[Pops]

Gail and the WSJ (subscription) say there is a glut of capital and labor in addition to oil and commodities in general. But what they means is not that there is too much capacity, rather that wages are simply too low.

Or, another way: Trickle Down didn't, wealth trickled UP.

What happens is that economic growth eventually runs into limits. Many people have assumed that these limits would be marked by high prices and excessive demand for goods. In my view, the issue is precisely the opposite one: Limits to growth are instead marked by low prices and inadequate demand. Common workers can no longer afford to buy the goods and services that the economy produces, because of inadequate wage growth.

In the late 1800s there was a period known as the Great Deflation. This was the biggest example of "good deflation" ever, the condition is defined as falling prices but increasing demand. The cause was (of course FFs and) rapidly increasing manufacturing technology, innovation, invention and of course FFs. Nearly as fast as new factories could be built they became obsolete, I read somewhere that one of the "Titans of Industry" actually did tear down a brand new factory before it produced a thing because it was out of date before it opened.

I'm thinking this deflation won't be like that one. Then, even though workers faced abominable conditions and just above slave wages, they were earning more than they had on the farm, so they constituted a growing market. But in addition, they also began to understand the strength of the ownership was that employers essentially (if not literally) colluded to keep wages low. The result was a fairly quick movement toward unionization.

The same situation exists today in the newly industrialized countries of the world. It is exactly the same. Those people working in factories for a few bucks a day are making much more than they were out in the rice paddy a few years ago. They in turn are creating the growth market for consumption. How long will it take before they decided to organize just exactly like happened the now mature economies 100 years ago?


Or, here is a strange thought, what if they do organize and the response is to replace them with machines?

Wouldn't it be a kick in the head if the limits to growth turns out to be unemployment?

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[AgentR11]

It is *very* possible, and I've thought about it for most of my working life. From the very first paycheck I got, my job has been to replace several people with me and the skill to leverage the machines around me. Its actually kinda scary to consider how many man-hours of paid labor I've deleted from the market; and I'm not at all unique in any way. At some point, productivity is the real enemy; these machines around me aren't magic, their output is counted as my productivity, they execute my instructions. What happens to the economy, when all real economic activity can be accomplished by just a million folks and their machines? What if its not a million, but 50,000? I see no reason that can not become our world. More interesting to me, in a selfish kind of way, is that I'd easily be in that single million, but I'd be completely outclassed by the 50k cohort; how does one transition from the life of the operator, to the life of the ignored, supported, eater/breeder. I'll probably be dead by then, so its just an interesting thought experiment; but I'm not very good with people; I can't just go wait tables or tend bar, couldn't sell a glass of water to a thirsty Arab in the desert, at a discount! What does that transition look like on a societal level. What does it do to the energy and material resources needed to sustain the society? If your kid has a 170 IQ how to explain to them that their duty in life is to be an operator; when everyone around them is mostly goofing off, being social, serving food and drinks, and preparing to make the next generation of eater/breeders served by the 1 in 500.... Who runs such a world? How does capital accumulate and flow? What is proper compensation for an operator? What do you tax? How do you distribute the proceeds of the tax to insure comfort and stability without inflating population growth?

All kinds of crazy questions that I don't think we're anywhere near ready to deal with...

[GHung]

Glut? Wall Street doesn't care much, at least not yet:

http://davidstockmanscontracorner.com/w ... ick-puppy/

..... Now how in the world do you capitalize earnings at a rate which implies gangbusters growth of output and profits as far as the eye can see, when the US economy is self-evidently trapped in a deep rut that represents a drastic downshift from all prior history? Thus, compared to the 0.35% rate since the turn of the century, full-time employment grew by 1.8% per annum during the prior 15 years.

When a trend rate downshifts by 80%, you just aren’t in Kansas any more—even if Keynesian economists and MSM financial journalists don’t know it. On that score, MarketWatch’s headline says it all:

“Jobs growth is ‘back on track,’ economists say after payrolls report”

The problem is that they blithely assume its the same old, same old cyclical track diagrammed in the Keynesian textbooks of yesteryear. Well, let’s see. Between 1985 and 2000, the adult civilian population (16 years +) grew by 34 million and the number of full time jobs increased by 26 million or by fully 76% of the population gain.

By contrast, during the fifteen years since the turn of the century, the adult population grew from 212 million to 250 million, but the number of full time jobs rose by only 6.2 million. In short, the nation gained 38 million more adult consumers, but only 15% of them have been employed as full-time producers. And that dismal trend is guaranteed to get worse because its baked into the demographic cake. That is, today’s 45 million retirees will become 75 million less than two decades down the road.

It's clear that this entire economic arrangement has an expiration date. What that date may be is anybody's guess, but methinks it'll be sooner than later. One thing I've noticed though is that I'm never paying anywhere near full price for the things I need to improve our local resilience (I bought a new electric tiller/cultivator at a deep discount last week), and the salvage economy I'm so fond of is doing well; lots of trading, bartering and gifting going on. Seems some folks are making their own arrangements.

[AgentR11]

I'm noticing that on prices too.. I'm not normally one to haggle price; but I remarked on the price of some batteries, 12v7ah things used in UPSs... I didn't get a modest discount, retailer cut the price in half.

Good for me short term, but kinda a bad sign in general. Our finance and accounting system works best with modest, and anticipated inflation pressure. High inflation is kinda annoying, but deflation... that's a disaster.

[Plantagenet]

there is a glut of capital and labor in addition to oil and commodities in general. But what they means is not that there is too much capacity, rather that wages are simply too low.

The fact that wages are low does not create a glut in labor.

Quite the opposite.

Its the glut in the supply of labor that leads to low wages.

There are way too many unemployed Americans and immigrants competing for the smaller number of jobs available, especially at the low end.

[Newfie]

There are way to many Americans for the work available due to the high efficiency of using cheap calories as labor slaves.

You can look at it any number of ways.
* too much cheap oil and we all can have labor slaves. Take away the oil and we will have to tend plots by hand and sail ships. Many more people needed.

* create a bunch of meaningless jobs to keep folks employed and keep churning the money through the economy.

* eliminate a lot of people, then they become a scarce resource once again

The pots are all interconnected, water flows to its natural level. You can't single out any one of the factors and say "IT" is to blame. Well, you can, but then you are wrong or near sighted.

[Shaved Monkey]

Peak trickle up economy.

[Quinny]

Why not a 10 hour week?

[Newfie]

Now there's the ticket!

[Ibon]

When is it going to be time to bring back the army corp of engineers?

Put those recent college graduates to work doing trail maintenance in national parks and forgive them their college debt.

Put all those laid off blue collar workers on to rebuilding our bridges.

All that good stuff.

[Ibon]

I think you mean the Civilian Conservation Corps. during the Great Depression put people to work and fixed up the country.

Yes, thanks.

[Newfie]

Ah, but that would require dirty hands.

No way that would fly in our modern world.

Great idea though.

[Outcast_Searcher]

When is it going to be time to bring back the army corp of engineers?

Put those recent college graduates to work doing trail maintenance in national parks and forgive them their college debt.

Put all those laid off blue collar workers on to rebuilding our bridges.

All that good stuff.

I think you mean the Civilian Conservation Corps. during the Great Depression put people to work and fixed up the country. (The Army Corp of Engineers mostly dykes wetlands these days.)

Yeah. Let's not talk about the US Army Corps of Engineers, since that's not exactly a model of government "success", with a prime example being Katrina levee rebuilding.

http://en.wikipedia.org/wiki/Drainage_in_New_Orleans

An article in the New Orleans Times-Picayune on 30 November 2005 reported that studies showed the 17th Street Canal levee was "destined to fail" as a result of fundamental design mistakes by the United States Army Corps of Engineers.

The failure of government and its entities is something the left never wants to admit to, lest it cause tax payers to resist raising taxes willy-nilly in the name of the "common good", regardless of how ineffective government might be.

If we're going to do things like rebuild flooded areas of New Orleans instead of turn it into a park, why not at least do it right? Oh, I know, all the current government programs are already racing to put us $20 trillion in debt, with the far left unwilling to part with any part of ANY government program, no matter how ineffective.

In March 2006, it was revealed that temporary pumps installed by the USACE were defective.[3][4] Until all problems are rectified, concerns remain that parts of the city could experience significant flooding in a storm much smaller than Katrina. The system did survive during Hurricane Gustav in 2008. The storm weakened and brought less wind and rain than forecast.

(All is well as long as no big hurricane hits New Orleans again. Hurrah. "Success".)

Let me guess. It's all the fault of "the rich" and George Bush, no matter what.
Oh, and of course, "more government" will inevitably "fix" all the problems. We mustn't forget that! LOL

[Pops]

Good.
I got in on eliminating a whole raft of skilled trades in the printing business. Good while it lasted, but now I'm part of the marginally attached group euphemistically known as "Self-Employed Entrepreneur". Desktop publishing has been on the top 10 list of endangered occupations almost since it was recognized as an occupation, LOL, anyone with a word processor can format a page.


Swerving a little from labor to capital, this from ZeroHedge a couple weeks ago on too much credit:

The premise is simple. By keeping rates artificially suppressed, the central banks of the world effectively make it impossible for the market to purge itself of inefficient actors and loss-making enterprises. As a result, otherwise insolvent companies are permitted to remain operational, contributing to oversupply and making it difficult for the market to reach equilibrium. The textbook example of this dynamic is the highly leveraged US shale complex which, by virtue of both artificially low borrowing costs and the Fed-driven hunt for yield, has retained access to capital markets in the midst of the oil slump and has thus continued to drill contributing to the very same price declines that put the entire space in jeopardy in the first place...

...Another client put it more strongly still. “By lowering the cost of borrowing, QE has lowered the risk of default. This has led to overcapacity (see highly leveraged shale companies). Overcapacity leads to deflation. With QE, are central banks manufacturing what they are trying to defeat?”

So we aren't reenacting the Weimar Republic (LOL, always a red herring) we are reenacting Zombiefied Japan but on the global scale. Uncle Sugar volunteered the taxpayer to bail out the gamblers to the tune of US$12 Trillion, how's that for Free Market Capitalism?

Governments are paying people to borrow money through negative real interest. Since there is no risk there is no reason not to borrow money and produce whether there is demand or not: if you are gambling on someone else's tab there is absolutely no reason to not go all in on every pot. Who knows, you might get lucky and if not, who cares?

Trickle Up is working fine. K Street has convinced a good portion of the public that corporate persons are over burdened and should be deregulated and their taxes lowered. They've also been successful raiding retirement funds and transferring that burden to the government as well.




How's that for Free Market Capitalism?
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[Lore]

Like it or not, there are some things only government is equipped to make work.