I comment on The Great Depression of 2006:
Once inflation gets going it'll be Alice in Wonderland, I think. Real wages have to come down in relation to earnings in competitor countries, and house prices have to come down with respect to wages.
So whatever the nominal value, I think we in the West shall see a real depreciation in both houses and the stockmarket, plus a real decline in earnings relative to both consumer prices and foreign labour.
Am I wrong?
10 comments:
No.
(Sorry for the terseness, but what is there to add? The redistribution of wealth will continue apace -- upwards, of course)
What advantages do we have over someone in China to explain our higher incomes? We do have some, of course. Existing capital invested; a much superior legal system, with (we hope) more secure property rights; speaking the global commercial language; and so on. Some that we might have had we've spent forty years destroying, such as a good school and university system. We've also added a heap of disadvantages, with a pile of restrictions on who we can hire and fire, how we can and can't work, how big a parasitical state sector we have to carry, and so forth. Whether this adds up to enough to keep us drawing higher incomes will be decided by experience. (I see from American blog comments that many Americans feel that they have an entitlement to be better paid than everyone else. Do you think many Brits feel the same, nowadays?)
When I came to the States 30 years ago, I couldn't see how the system sustained itself even then. The average American wasn't as well-educated as the average Brit, and didn't work any harder. However, Americans 'know' that they have the best schools, political system and medical care in the World. The next few years will be a rude awakening, and I'm not looking forward to it. I will keep my fingers crosses that it doesn't lead to massive violence and/or a totalitarian state.
No argument there.
Hi Sack
This was my reply to your comment in my blog. Makes for easier reading.
I think this will be a two step process. Deflation to settle out and collapse the markets and then inflation. The uncertainty is the time for one to end and the second to begin. It could be a matter of months.
We get a collapse of housing and finance, then a large increase in unemployment. At that point the government transfer programs for unemployment kick in and inflation takes off.
The only real certain thing is that government tax revenues will not be even close to projected for next year. That speaks volumes for inflation.
I agree that wages should drop with a lack of jobs. I do get the feeling that we are missing something here, it doesn't all fit together neatly.
Got any ideas?
Patrick, James: hi; brevity is the soul of wit.
DM: Maybe note China, but India, if they get their infrastructure right - don't they have better demographics, a more sustainable ecosystem and British legal/democratic institutions (and no New Labour)?
Old Prof: you and me both.
Jim: thanks for the courtesy, will reply on yours.
"Am I wrong?"
Glaswegian reply:- "No, an eclair please".
Ahh, eclairs... We once gave a party which finished with me giving everyone two large chocolate eclairs. They all said they couldn't possibly... and they all ate both.
Sack you gave them ECLAIRES!!!!!!
Exquisite
Chocolate
Laced
Instruments for
Reinflating
Expanding
Stomachs
I thought you learned your lessons from Paulson and Bernake. How could you!!!!!!!
INP: very good acronym. But you are confusing inflation with solid growth.
Post a Comment