I just thought it might be helpful to pass on to you this revealing chart:
Bernstein sees three forces contributing to the decline in wages: wage growth has slowed for American non-managers, about 80% of the workforce; inflation is picking up, spurred by higher gas prices and a rise in food prices; and last, employers are cutting back on hours as the economy shrinks. Since the economy is continuing to slump and prices continue to rise, the trend will continue, and as our paychecks purchase less, we will cut back on spending. Rough weather ahead . . .Except of course, for the managers and the entrepreneurs in the financial sector and elsewhere. Remember that the top ten percent of the population owns an enormous share of the country's entire wealth to begin with. This includes the people who put together the unregulated, unsupervised, irresponsible—in some cases probably criminal—hornswoggle of sub-prime mortgages, later sold off by the mortgage lenders to financiers, who in turn sliced and diced and rebundled them into what are now seen to be almost worthless securities.
As a result, the banks who bought the subprime-based securities are in trouble, having to write off the losses on their balance sheets. The big guys, like Citicorp and Mellon/Bank of New York, and others not only here in the states but all over the globe. And governments are bailing them out. Here in the US the banks have hit the Federal Reserve for $50 billion in new money to support their balance sheets.
What else is new? We paid for the Savings and Loan crisis. And despite his outspoken criticism of the economy and the political scene right now, Lee Iacocca insisted that the government had to bail out Chrysler a few decades ago.
Of course, the financiers and brokers have already scooped up their bonuses and commissions. They have put their money into foreign currencies, gold, or cash have no responsibility imposed upon them. Now they are waiting for "buying opportunities" in the market, including the foreclosed properties in the neighborhood across town or out in San Bernardino.
No one of them is guiltless, and I am sure that there are Democrats, Republicans, and Libertarians who have made their money off the scam. Not to mention some closet anarchists. But the subprime securities crisis has eroded the dollar. The wartime economy has borrowed its way into war. The “Haves and the Have-mores”--the president's favorite people--have made out like bandits. And most of us are shuddering when we fill up the gas tank.
Perhaps it will make us walk more or ride a bike. But as you do watch out for backwash of the Cadillac and Hummer SUVs. That's the first sign of the rough weather ahead. It will tousle your hair and jostle your determination.
Feb 21, 2008
What hath unregulated Corporate Socialism wrought?
Writing in The Nation online, Nancy Cleeland in “The Incredible Shrinking Paycheck” reports on the analysis of recent Bureau of Labor Statistics information. The analysis, by Jared Bernstein of the Economic Policy Institute, indicates that the “grim news” was worse than he expected.