Posted By: Will Rhodes
While this crash, crisis, whatnot has been on – I have been watching the markets and I did, ask Mike, predict that the DOW would drop to where it is now – and I did predict that it would stay there until after the stimulus package was a done deal, signed into law and used.
That package will help the rest of the world – unless you’re a Tory in the UK – or you are a minimum wage earner in the UK.
The credit crisis is massive – I really don’t think that we will know just how bad it was until it is over – so I won’t really say anything more about that point – until it is over.
But the credit crisis is just that – credit, seems obvious I know – but what caused this crisis? Obviously the demand for credit – credit that wasn’t and isn’t sustainable. And – if we really look at it, it was credit that wasn’t sustainable by those who will spend, the working-class and the lower to upper middle-class.
What is needed is not a wage cut – but a wage rise! Those who are the working poor, a disgusting term I know, need more cash and not in the guise of tax credits or just relief from income tax – they need their wages bringing up to what they should be. For far too long wages have been kept artificially low – if wages had been higher than they are now a lot of this crisis would not have seen the light of day.
That said, it may seem like a bad time to boost workers’ pay, but that’s not the case. Crisis creates opportunities for change—real structural change. And that’s what’s needed.
The bottom line is that this whole mess could have been avoided if demand was predicated on wage increases instead of asset inflation. Of course, that precludes the Fed’s traditional remedies for economic malaise–easy money and massive leveraging. Just last week, Bernanke announced a plan to buy $800 billion of securities backed by mortgages and credit card debt in an effort to stimulate more borrowing. The Fed chairman would rather drown the country in red ink than support pay raises for workers. Go figure? This just illustrates the class bias that underscores the Fed’s policies, which is why pointless to debate the issue or try to find common ground. The only way to effect real change is with political power.
From Bernanke and Greenspan’s perspective, any small gain by workers is tantamount to communism. They will continue to do everything in their power to preserve the current labor-debasing system which keeps workers just one paycheck away from the homeless shelter. This type of hostility is neither good for the economy nor the country. It just intensifies class animosities by accentuating the chasm between rich and poor. The only way to overcome these differences is by narrowing the wealth gap and rewarding hard work with fair pay. [Dec 24, 2008]
Now is not the time to be cutting the meagerist of wages – it is the time to increase them. Make the poor richer but not from the every decreasing tax pot – but from the employers who have made such profits on the back of those who can ill afford it most. There will be those who state that if you do that, businesses will not employ people or send those jobs overseas – well guess what? They have done that in the last 30 years. The businesses have set up in whatever country will have them – not because the worker will be more productive, just that the worker will be less paid!
Look around you now – people who, in effect, are on shit wages are being laid off, why? Profit of course, while there is nothing wrong with profit, the bottom line as it were, what is the point in having people who work for you who need to sell their sole to buy the goods they produce?How many people can genuinely save to buy that car? How many can genuinely afford to save for that down payment for a home?
These crises’ are about debt, not just credit – and if you have people who are earning enough not to take out credit, which obviously leads to debt – you don’t have the kindle to start the crisis in the first place.
That is how you spot a dunce, and a conservative dunce at that – they want people to be poorer so they take out more debt/credit. If that is the case – it will be another 100 year credit down-turn in another 20 years.
Those who do the purchasing need the money to do so – and that means large pay rises and large increases in the minimum wage!