While they have put some incredibly harsh population controls, China's population pretty much requires them to grow like a weed just to sustain on that large of a population.
Yeah, the Chinese save, we spend, they lend, so they still do not have much of a domestic economy. I don't think their per capita is still very good, i.e. they have a super rich class and then the working poor.
Beijing is diversifying away from US treasuries is a long time coming. If I were China holding on to that much paper, I would be thinking of ways too. Saying that, the bulk of these purchases are to stimulate internal demand through things like more urbanization. The Chinese are facing a big problem, and that is they have too much capacity which brings about the specter of deflation. At the same time, they are also coming off an asset bubble of sorts. I've written how there are really many economics rolled up into one in China.
I still don't see how we'll all be Chinese one day reading this. The Chinese have other priorities than wanting to annex the US. I remember the same talk, same words, almost same everything, only it was the Chinese, it was the Japanese. Anyone remembered the shaking hands and the uproar when they purchased that golf course or when Mitsubishi purchased Rockefeller Center? Saying this, it wouldn't hurt you to know Mandarin.
But remember this, we live in this thing called globalization, and one of it's main pillars is cost arbitrage. China grows because they can make it cheaper and export it for a profit, the underpinning of this is near-slave waged labor and lax regulations. But this is a game that really anyone can play so long as they are willing to pay the price, that being the discarding of paying relatively high wages (or living standards?). There is nothing to stop India from copying China in this regard, and in fact they are already starting. India has or will have more people than China, and a relatively younger one at that. The folks both in Beijing and New Delhi knows this, and they know that the folks that open up factories and services firms know this. China neglected fostering a real domestic consumer like we neglected our infrastructure.
But does this make us future slaves of China? You know, ironically enough today I was talking to a friend about this very subject. She's a history professor, mainly Latin American, and she feared that China will do to us one day what France did to Mexico when it stopped paying interest on debt it owed to Napoleon's regime. "You know" she goes" if we default, they'll take Alaska!"
There isn't to say we won't default, it is within the realm of possibilities. But grabbing land won't jive these days, the costs would be too high. The Chinese, like I said previously, really have other priorities at this point. We're 'down here' their list, while keeping the regime in power is 'up here'. But let me ask you all this, would it really be that bad in the long term, if China stopped buying our debt? Wouldn't this force us to finally do what was needed? Yes the pain would be great, in fact in the short-to-medium term I would say things would be horrible in this country. But we need to break this financial heroin addiction that we have.
It's why I've not done much on DK (well not much in general...but that's cause of my health and other things at the moment), the 'Kos site is just too partisan. While I like to think I hold some liberal views, I know I don't have all my issues angled the same way. When you don't hold the same views on every issue, I've noticed on some sites, you're virtually nailed to the cross. That's why I like this place, I may not agree 100% on everything, but you don't have people calling you a troll or what have you.
IF unemployment stops with under 20%, sure, we'll hit that L or V.
If not, we may yet see 40% deflation in wages- once companies realize that they can cut costs by laying people off and rehiring from the starving worker pool.
We may yet see a return of "will code HTML for food" signs yet.
-------------------------------------
Executive compensation is inversely proportional to morality and ethics.
The Retirement Crisis will be the next big crisis. I did a story about this in February. Consider this:
The [National Retirement Risk Index] NRRI has determined that almost 45% of households are “at risk” of not having enough retirement savings to maintain their living standards in retirement. The percentage of households “at risk” jumped to 61% when the health care costs were included in the NRRI.
You and Rob are asking similar questions, so I'll put my reply here. I don't think the "downward slope" Rob mentions, which goes to ~+2.5%/year (iirc) is that significant. During the Great Depression, for example, wages fell 40%! So a +2.5% reading in a major downturn isn't nearly the same.
To some extent, businesses have a choice of downsizing by layoffs, cutting hours, or cutting wages (or some combination thereof). So far, it appears the huge majority are choosing layoffs. While that is bad for the laid off workers, it means that the 90%+ survivors in the economy have the same, or higher, purchasing power -- which is a better base from which a recovery might occur.
I think we are at the bottom of a "ratcheting down" of the economy. We probably either go sideways ("L" shaped) or a very slow increase (Verizon "V" shaped) from here.
Unions were once organized into "Locals" for a reason- and so were corporations for that matter. These international unions and international corporations- they're too big to succeed in my opinion. The larger your organization is, the less contact you have with the people who actually get things done- the workers on the ground so to speak. And that is a bad thing all around.
-------------------------------------
Executive compensation is inversely proportional to morality and ethics.
I don't know NDD, that sudden downward slope in the graph ...
on the 1929-1934 wage deflation, exactly how badly did that lag other economic indicators? i.e. what's the gap?
I think you're right but I'm also wondering about changes in data reporting on wages as well. I don't think back then there was this revolving "hire/fire" door that is so common now. I mean I know there were layoffs, but not this massive permatemp employment base and being outright fired, I believe you had to have done something actually wrong...
so all of that I don't think is calculated into wages, these extraneous income reduction techniques.
really great analysis. I figured you were going to cover this but not so quickly after the numbers were out!
This is something I've been meaning to research out, on the aggregate, the actual guaranteed funds for retirement now versus the current retired population.
Honestly, I don't know anyone who has enough saved and almost everyone has at least one horror story of getting displaced by outsourcing, or their 401k tanked and never recovered to having to raid the 401k due to unemployment, medical bills or their children, on and on.
But this is a huge wealth removal from the middle class, I believe a walking tsunami coming right at us and it gets scant attention.
It's like manana is never coming in the psyche of the American people and it's almost here.
A great aggregate graph would be the percentage of people who got wiped out in the dot con and then the percentage of people who are now wiped out...
then I imagine the total retirement fund graph from say 1945 onward would look like a ski slope down.
So, aren't we all thrilled Obama is talking about "reducing entitlements" to balance the budget?
is being hidden behind massively growing unemployment?
In other words, what if instead of depressing wages of those still working, we're putting other people out of work?
Eventually, that will come back around to a depression of wages, this summer when we run out of the first 6 months of unemployment.
But until then, unemployment compensation might be hiding the "other side" of the deflationary death spiral.
-------------------------------------
Executive compensation is inversely proportional to morality and ethics.
We are officially non-partisan for this reason, although politics, but more in the way of policy is a big topic area I like to write about.
If you notice NDD can go against "group think" because he's looking at the numbers, graphs and so does midtowng quite often, again looking at the graphs, numbers.
BTW: and yes I do know this is poor design and I have major guilt on the upgrade at this point, but people need to hit that little "reply" link when replying to someone else's comment. That's how the tracking system works in the account section and if people don't hit that reply, it doesn't show up that someone replied to your comments.
Robert Oak.......... I agree 1000% with what you say!
I swear that many of the blogs are either:
A. Filled with kids
B: Filled with people that act like bullies
There are a lot of blogs that people move and thing more like a herd of sheep than people that want to debate ideas.
I make my own decisions and more often than not, those decisions can not be button holed into a certain group. It makes me an odd animal. If a Dem or Rep President makes what I consider a good decision I will give kudos to them. If they make a bad decision I will say it was wrong.
It often gets me painted as a troll because I don't follow any one party line.
FDIC exercises some ratings arbitrage and Goldman Sachs issues $28 billion in FDIC guaranteed debt possibly more in the future. This might be the real reason they became a depository bank. GS debt gets AAA rating.
Hey, you can express whatever your views are and problems you see on EP, as long as we're in some sort of reality and on topic.
That's one of the things that drives me nuts on some blogs, where you must participate in group think or be damned to eternity for being a troll, when it's simply a well thought out different view.
The SEIU has had some well broadcast fights trying to wipe out local nurses union in CA and I read the complaints and it sure seemed the SEIU wasn't interested in the real labor issues.
I don't know what the answer is, maybe more of a guild type of organization. There are professional societies but very often, they also do not represent the labor interests of members.
A fundamental problem seems to be the power structure in these things. They are not democratized enough.
Follow this link to Prof. Brad DeLong's blog. There is a follow up by Prof. Krugman.
This discussion is two months old. The employment cost index for Q1 2009 will be released at the end of this month.
While they have put some incredibly harsh population controls, China's population pretty much requires them to grow like a weed just to sustain on that large of a population.
Yeah, the Chinese save, we spend, they lend, so they still do not have much of a domestic economy. I don't think their per capita is still very good, i.e. they have a super rich class and then the working poor.
Beijing is diversifying away from US treasuries is a long time coming. If I were China holding on to that much paper, I would be thinking of ways too. Saying that, the bulk of these purchases are to stimulate internal demand through things like more urbanization. The Chinese are facing a big problem, and that is they have too much capacity which brings about the specter of deflation. At the same time, they are also coming off an asset bubble of sorts. I've written how there are really many economics rolled up into one in China.
I still don't see how we'll all be Chinese one day reading this. The Chinese have other priorities than wanting to annex the US. I remember the same talk, same words, almost same everything, only it was the Chinese, it was the Japanese. Anyone remembered the shaking hands and the uproar when they purchased that golf course or when Mitsubishi purchased Rockefeller Center? Saying this, it wouldn't hurt you to know Mandarin.
But remember this, we live in this thing called globalization, and one of it's main pillars is cost arbitrage. China grows because they can make it cheaper and export it for a profit, the underpinning of this is near-slave waged labor and lax regulations. But this is a game that really anyone can play so long as they are willing to pay the price, that being the discarding of paying relatively high wages (or living standards?). There is nothing to stop India from copying China in this regard, and in fact they are already starting. India has or will have more people than China, and a relatively younger one at that. The folks both in Beijing and New Delhi knows this, and they know that the folks that open up factories and services firms know this. China neglected fostering a real domestic consumer like we neglected our infrastructure.
But does this make us future slaves of China? You know, ironically enough today I was talking to a friend about this very subject. She's a history professor, mainly Latin American, and she feared that China will do to us one day what France did to Mexico when it stopped paying interest on debt it owed to Napoleon's regime. "You know" she goes" if we default, they'll take Alaska!"
There isn't to say we won't default, it is within the realm of possibilities. But grabbing land won't jive these days, the costs would be too high. The Chinese, like I said previously, really have other priorities at this point. We're 'down here' their list, while keeping the regime in power is 'up here'. But let me ask you all this, would it really be that bad in the long term, if China stopped buying our debt? Wouldn't this force us to finally do what was needed? Yes the pain would be great, in fact in the short-to-medium term I would say things would be horrible in this country. But we need to break this financial heroin addiction that we have.
and more interesting, they have engineers on that 20 person panel crafting national economy strategy.
The U.S. on the other hand, has just been giving it away to China.
It's why I've not done much on DK (well not much in general...but that's cause of my health and other things at the moment), the 'Kos site is just too partisan. While I like to think I hold some liberal views, I know I don't have all my issues angled the same way. When you don't hold the same views on every issue, I've noticed on some sites, you're virtually nailed to the cross. That's why I like this place, I may not agree 100% on everything, but you don't have people calling you a troll or what have you.
It's 2009.
/snark
to have a former Treasury Secretary sitting on the board either
It has always been about class warfare.
Nice call out. Let's see, now in the USSR we had media blackouts, propaganda, fiction statistics, fictional economy and ....what else?
but in the United States we have a what? Free independent press, a Democracy and what was that about fact based policy?
I think it's simply too soon to tell.
IF unemployment stops with under 20%, sure, we'll hit that L or V.
If not, we may yet see 40% deflation in wages- once companies realize that they can cut costs by laying people off and rehiring from the starving worker pool.
We may yet see a return of "will code HTML for food" signs yet.
-------------------------------------
Executive compensation is inversely proportional to morality and ethics.
The Retirement Crisis will be the next big crisis. I did a story about this in February. Consider this:
You and Rob are asking similar questions, so I'll put my reply here. I don't think the "downward slope" Rob mentions, which goes to ~+2.5%/year (iirc) is that significant. During the Great Depression, for example, wages fell 40%! So a +2.5% reading in a major downturn isn't nearly the same.
To some extent, businesses have a choice of downsizing by layoffs, cutting hours, or cutting wages (or some combination thereof). So far, it appears the huge majority are choosing layoffs. While that is bad for the laid off workers, it means that the 90%+ survivors in the economy have the same, or higher, purchasing power -- which is a better base from which a recovery might occur.
I think we are at the bottom of a "ratcheting down" of the economy. We probably either go sideways ("L" shaped) or a very slow increase (Verizon "V" shaped) from here.
Unions were once organized into "Locals" for a reason- and so were corporations for that matter. These international unions and international corporations- they're too big to succeed in my opinion. The larger your organization is, the less contact you have with the people who actually get things done- the workers on the ground so to speak. And that is a bad thing all around.
-------------------------------------
Executive compensation is inversely proportional to morality and ethics.
I don't know NDD, that sudden downward slope in the graph ...
on the 1929-1934 wage deflation, exactly how badly did that lag other economic indicators? i.e. what's the gap?
I think you're right but I'm also wondering about changes in data reporting on wages as well. I don't think back then there was this revolving "hire/fire" door that is so common now. I mean I know there were layoffs, but not this massive permatemp employment base and being outright fired, I believe you had to have done something actually wrong...
so all of that I don't think is calculated into wages, these extraneous income reduction techniques.
really great analysis. I figured you were going to cover this but not so quickly after the numbers were out!
This is something I've been meaning to research out, on the aggregate, the actual guaranteed funds for retirement now versus the current retired population.
Honestly, I don't know anyone who has enough saved and almost everyone has at least one horror story of getting displaced by outsourcing, or their 401k tanked and never recovered to having to raid the 401k due to unemployment, medical bills or their children, on and on.
But this is a huge wealth removal from the middle class, I believe a walking tsunami coming right at us and it gets scant attention.
It's like manana is never coming in the psyche of the American people and it's almost here.
A great aggregate graph would be the percentage of people who got wiped out in the dot con and then the percentage of people who are now wiped out...
then I imagine the total retirement fund graph from say 1945 onward would look like a ski slope down.
So, aren't we all thrilled Obama is talking about "reducing entitlements" to balance the budget?
is being hidden behind massively growing unemployment?
In other words, what if instead of depressing wages of those still working, we're putting other people out of work?
Eventually, that will come back around to a depression of wages, this summer when we run out of the first 6 months of unemployment.
But until then, unemployment compensation might be hiding the "other side" of the deflationary death spiral.
-------------------------------------
Executive compensation is inversely proportional to morality and ethics.
We are officially non-partisan for this reason, although politics, but more in the way of policy is a big topic area I like to write about.
If you notice NDD can go against "group think" because he's looking at the numbers, graphs and so does midtowng quite often, again looking at the graphs, numbers.
BTW: and yes I do know this is poor design and I have major guilt on the upgrade at this point, but people need to hit that little "reply" link when replying to someone else's comment. That's how the tracking system works in the account section and if people don't hit that reply, it doesn't show up that someone replied to your comments.
Robert Oak.......... I agree 1000% with what you say!
I swear that many of the blogs are either:
A. Filled with kids
B: Filled with people that act like bullies
There are a lot of blogs that people move and thing more like a herd of sheep than people that want to debate ideas.
I make my own decisions and more often than not, those decisions can not be button holed into a certain group. It makes me an odd animal. If a Dem or Rep President makes what I consider a good decision I will give kudos to them. If they make a bad decision I will say it was wrong.
It often gets me painted as a troll because I don't follow any one party line.
FDIC exercises some ratings arbitrage and Goldman Sachs issues $28 billion in FDIC guaranteed debt possibly more in the future. This might be the real reason they became a depository bank. GS debt gets AAA rating.
Could they survive w/out this subsidy?
U.S Program Lends a Hand to Banks, Quietly
Hey, you can express whatever your views are and problems you see on EP, as long as we're in some sort of reality and on topic.
That's one of the things that drives me nuts on some blogs, where you must participate in group think or be damned to eternity for being a troll, when it's simply a well thought out different view.
The SEIU has had some well broadcast fights trying to wipe out local nurses union in CA and I read the complaints and it sure seemed the SEIU wasn't interested in the real labor issues.
I don't know what the answer is, maybe more of a guild type of organization. There are professional societies but very often, they also do not represent the labor interests of members.
A fundamental problem seems to be the power structure in these things. They are not democratized enough.
Kudos...
There will be a special place in Hell for Phill Graham.
Also...loved that pic you used of the Penguin taking money from that poor guy.
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