WatchPoliticians, economists, private citizens, public and private unions all want to have highly paid jobs. Not many such jobs exist. Why not these folks focus on cutting down the cost of living? For instance, food is damn cheap in the states. In countries like India, those in Africa, majority of their earnings go to the food. In the states, majority of it goes to paying rent (mortgage), health insurance, etc.
Manufacturing jobs are not coming back: even Foxconn in China is replacing humans with robots. JC Penney is replacing cashiers with self-check out counters. Big expense items for any company is labor and their health insurance. Companies, in order to beat the competition, find creative ways to cut down these expenses.
Why don't academics, thinktanks, politicians, economists, focus on CUTTING down the cost of living? Why waste time on generating highly paid jobs, only to have these wages taken away by rentiers?
What do you say?
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jvolstad's website
I enjoy living a simple and less expensive lifestyle. My younger co-workers kid me about driving a 10-year-old Honda Civic.
Hey, it's paid for and gets great gas economy.
They of course of driving sports cars.
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You can't reduce the cost of living without reducing the cost of everything else, at least in relative terms.
And since the top X% have so much money, reducing the cost of living, would essentially make them richer. (isn't real wealth finite ?). Although, it isn't quite that simple (their non-cash assets would decrease in price).
Also, given the amount of debt out there, held by the government, business and individuals, "reducing the cost of living" would mean that those debts would have to be repaid with dollars that are essentially worth more than the ones that were borrowed. This is more than a little problematic.
It's a good question though.
How are we supposed to be a thriving growing and improving country without a strong middle class, and without the ability to build businesses and infrastructure with laborers who can have a decent living in exchange for their hard work ?
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jvolstad says
A special ladyfriend once confessed to me that the best most endowed lovers she'd ever been with invariably drove old beaters or shit-boxes.
As I was driving a brand new red Cadillac Eldorado at the time, you can imagine hwo I felt.
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marcus says
Sadly, this is a myth. The American middle class is no longer needed, as the 1% that squeeze everything penny of rent possible out of our society can now sell to a global middle class. Still, we have some wealth left and the parasites won't leave until we're destitute and living eight to a two bedroom, while paying them rent on that two bedroom.
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Because people think in nominal terms. More/bigger is always better.
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Cause that would make too much sense. And the top dogs wouldn't make as much money of us dopes.
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In theory that is how the Federal reserve was pushed on us. Their sole mandate was to keep inflation in check. History shows they have failed as our dollar has lost 95% of its value since the Fed was enacted.
If the government didn't lie about inflation, and didn't destroy our dollar with Fed terrorism, then costs would be steady. But then government couldn't keep borrowing and have a deficit this big. They play games. They defund social security by lying about inflation. The little old lady still gets the $1500 she did five years ago, but because of money printing it buys her 30% less. By lying, they don't have to give her a raise. At the same time, they can inflate away the money owed to China.
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San Diego, CA
You have just asked the question that will eventually provide the solution to our economic problems. Wages don't necessarily matter, what matters is wages relative to the cost of housing, healthcare, and education. Many countries have a smaller per capita income than the U.S., but have a higher quality of life because they can afford the things that affect their life the most. (Housing, healthcare, education.)
The solution to our economic problems is to deflate our wages (or increase productivity) to a level that is competitive with the rest of the world WHILE lowering our cost of living at a greater rate. Housing, healthcare, and education can ALL be affordable once again if we focus on increasing the supply of each, rather than increasing the demand.
Good luck to us all.
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Because that would go against the Keynesian ponzi scheme theories of spending oneself into prosperity.
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obligatory
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thomaswong.1986 says
My understanding is it's already coming back, but only in Right To Work states. The new VW plant in Chattanooga is running wide open. BMW sells all the SUVs it can produce here. The Daimler Benz plant in Alabama is also running at capacity.
Even Ford is doing well again. They say the Fusion is one hell of a car.
General Motors, however, is still having many of the same problems it has had over the past 10-15 years. The stupid politics, brutal corporate culture, etc...it won't last, will end up like British Leyland.
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epinpb - your post has a lot of merit. What if prices and wages returned to the same level they were in the 70's or 80's, (without price controls or wage controls).
If home prices were in the $20,000 to $60,000 range for the average person, a good three year old car could be had for $1,800 and the cost of living was comparatively low - life would be better for millions of Americans.
BUT the establishment and slimy politicians doesn't want that to happen. In fact they've thrown trillions of dollars around to make sure home prices don't come down.
Lets pray for a flushing out of the establishment come this November.
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Mountain View, CA
thunderlips11 says
The whole game of efficiency is misguided. Companies reduce the output, even if they are efficient to meet the demand, so that they can make money.
The problem is not so much about robots replacing humans. If robots replace humans in every work, isn't it good? After all, we can use the time to do whatever we want? Yes, it is good: but the problem is we have toll booths (rentiers) that collect toll from everything related to survival: food, shelter, health, etc. Here, a tax policy can be used to euthanize rentiers. The other problem is: even the robbed wanna be a robber! That's the irony. Today, we all complain about rentiers because we are not rentiers: we all believe that we can become rentiers one day, thats why we defend the logic of rentiers. For instance, Fannie Mae, Freddie Mac, Mortgage interest rate reduction, Prop 13 in California, FHA, etc--all these programs/entities increase the cost of living, yet every one wants to keep them!
Read this:
http://neweconomicperspectives.org/2012/06/mmp-blog-51-the-efficiency-fairy-and-inflation-goblins.html
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My goal is to drive the last Sesquicentennial-plated car on the road, LOL. I'm cheating by getting in at the tail end of the sequence, plus I put a whole new motor in back in 2009 and only have 20,000 miles on it now.
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Mountain View, CA
Delurking says
Well, no one is paying for these expenses. The so-called debate about deficits is bunk. It is called monetization of debt. On one hand, fractional reserve bank creates 'fictitious' wealth (of course, it is not fictitious to those who loot money that way). On the other hand, montetization of debts (government expenses - tax receipts) increases the GDP, which 'creates' wealth for private corporations, majority of which are owned by trust funds (top 500 families in the states plus 0.1 percent).
Why no economist does not try to connect these dots? Oh they are busy prepping for their golden parachutes (consulting gigs from Federal reserve; banks; thinktanks; endowed chairs, etc)
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The answer to your question: http://patrick.net/forum/?p=1213971
What you are describing is free market capitalism. The U.S. is far from it. The list of above high cost, low performing industries are all government protected from competition. Health care is probably the worst example of socialization in the US and the government wants to add to it. Industry inflation is synonymous with socialism and communism. The deflation you are describing is synonymous with free market capitalism. Yes, the goal is to try to restrict well connected industries and individuals from benefiting from our tax base.... Good luck, the people who make government decisions are the people who get to spend our tax money. Does anyone think they will ever decide to reduce the power and control their positions have? I didn’t think so.
Until then, the 99% will just have to keep accepting a declining share of GDP all while assuming more of the hardships.
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Then again, if we had that we would be using natural resources faster and reproducing more, and with global population at 7 billion, that may be problematic too.
Ahh, maybe I should become a right winger, and just whine a lot and act like there are easy solutions, that I can grasp and that are intellectually out of reach of those smarty pants moderate commie liberals.
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Fort Mill, SC
Liquidity Trap.
Simply put, if everyone expects the "cost of living" to decrease, then they will hoarde cash.
A strong dollar policy discourages investment and consumption. Without investment and consumption, the economy screeches to a halt.
Its about a 9.75/10 on the bad idea scale. Huntington Moneyworth III, sitting on his pile of cash thinks its a great idea though.
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Mountain View, CA
david1 says
Honestly, savings play a role in tables, statistics, etc. In reality, savings don't play any role in lending. Lending to private citizens is done by fractional reserve banking; lending to the gubmint is done by monetization of debt. 40 percent of GDP in the states is due to the gubmint spending.
Taxes (federal and state income; FICA; sales; etc) and servicing debt (mortgage/rent/insurance/credit card debt) take the majority chunk of people wages. They are left with like 18 percent of wages to consume. I don't have the exact stats (Michael Hudson has it somewhere). For sake of discussion, lets increase wages by 40 percent, does it increase the purchasing power by 40 percent (that is, 18 percent * 1.4 = 25 percent of wages)? I don't think so. Instead, rentiers and taxes gonna take more of these increased wages.
If there is no fractional reserve banking or if there is 100 % reserve banking, yes, hoarding causes problems
Again, I have opened the thread to *understand* what's going on at the macro level.
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everything says
But if "you" are dying, an assertion like "the answer lies in you" is cold comfort.
Deep down we all know that any kind of "salvation" has to come from outside of ourselves.
But I guess that's a topic for the Religion section.