the labour market and claim,or more, as is happening, work 16 hours to avoid the jobcentre and claim tax credits and HB.

That is why the benefits bill is still rising even though employment numbers are going up.

The good old social housing providers keep putting their rents up as well way above wage increases so more and more end up no better off than not working.

I really wouldnt want to win the next election.

I think it's much more than that.

We tried globalization in the 1920's and 30's and it resulted in a catastrophic mess. We've tried it again now and guess what? It has again resulted in a catastrophic mess.

That at a fundamental level globalization does not work because individual nations will always try to game the trade system to their advantage, as multiple nations have done from china and japan to germany.

Add in that instantaneous free capital flows simply do not "work" in a system where the other system components cannot instantaneously adjust, and where animal spirits play such a large role, and you get a system that has wild gyrations that eventually lead to the whole system toppling over.

Every time we try globalization we will get the same economy destroying outcome as it is now playing out. Best we realize that, give it up as a bad job, and redesign the system.

Edited by alexw

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....I know.....get the whole world in unison printing more to pay higher wages, that should kill the debt flat.... ;)

And 200 dollar oil will kill everything else off at the same time.

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Everyone who has been here for a long time knew what would happen.Wages were always going to suffer due to the globalisation of labour situation.That wouldnt of been a problem if we had then had the falling prices to go with it.Level wages and deflation at 2% a year is great for workers.

Of course that would also mean asset prices falling and the rentiers taking a big hit to their leveraged assets.It also means governments would have to face up to their huge deficits.

They simply left all the structural problems in place and bailed out the top 1% (or more like 5%).

Of course due to them failing to reform welfare it is now a no brainer for a huge amount of people to leave the labour market and claim,or more, as is happening, work 16 hours to avoid the jobcentre and claim tax credits and HB.

That is why the benefits bill is still rising even though employment numbers are going up.

The good old social housing providers keep putting their rents up as well way above wage increases so more and more end up no better off than not working.

I really wouldnt want to win the next election.

Funny isn't it. A lot of us thought 2010 was the one to lose, given what had happened in 2008-9. But the global super-reflation pushed the day of reckoning back to 2014 for the emerging markets and maybe even 2015 for the UK.

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I think it's much more than that.

We tried globalization in the 1920's and 30's and it resulted in a catastrophic mess. We've tried it again now and guess what? It has again resulted in a catastrophic mess.

...

Every time we try globalization we will get the same economy destroying outcome as it is now playing out. Best we realize that, give it up as a bad job, and redesign the system.

Interesting. No clear indicating of lawmakers stepping back from the current levels of capital mobility, so if there is something to this idea, then we're still presently off in search of a serious enough depression to provoke a change in the system.

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Have wages increased for the 1%? If so job done.

I get the impression that at least some of the 1% have become dimly aware that if the 99% don't get at least some sort of pay rise, they won't have anything more to appropriate, and they might even start forming non-approved political movements. Hence even organisations like the CBI making noises on the subject.

The problem is that they've removed most of the possible mechanisms for achieving pay rises.

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I think the difference with Germany is that it is by design. They've been asked to reflate to help the Eurozone - hence the housing boom and wage rises. Large scale private sector unions helps push this through without impacting any one concern within Germany - they are all affceted equally.

It is going against the tide though. Policy.

They don't give a F*ck about reflating to help the periphery.

They're doing it to create domestic demand because that benefits German industry at a time when their export markets are tightening.

In US/UK etc we haven't even started with helicopter money or nGDP targetting yet. Not explicitly in any event.

Extrapolating current falling real and flat nominal wages too far into the future is a massive error.

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They don't give a F*ck about reflating to help the periphery.

They're doing it to create domestic demand because that benefits German industry at a time when their export markets are tightening.

In US/UK etc we haven't even started with helicopter money or nGDP targetting yet. Not explicitly in any event.

Extrapolating current falling real and flat nominal wages too far into the future is a massive error.

The Japanese are getting close to helicopters. Price inflation currently running at 5x wage inflation.

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Meaningless. The consensus can't even get a six month forecast right let alone six years!

So they're as likely as not to be wrong on the upside too then no?

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And 200 dollar oil will kill everything else off at the same time.

:D ......just borrow some more....the more you earn the more you can borrow and the more you can pay for fuel.....then sell the new found debt on, until all the money/fuel is gone.....someone will buy it. ;)

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Posted on another thread:

http://www.thisismoney.co.uk/money/news/article-2553742/Britains-economic-recovery-far-assured-REAL-wages-stay-stuck-2004-level-wont-recovery-2020.html

UK economic recovery far from assured as real wages stay stuck at 2004 levels and 'won't recover until 2020'

NIESR forecasts real wages will take a decade to recovery to 2009 peak

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Have wages increased for the 1%? If so job done.

Indeed. Money printing happened because it suited the politicians who got to print money for their structural deficits and it very much benefited their elite paymasters who get first access to the newly created money and therefore become the net winners (savers and wage earners being the net losers, of course) in the wealth transfer process that inflation creates.

Lagging wage inflation is part of the script to enable the wealth transfer. It also helps boost the profits of export industry in particular by amounting to a pay cut for the workers. More profits for the elite and bragging rights for the politicians about 'improving business competitiveness'.

Large whiskies all around for the people who matter and all that remains is to sell it to the masses whom you've just robbed blind, as a good thing. Easily done these days with a compliant mainstream media and a generally ill-informed public who don't engage much with politics and current affairs.

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So they're as likely as not to be wrong on the upside too then no?

No! Economists and central bankers have spent the last five years wildly exaggerating the strength of recovery. They're still talking about 2014 being the year 'escape velocity' is achieved even though there's a weight of evidence to suggest the converse is true. Even with Keynesian modifiers I believe the neoclassical synthesis fails utterly to comprehend the role of money and debt in an economy.

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The problem is that they've removed most of the possible mechanisms for achieving pay rises.

That's what the entire Globalization project has been about- putting labor back in it's box. Which is why it's so funny to see the neo liberals now calling for wage rises. A classic case of 'be careful what you wish for'.

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That's what the entire Globalization project has been about- putting labor back in it's box. Which is why it's so funny to see the neo liberals now calling for wage rises. A classic case of 'be careful what you wish for'.

How can you have wages above inflation level when there are more people searching for these jobs than above inflation wage jobs in existence......plenty of below inflation wage jobs, that only undermines the value of doing those jobs over time.....then before long they get automated or outsourced somewhere....large demand of people wanting living wage jobs against low supply of these jobs.......high demand for homes, but only a low supply of homes with rents low enough and living conditions high enough that the lower than inflation jobs can afford to pay.

....Handing out top-up benefits to working people is not the answer.....this, if it carries on can only get worse not that dissimilar to QE........working people should not be receiving benefits, as soon as this started happening in very recent times it was clear to see something was not right with the system, free markets, the economy becoming massively out of kilter, highly manipulated, the main culprit the securitised land and property market.........next. ;)

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