It’s been an unrelenting process. Survey after survey has shown that wages haven’t kept up with inflation since the wage peak in 2000. Families earned less at the end of the decade than at the beginning, a phenomenon not seen since World War II—the process of hollowing out the middle class. But now there is a new phenomenon: the unmentionable class, the class that doesn’t exist in America, is ballooning.
Contributed by Bianca Fernet. The winter weather is not the only thing chilling the bones of Argentina’s residents. Since late July, a new set of words has been showing up in the articles about the economy. Shrinks. Slows. Stagflation. These chilling terms are being used to describe the consequences of what some nasty looking economic indicators might have in store. Argentina, an alternative path for indebted Eurozone countries? Not so fast!
The strongest and toughest creatures out there that no one has been able to subdue yet, the inexplicable American consumers, are digging in their heels though the entire power structure has been pushing them relentlessly to buy more and more with money they don’t have, and borrow against future income they might never make, just so that GDP can edge up for another desperate quarter. But it’s been tough.
“Ugly” doesn’t even describe it. I’m not talking about today’s ISM index of US Manufacturing, which was quite ugly, dropping to the worst level since 2009; and whose all-important New Orders index was beyond ugly. And I’m not talking about today’s Global Manufacturing PMI, which was truly ugly, seeing its lowest level since June 2009. These are volatile indices that might turn around on a dime, though that appears to be wishful thinking.
Contributed by Bianca Fernet. When I first moved to Argentina, I would joke endlessly about the little old ladies in line at the supermarket who would issue a constant stream of complaints regarding the price of meat. To me, this seemed ludicrous. The price of meat was low compared to what I was used to in the States. Over time however, these abuelas have come to represent for me a transformation.
Jens Weidmann, President of the German Bundesbank, ventured into a veritable lion’s den with an interview in Le Monde, largest liberal daily in France, supporter of President François Hollande and his “growth” policies. And there, he lashed out at Hollande, the ECB, Greece, at everything that smelled of a transfer union, at Paul Krugman even.
Newly appointed French Minister of Economy, Finance, and Trade, Pierre Moscovici surprised the world: “A country that indebts itself is a country that impoverishes itself,” he said and proclaimed that the government would cut the deficit because “public debt is an enemy for the country.” Powerful words, reasonable and refreshing. What a difference from what we’re getting dished up in the America.
When inflation isn’t particularly hot, it’s praised as something desirable…. Alas: “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily.” John Maynard Keynes.
When the world’s major central bankers get together, as they did at the Fed conference in Washington this weekend, ironies abound. Off to the side, Turkey had just floated a plan to get its people to turn in their physical gold in exchange for “certificates,” a first if still voluntary step in what may become a process of gold confiscation. In the background: the Fed, which had promised to keep interest rates at record lows through 2014, come hell or high water, after having purchased $2.3 trillion in bonds. In the foreground: the money printers of Japan and Europe.
150 factory workers in China threatened to jump off the roof of an iPhone factory unless they received a raise. Similar stories are accumulating. To make ends meet, desperate workers sometimes take drastic measures. These anecdotes underscore a major trend in China: skyrocketing cost of labor. But in the US, it’s the opposite—and now part of the official White House strategy.