BROUGHT TO THE FRONT TO SHOW HOW COMPULSIVE LYING WORKS ON CATALLAXY. THIS THREAD ADVOCATES FALLING NOMINAL WAGES TO COMBAT RECESSION. AND ASSERTS THAT THE RESULT OUGHT NATURALLY BE RISING REAL WAGES. YOU HAVE TO BE SMARTER THAN CATALLAXY TO UNDERSTAND THIS. YOU HAVE TO BE ABLE TO TELL THE DIFFERENCE BETWEEN REAL AND NOMINAL VALUES. TOUGH GIG HEY?
Not only is it possible to increase real wages in a recession, but indeed it is the natural way of things under capitalism. Strictly speaking, capitalism is a system where there would be no recessions, since once a monetary metal like gold comes into existence it stays in existence. This is a point that George Reisman emphasises. That while any gold standard would eliminate serious price inflation, 100% backing would also eliminate recessions. Since there is no, or very little scope, for the money supply to drop.
But supposing we started playing favourites with the banks. Suppose we give them special priviledges to pyramid upon gold and sell or loan ponzi-pyramided gold rather than the real thing?
Well you go down that path you set things up for a recession.
So what happens if an otherwise capitalist country winds up in recession thanks to bank/government collusion?
Well its actually the boom where real wages begin to erode and its a monetary collapse where real wages will increase. But there is a catch to this.
Under this scenario we would expect REAL WAGES TO INCREASE WHILE NOMINAL WAGES WOULD FALL. There is really no way that this increase in real wages would pan out without a system so flexible that nominal wages would quickly fall, allowing prices to fall even faster.
This post where I am giving Cambria a hard time is taken from elsewhere in this blog. It talks around this subject and does not comprehensively explain it. But if someone is genuinely trying to understand monetary economics, still it may be helpful:
Consider the occultism in what Cambria is claiming. Stealing all that money off us and squandering it on mindless vote-buying and investments in taxeater ego must, if Cambria is right, be doing us a net service of some sort. It must actually be helping business.
But how could that be? How could it be that us having to carry the taxeater, and his family……… well this must in some way be making the machines run better or something. Somehow it must be making the shift go more quickly. The paypacket larger at the end of the week and the prices at the shops less than they otherwise would be. That we are carrying these people must be making all our tasks and deadlines less arduous. If Cambria is right then these things must be true, but Cambria will not explain how.
Many hands make light work. And if almost all the public servants suddenly have to get work in the private sector, in the context of business finding itself in a situation where it is both willing and able to spend large now, to cut recurring costs, then those many hands formerly employed in the public service, will be turned to the task of our living costs going down every quarter.
Now there are some worries, and legitimate worries, about nominal wages not being downwardly flexible enough for these sorts of policies to work. Good policy in a monetary crunch leads to increasing real wages but reducing nominal wages.
This may seem counter-intuitive so I think its worthwhile highlighting the matter:
GOOD POLICY IN A MONETARY CRUNCH LEADS TO INCREASING REAL WAGES EVEN AS NOMINAL WAGES ARE REDUCED.
This is no joke. Real wages ought to INCREASE if prices are downwardly flexible in a recession.
This ought to be obvious since if people are saving more, and a greater proportion of spending is in producer goods…….. if people are cutting back on consumption………. still just as much consumer goods will be produced. More even. Less will be demanded and more produced and increasingly so, since we have devoted a greater proportion of gross domestic revenue to producer goods.
Hence the generation of extra savings and retained earnings leads to an immediate increase in real incomes at the bottom and CONTINUING increases in real incomes thereafter. Our job is to try to get pretty close to that ideal with policy.
It is unrealistic right now to get perfectly flexible prices downwards for the moment. But we can do our best and come pretty close……… to a sort of “something-for-nothing” increase in real incomes. We can achieve this but we just cannot achieve it as well as in the idealised model. We can muddle through and get somewhat close to this ideal. Good enough for positive results.
It is my contention that the policies advocated in the thread below, will promote some downward flexibility in wages costs to business, will get businessmen thinking about employing all sorts of people, and will throw enourmous resources into what I’m calling “business-renovation.”
The policies described should also allow us to CUT our welfare overhead, and it ought to allow us to cut our welfare burden right in the middle of a recession.
A lot of you may have seen this thread before but I think its worth reviewing:
This thread ought also double as a place where economics illiterates like Jason Soon, Joseph Cambria and Mark Hill can explain how they think that government spending during a recession is inherently helpful for those paying for that government expenditure.
Truly we are talking occult-economics with these idiots.