Thursday :: Jun 8, 2006

Recession Is For The Little People

by pessimist

My good friend Duckman asks above: "The estate tax cut failed. What next?"

This is next.

The upper economic classes think most of us are toys and props to be used for their own enrichment and amusement. They get very nervous when they have to part with "Their Money" to remain in the high-statkes game they play among themselves for domination and personal agrandizement. In fact, more than anything else in the world, the topic of this next article frightens them - and they expect us to deal with it by sacrificing for them:

Inflation revives; don't blame Fed chairman for saying so
Jun 8, 2006

Pity Ben Bernanke, the new Federal Reserve chairman. His predecessor, Alan Greenspan, had the good fortune of holding office when low energy prices and soaring worker productivity combined to make inflation a non-issue. Bernanke, in contrast, barely had a chance to unpack his boxes before confronting rising inflationary threats.
In the first four months of 2006,
consumer prices rose at an annualized rate of more than 5%.
That's a troubling increase from recent years.
For being the bearer of this unfortunate news, Bernanke is being blamed for spooking Wall Street. They apparently long for some indecipherable Greenspan utterance about asset prices relative to equity premiums measured against the spread between the Thai baht and the Australian dollar. "Most of us would choose to go back to the general confusion Greenspan created," John Caldwell, of McDonald Financial Group, told the Associated Press.

While Bernanke might still have a few things to learn about how his words can roil markets, the larger issue here is not the messenger but the message. Inflation is a concern for the Fed.

How could it not be? American policymakers and consumers are doing everything in their power to make it one. Congress and President Bush are still juicing the economy with a stimulus bordering on electroshock therapy. They have slashed taxes, set out on the biggest expansion of government spending since the New Deal and are borrowing without thought to the consequences.
Ideally, the nation's leaders would adopt more prudent tax and spending policies. In addition to robbing future generations, these policies stimulate an economy already showing signs of overheating. Thanks to robust levels of consumption, both here and in developing nations such as China, prices for oil and other commodities are up. Housing and health care costs have skyrocketed. The nation could benefit from a little economics lesson, even one that folks can understand.

Oh, don't worry! That "little" lesson is underway as we speak!

The key phrase for my assertion begins with this, taken from the previously linked article:

Even the world's seemingly inexhaustible supply of cheap labor appears to be tightening a little.

Ever since the 1970s, this has been a sure-fire predictor of a recession beginning. Capital hates labor. They would enslave us and make us work for free, then charge us for their costs of doing business if they could get away with it.

Come to think of it, considering Bu$hCo labor, tax, and economic policies, they are!

But I digress.

There are other signs to watch for. Social groups push for minimum-wage increases:

"Wages must be adequate for workers to provide for themselves and their families in dignity. Although the minimum wage is not a living wage, the Catholic bishops have supported increasing the minimum wage over the decades."

The legislative branch actually could pass such legislation - without much opposition from the usual suspects:

You know the California economy is in pretty good shape when the state is probably going to raise the minimum wage 15 percent -- and the business community barely raises a peep. For most businesses, "it's gotten to be sort of a shrug," said economist Jack Kyser of the Los Angeles County Economic Development Corp. "Basically, you're at full employment. You talk to any business group and they'll tell you it's hard to find skilled workers."

The keyword here is "skilled". There are lots of workers, but not enough with the "desired qualifications". That is, by the way, the source of the lie that unemployment is low. If it was so low, even burger flipper jobs would be raising their wages.

But again, I digress.

Another good sign a recession is about to erupt is when an alleged conservative elected executive doesn't oppose a minimum-wage increase, even if there ARE conditions attached to it:

[T]he pro-business Republican governor, who twice vetoed a similar increase, now embraces the idea. Indeed, the only real friction over the minimum wage is over something called indexing. The Democratic-controlled Assembly and Senate passed bills last week that would gradually increase the minimum wage $1 an hour, to $7.75, and then index the wage to inflation, meaning it would rise every year.

Gov. Arnold Schwarzenegger opposes the indexing plan and is likely to veto the bills -- but has asked the state's Industrial Welfare Commission to institute a one-time $1-an-hour increase.

Now that the 'conservatives' aren't taking care of their constituency, said constituency becomes extremely vocal:

Sacramento restaurateur Derrick Fong said the increase would translate into "wage creep" by putting pressure on employers to boost the pay of higher-paid workers to keep them above minimum wage. "State legislators talk to the unions too much," said Fong, who runs the Mikuni sushi restaurants. "They don't really talk to people like me who sign the paychecks."

The National Federation of Independent Business, which lobbies for small-business owners, also is against any increase in the minimum wage, said assistant state director Michael Shaw.

"Our members have consistently voted against increasing the minimum wage, period," Shaw said.

These business owners resort to telling trite tired lies [ according to a recent Gallup poll] to support their greed:

He argued that raising the minimum might drive some small-business owners out of business or force them to cut back on staffing levels. He also said the vast majority of minimum-wage employees are the very young or the very old looking to pick up a few dollars, and don't really need a raise. "Very few of them … actually support a family," Shaw said.

At least someone is rising this time to defend the defenseless:

But advocates for the poor and working class say the minimum-wage work force is much broader than that.

Some 1.4 million Californians earn less than $7.75 an hour and would get a raise if the minimum goes to that level, said Jean Ross, head of the advocacy group the California Budget Project. She said 60 percent of those Californians are 25 or older. Just 17 percent are teenagers, she said.

For those making the current minimum and working full time, an extra $1 an hour would translate into $2,000 a year. "It has the potential to make a very real impact on people's standard of living," she said.

When there is opposition to these economic bullies, they run:

In slower times, a hike in the minimum wage would likely force employers to cut back and cause a rise in unemployment, many economists say.

But when business is good and the profits are easy, the capitalists make a stand:

Now the economy is so strong that many businesses are already bidding up wages in order to attract workers, said economist Sean Snaith of the University of the Pacific. Alex Olenick, 21, found that to be true. "A lot of places are paying more," Olenick said Friday as he filled out an application at a Davis restaurant.

This puts the capitalists in a bad place. There is only one thing left for them to do - declare the need for a recession and regain control of labor through deprivation. The following excerpt comes from Australia, but the principle is international and applies everywhere:

The strength in the latest jobs numbers -- although good for the economy as, along with the income tax cuts that will come into effect next month, underpin growth in consumer spending – could exert upward pressure on wages, pushing up inflation and ultimately, force the Reserve Bank of Australia to again lift interest rates.

See! It's those damned greedy workers causing all of this economic distress!

Worker confidence up as hiring risesBy Stephanie Armour, USA TODAY

Employees are feeling more confident about the labor market and their own job security as hiring picks up in a number of industries. Mounting research shows employees are cautiously optimistic as salary freezes thaw and companies play tug-of-war over skilled job candidates.

•Pay. Wages are up in many industries. The hourly earnings of production and non-supervisory workers, which is most of the private sector, grew 3.8% in the past year, the fastest in nearly five years. That follows a period when wages lagged inflation for several years.

•Jobs. With the unemployment rate at a low 4.7% in April, some employers note that hiring is becoming more of a challenge.

•Perks. Signing bonuses, which waned in popularity as the economy faltered, are back in vogue in several industries. Sixty-five percent of employers in 2005-06 are offering signing bonuses for technology-related positions, according to a poll by Mercer Human Resource Consulting.

"What we're seeing is major. Competition is really heating up," says Marlon Doles, senior manager, staffing and diversity, with Campbell Soup in Camden, N.J. "It hasn't been like this in a number of years."

Brian Callaghan, CEO of Apex Systems, a Richmond, Va.-based provider of temporary information technology staffing, says the shift in demand means candidates can be choosier about job assignments. "Good (candidates) will have several opportunities," Callaghan says.

One thing that management hates is competition - especially when they don't have the advantage. They talk about the Free Market and the Law of Supply and Demand, but they only believe in them when it puts a few more coins in their pockets. When it doesn't, they go running to Uncle Sugar to make things Right (Wing):

Ask Dr. Econ

Companies are beginning to compete for workers by increasing wages. Is the Federal Reserve concerned that these wage increases will result in higher prices throughout the economy? If so, what could the Federal Reserve do to counteract this trend? (March 2004)

[T]his is a good indicator to watch as economic growth improves. [Y]ou asked: "What can the Fed do to counteract a rise in the overall inflation rate?" The short answer is to begin to tighten monetary policy; evidence of such action would be announced as an increase in the federal funds rate target.

Then, the 'experts' begin to call for anti-labor action. This next article is again foreign [from New Zealand], but the internationalism of the principle still applies:

Warning: extravagant wages could lead to interest rates rise
By Ian Llewellyn
June 8, 2006

Reserve Bank Governor Allan Bollard has warned he might push up interest rates if workers get "extravagant" pay rises. The Reserve Bank fears inflationary expectations because it leads to people and businesses expecting prices and wages to go up at higher rates than inflation creating yet more inflationary pressure. The Reserve Bank uses the Labour Cost Index to measure wage increases. The index is currently growing at 3 per cent and the Reserve Bank predicts this trend to continue. Wage and price growth in excess of this could see Dr Bollard consider increasing interest rates, though he said he did not expect to have to.

Why would he not have to raise interest rates?

A global effect on wage boosts
Jun. 06, 2006

Indicators continue to point to rising workers’ wages in the United States... “The labor market factors that influence wage growth are in place for modest acceleration,” said economist Kathryn Kobe... Eventually, the domestic labor market should tighten up to the point that wages will accelerate more than it has so far, Kobe said.

However, private-sector wages were only 2.4 percent higher in the 2006 first quarter from the same period last year. That was a slight drop from the 2.5 percent gain in the fourth quarter of last year. In previous periods, the actual wage increases would have been higher by now ... ith more U.S. industries competing with foreign companies, the ability of many U.S. workers to pursue higher wages has been undercut.

But as we noted, the wages are rising even as there are governmental calls being issues toward giving labor more. Thus, the capitalists have no other option but to declare a recession and get it going for their own confort and reward.

You don't have to believe me on this. I have the Wizard of Wall Street on my side:

Wake up: the American Dream is over
Paul Harris, The Observer
June 8, 2006

When even the rich are starting to think they are getting too many tax cuts, then you know something has gone very wrong.

Even America's richest think they're getting too many tax breaks from a government determined to keep the poor in their place. Don't just take my word for it. Take Warren Buffet's. After all he doesn't have anything to gain from criticising current policy. In fact he has hundreds of millions of dollars to lose.

'If class warfare is being waged in America,' he has written 'My class is clearly winning.'
Over the past few decades there has been a fundamental shift in the structure of the American economy. The gap between rich and poor has widened and widened. In California, home to both Beverly Hills and the gang-ridden slums of Compton, incomes for lower class families have fallen by four percent since 1969.
For upper class families they have risen 41 percent.
As it does so, the ability to cross that gap gets smaller and smaller. Over the past 25 years the median US family income has gone up 18 percent. For the top one percent, however, it has gone up 200 percent. A quarter of a century ago the top fifth of Americans had an average income 6.7 times that of the bottom fifth. Now it is 9.8 times.
This is far from business as usual but there seems little chance of it stopping,
not least because it appears to be government policy.
[T]he American government is set on tax breaks for the rich. This has led to an economy hugely warped in favour of a small slice of very rich Americans. Bush's first-term tax cuts notoriously benefited the upper strata of American taxpayers. So much so that even Buffet, the second richest man in the world who benefited to the tune of hundreds of millions of dollars, has said the tax cuts 'scream of injustice'.
As head of a hugely successful investment firm,
it is hard to paint Buffet as a lefty liberal who hates Wall Street
(though, bizarrely, some conservatives do try).
The wealthiest one percent of households now control a third of the national wealth. The wealthiest 10 percent control two-thirds of it.
Yet the tax burden on America's rich is falling, not growing.
The top 0.01 percent of households has seen their tax bite fall by a full 25 percentage points since 1980.
That was when 'trickle down' economics began, arguing that the rich spending more would benefit everyone as a whole. But America's poor have simply been getting poorer: clearly that theory has not worked in reality.
This is a society that is splitting down the middle,
and it has taken place against a backdrop of economic growth.
Between 1980 and 2004 America's GDP went up by almost two-thirds. But instead of making everyone better off, it has made only a part of the country wealthier, as another part slips ever more into the black hole of the working poor. There are now 37 million Americans living in poverty, and at 12.7 percent of the population, it is the highest percentage in the developed world.

At the same time the Bush administration has sanctioned millions of dollars of cuts to Medicare, Medicaid and the education budget as part of a measure aimed at reducing the spiraling deficit. This is, frankly, obscene.

The effect of all this has been to scotch that long-cherished notion of the American Dream: that honest toil is enough to reap the rewards and let even the poorest join the middle class, or maybe even strike it rich. A survey last year showed that such economic mobility (a measure of those people trying to make the Dream come true) was lower in America than Canada, Germany, Norway, Denmark, Sweden and Finland.

In fact, the only country doing as bad as America was Britain (food for thought, there).

Now this is not some argument against capitalism. Inequality is inevitable. It is a good thing. People need incentives. People need competition. People need markets. Some people will always be poor. Others deserve to be rich. But at the moment it looks like the rules of the game are being fixed in America in favour of the wealthy.

The gap between rich and poor will only get wider. That is very dangerous.

But that doesn't matter to the class which spawns the largest number of recruits for the Yellow Elephant 101st Fighting Keyboardists! They laugh in the face of danger - especially when that endangered face comes from a lower economic class. And, as long as they control who gets what, they will keep it that way.

After all - do you know how hard it is to have fun anymore? Especially when you have to - GASP! - SHARE???

No wonder the Chinese speak of us as spoiled children!

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