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Deflation Supercycle Is Over As World Runs Out Of Workers

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http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/11882915/Deflation-supercyle-is-over-as-world-runs-out-of-workers.html

Workers of the world are about to get their revenge. Owners of capital will have to make do with a shrinking slice of the cake.

The powerful social forces that have flooded the global economy with abundant labour for the past four decades years are reversing suddenly, spelling the end of the deflationary super-cycle and the era of zero interest rates.

"We are at a sharp inflexion point," says Charles Goodhart, a professor at the London School of Economics and a former top official at the Bank of England.

As cheap labour dries up and savings fall, real interest rates will climb from sub-zero levels back to their historic norm of 2.75pc to 3pc, or even higher.

The implications are ominous for long-term US Treasuries, Gilts or Bunds. The whole structure of the global bond market is a based on false anthropology.

Prof Goodhart says the coming era of labour scarcity will shift the balance of power from employers to workers, pushing up wages. It will roll back the corrosive inequality that has built up within countries across the globe.

Personally I don't think we've even started the deflationary supercycle yet!!!

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Just as well Germany is stocking up on cheap migrant labour.

This loomed large in Merkel's thoughts, I would say.

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Desperate wishful thinking. In reality, western countries have stagnant/falling productivity through lack of demand - while being swamped with cheap labour. Then there's automation.

Despite skills shortages countries like Denmark Hungary and Slovakia are turning away cheap educated labour. They aren't swamped at all, not in the right skillsets anyway

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I really am starting to get a bit bored with all these tales of global economic woe now, it seems like no matter how bad things get everything just keeps on trundling along regardless.

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@mike74 +1

I also subscribe to the view that inflation is ultimately driven by monetary policy and nothing else. The point that Goodhart makes in that piece ultimately relates to the share of labour income in GDP. The link to inflation is tenuous at best.

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There isn't going to be any worker scarcity.

Humans will be replaced in LOADS of jobs within 10-15 years by computers/robots/technology etc.

In what areas would the telegraph think we would have shortages??

It's going to be the other way around. There are going to be far too many people looking for jobs with nowhere near enough jobs available. And in these circumstances letting in loads of immigrants and people who have no place in our country will inevitably lead to race wars, mass violence and unrest.

Edited by Errol

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Despite skills shortages countries like Denmark Hungary and Slovakia are turning away cheap educated labour. They aren't swamped at all, not in the right skillsets anyway

Not sure why they are turning them away if a} they need them and b} they are cheap? Doesn't make sense.

Humans will be replaced in LOADS of jobs within 10-15 years by computers/robots/technology etc.

True. Driverless transport - just think about taxis and freight alone - that's a lot of jobs lost. This technology WILL go mainstream, it's just a question of when. Any kind of paperwork role too - certainly replaceable by computer. And then.....journalism itself - see how desperate the Telegraph are in trying to make money. I would be surprised if we don't see some big newspapers disappear in the next few years - because news itself has been de-valued. It's everywhere and it's instant. The Telegraph has lost its meaning and is - like many other "newspapers" - just a bunch of opinions.

Edited by canbuywontbuy

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Shortage of labour? If the journo is using official govt stats , then he might believe his own prose.

However, given the stats (in the West at least) have been fiddled for the last 30 yrs to remove as many from the unemployed lists as possible, I don't believe there's a shortage. Just millions of hidden unemployed.

Mayeb what he means is "there will soon be a shortage of ultra cheap employees willing to work for $2/day " ???

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There isn't going to be any worker scarcity.

Humans will be replaced in LOADS of jobs within 10-15 years by computers/robots/technology etc.

In what areas would the telegraph think we would have shortages??

It's going to be the other way around. There are going to be far too many people looking for jobs with nowhere near enough jobs available. And in these circumstances letting in loads of immigrants and people who have no place in our country will inevitably lead to race wars, mass violence and unrest.

anything that computers are not so good at, so ones with either high technical content (computers can't do the higher end of engineering yet) or high human content including everything from bottom-wiping to tutoring to waiter/waitressing. Robots can even cook the meals these days so you won't even need chefs soon!:

http://www.ibtimes.co.uk/robotic-chef-can-cook-michelin-star-food-your-kitchen-by-mimicking-worlds-best-cooks-1496168

. Of course lecturing can be delivered over the internet but personal tutoring to back up the lectures is more small-group oriented.

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True. Driverless transport - just think about taxis and freight alone - that's a lot of jobs lost. This technology WILL go mainstream, it's just a question of when. Any kind of paperwork role too - certainly replaceable by computer. And then.....journalism itself - see how desperate the Telegraph are in trying to make money. I would be surprised if we don't see some big newspapers disappear in the next few years - because news itself has been de-valued. It's everywhere and it's instant. The Telegraph has lost its meaning and is - like many other "newspapers" - just a bunch of opinions.

Yes, but white collar jobs are also under direct threat in the immediate future. Jobs like - junior/medium level lawyers, Accountants, designers etc etc. Bascially any job that involves mostly routine work that a computer can learn.

Projects like IBM WATSON - https://en.wikipedia.org/wiki/Watson_(computer) - are moving things forward very quickly.

Moore's law will mean that the pace of change from now on is going to accelerate at monstrous pace. Exponentially, in fact. So people shouldn't expect gradual developments or slow change as we've seen in the past. Things are going to change and computers are going to get more powerful far more quickly than the man in the street supposes.

Edited by Errol

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Not sure why they are turning them away if a} they need them and b} they are cheap? Doesn't make sense.

on the surface yes

2 things

1 legitimate: genuine fears of ethnic tensions and mass immigration (they're turning away skilled Syrians)

1 less legitimate: a small minded rejection for the economic principle we're discussing

http://www.economist.com/news/europe/21665031-eastern-europe-may-not-refugees-needs-them-more-other-countries-more-vacancies

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Goodhart sounds about right.

Just as everyone starts to agree that were headed to a ZIRP/NIRP world they will, as is always the case, be perfectly wrong at perfectly the wrong time.

#turningjapanese being a typical example of this

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I would not start wetting your pants about robots for a good few years yet.

There's a mismatch between 'warm bodies' and 'employable bodies'.

My home area of the Yorkshire Coast has a resident population of ~100k.

If you are a private sector employer trying to recruit someone with, say, 5 GCSEs, and to start a job that requires the employee to do a bit more than breath air and push a broom then its really really hard.

Once you remove the totally unemployable (drunks, congenital halfwits), people on disability, single parents, people who cannot/will not drive/commute 15 miles,people who cannot read + write, people who cannot work with other people, public sector seat warmers etc, you are left with a tiny pool of employees.

The cretinous one eyed scots tnuc tax credits made a hard situation impossible. Families on less than 30k disappeared from work force.

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There isn't going to be any worker scarcity.

Humans will be replaced in LOADS of jobs within 10-15 years by computers/robots/technology etc.

In what areas would the telegraph think we would have shortages??

It's going to be the other way around. There are going to be far too many people looking for jobs with nowhere near enough jobs available. And in these circumstances letting in loads of immigrants and people who have no place in our country will inevitably lead to race wars, mass violence and unrest.

If this is so then it is vital that taxes on Companies using robots are taxed to pay for the displacement they are causing.

The income a firm run in this way merely needs to provide for the wages of the owners.

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Given that youth unemployment is around 25% in Slovakia, just under 20% in Hungary, and nearly 12% even in Denmark, I can't see where there is a shortage of workers in those countries.

Nor in the UK, where it is 15.5%, despite aiming for 50% of young people in university. And despite all the zero hours, NMW jobs.

In Spain it's just under 50%, despite all the emigration. In Italy it's still above 40%. In Portugal it's just above 30%.

Even in Germany it's hovering around 10%.

All of the above are the official figures.

Western Europe, at least, doesn't appear to have a problem with lack of workers.

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Initially the scare-mongering about tech had my attention. But surely the big picture is that businesses need people to spend money with them to make them rich. If businesses and governments invest in tech to such an extent that jobs are in danger of becoming an exception and not the norm, where does the money come from for jobless people to buy the products (physical or intellectual) unless governments are willing to accept that the way of the future is 'don't work, we'll just print money to go round and round the system for the rest of time'.

Doesn't make sense to me for the long run. Money would die. It feels like we're on the verge of it now. But, like the finite resource that is humanity teetering on the brink of an overall ageing population that nobody really considered until recently, and like house prices, stuff never only goes in one direction. There is always a balancing and symbiosis. It just takes time.

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Initially the scare-mongering about tech had my attention. But surely the big picture is that businesses need people to spend money with them to make them rich. If businesses and governments invest in tech to such an extent that jobs are in danger of becoming an exception and not the norm, where does the money come from for jobless people to buy the products (physical or intellectual) unless governments are willing to accept that the way of the future is 'don't work, we'll just print money to go round and round the system for the rest of time'.

Doesn't make sense to me for the long run. Money would die. It feels like we're on the verge of it now. But, like the finite resource that is humanity teetering on the brink of an overall ageing population that nobody really considered until recently, and like house prices, stuff never only goes in one direction. There is always a balancing and symbiosis. It just takes time.

That's Ford economics. He realised that he needed to pay his workers enough that they could afford to buy what they were making. If the majority of jobs disappear then we'll need a citizens income or the whole thing falls apart.

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If goodhart is correct it also means govt has missed a once in several generations opportunity to borrow at -ve real rates for long term infrastructure investment & instead chosen "austerity". Which is pretty dumb. Door is closing.

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Given that youth unemployment is around 25% in Slovakia, just under 20% in Hungary, and nearly 12% even in Denmark, I can't see where there is a shortage of workers in those countries.

Nor in the UK, where it is 15.5%, despite aiming for 50% of young people in university. And despite all the zero hours, NMW jobs.

In Spain it's just under 50%, despite all the emigration. In Italy it's still above 40%. In Portugal it's just above 30%.

Even in Germany it's hovering around 10%.

All of the above are the official figures.

Western Europe, at least, doesn't appear to have a problem with lack of workers.

It has a problem with "austerity". Europes youth unemployment is a choice.

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Guest eight

I really am starting to get a bit bored with all these tales of global economic woe now,

I'd suggest you're on the wrong website if that's how you feel!

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Initially the scare-mongering about tech had my attention. But surely the big picture is that businesses need people to spend money with them to make them rich. If businesses and governments invest in tech to such an extent that jobs are in danger of becoming an exception and not the norm, where does the money come from for jobless people to buy the products (physical or intellectual) unless governments are willing to accept that the way of the future is 'don't work, we'll just print money to go round and round the system for the rest of time'.

Doesn't make sense to me for the long run. Money would die. It feels like we're on the verge of it now. But, like the finite resource that is humanity teetering on the brink of an overall ageing population that nobody really considered until recently, and like house prices, stuff never only goes in one direction. There is always a balancing and symbiosis. It just takes time.

It makes sense if the long-term target is neo-feudalism.

Think gated communities protected by guards, robots, drones etc, where the 1% live. The 1% who own 99% of the planet.

Everyone else will be grovelling in the mud, trying to scrape a living somehow.

As Orwell said, 'If you want a vision of the future, imagine a boot stamping on a human face - forever.'

Edited by Errol

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The only way to make the workers keep working longer to overpay for a shelter is to dangle a carrot on a stick... it's your turn tomorrow... tomorrow never comes.... meanwhile the asset rich wealthy get wealthier. Did he then say people are living longer so they can work longer?

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