Comments on: Congress to Bernanke: “Why Aren’t Your Rate Cuts Buoying Stocks?” http://enlightened-american.com/2008/04/02/congress-to-bernanke-why-arent-your-rate-cuts-buoying-stocks One person's quest to make sense of a senseless American economy and society. Mon, 13 Feb 2012 17:26:16 +0000 hourly 1 http://wordpress.org/?v=3.0 By: Matt C http://enlightened-american.com/2008/04/02/congress-to-bernanke-why-arent-your-rate-cuts-buoying-stocks/comment-page-1#comment-25 Matt C Thu, 03 Apr 2008 04:45:35 +0000 http://enlightened-american.com/2008/04/02/congress-to-bernanke-why-arent-your-rate-cuts-buoying-stocks/#comment-25 Thanks for the reply. I appreciate the extended discussion. The scenario for workers demanding raises and causing inflation doesn't seem plausible to me, but it is the kind of thing you hear politicians and pundits say, I can believe Bernanke pushed it. I suspect the falling prospects for unskilled labor in the US will be a pivotal political issue over the next few decades. It will get worse before it gets better. Thanks for the reply. I appreciate the extended discussion. The scenario for workers demanding raises and causing inflation doesn’t seem plausible to me, but it is the kind of thing you hear politicians and pundits say, I can believe Bernanke pushed it.

I suspect the falling prospects for unskilled labor in the US will be a pivotal political issue over the next few decades. It will get worse before it gets better.

]]> By: Davy Bui http://enlightened-american.com/2008/04/02/congress-to-bernanke-why-arent-your-rate-cuts-buoying-stocks/comment-page-1#comment-23 Davy Bui Thu, 03 Apr 2008 00:00:44 +0000 http://enlightened-american.com/2008/04/02/congress-to-bernanke-why-arent-your-rate-cuts-buoying-stocks/#comment-23 On a fundamental level, you are right in that inflation is a monetary phenomenon and any distinction between wage inflation, asset inflation, etc. is pretty much arbitrary. But the mainstream financial media have bought into these distinctions and that's why you have these fictions like core CPI or people regularly comparing today's CPI with the 70's numbers (which is like comparing oranges to tangerines as a number of methodology changes have been introduced since then). Pre-credit crunch, Bernanke would regularly discuss tight labor markets and wage inflation at these political testimonies. If workers went to their bosses en masse and demanded higher wages, this could pressure companies to raise prices to maintain margins thus cutting into consumer purchasing power, forcing those workers to go back and demand higher wages and so on. These "inflationary pressures" still exist of course; it's just that the workers as a whole have very little leverage to act on them. Many of these people have also levered up (mortgages, car, student loans, credit cards, etc.) so they can't afford not to be working which hurts their bargaining position. The unions have been decimated and the gap between skilled, in-demand workers and unskilled fodder continues to grow. We have no real hope of educating or training these workers to bolster their value in the job market in the short term and probably need to reconfigure our economy before this can happen in the medium/long term. Since these people have no leverage in the job market, we are witnessing these "inflationary pressures" in the political market -- hence the resurgent populist, anti-trade, anti-China rhetoric. And if the business elite aren't careful, it won't just be rhetoric. Probably rambled on more than you wanted. On a fundamental level, you are right in that inflation is a monetary phenomenon and any distinction between wage inflation, asset inflation, etc. is pretty much arbitrary. But the mainstream financial media have bought into these distinctions and that’s why you have these fictions like core CPI or people regularly comparing today’s CPI with the 70′s numbers (which is like comparing oranges to tangerines as a number of methodology changes have been introduced since then).

Pre-credit crunch, Bernanke would regularly discuss tight labor markets and wage inflation at these political testimonies. If workers went to their bosses en masse and demanded higher wages, this could pressure companies to raise prices to maintain margins thus cutting into consumer purchasing power, forcing those workers to go back and demand higher wages and so on.

These “inflationary pressures” still exist of course; it’s just that the workers as a whole have very little leverage to act on them. Many of these people have also levered up (mortgages, car, student loans, credit cards, etc.) so they can’t afford not to be working which hurts their bargaining position. The unions have been decimated and the gap between skilled, in-demand workers and unskilled fodder continues to grow. We have no real hope of educating or training these workers to bolster their value in the job market in the short term and probably need to reconfigure our economy before this can happen in the medium/long term. Since these people have no leverage in the job market, we are witnessing these “inflationary pressures” in the political market — hence the resurgent populist, anti-trade, anti-China rhetoric. And if the business elite aren’t careful, it won’t just be rhetoric.

Probably rambled on more than you wanted.

]]> By: Matt C http://enlightened-american.com/2008/04/02/congress-to-bernanke-why-arent-your-rate-cuts-buoying-stocks/comment-page-1#comment-22 Matt C Wed, 02 Apr 2008 22:32:10 +0000 http://enlightened-american.com/2008/04/02/congress-to-bernanke-why-arent-your-rate-cuts-buoying-stocks/#comment-22 How does Bernanke crusade against wage inflation, and what is it supposed to accomplish? I do not understand how "wage inflation" can be separated from "inflation", and I see inflation as mostly if not entirely caused by the Fed. Curious to hear your thoughts. How does Bernanke crusade against wage inflation, and what is it supposed to accomplish? I do not understand how “wage inflation” can be separated from “inflation”, and I see inflation as mostly if not entirely caused by the Fed. Curious to hear your thoughts.

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