The Wandering Economist

If you have read the news over the past several month you know that various economists have been arguing over whether we are in for inflation, deflation or a combination of both called stagflation. The ones to watch in all of this are those at the Fed. These guys are really, really sneaky. If the Federal Reserve Board starts talking about how they are “Woried about Inflation” well, then you can assume that DEFLATION is on the way. Same with more recently all of thier talk about deflation. Its a sure sign that INFLATION is on the way. Central banks around the world have been printing new money like a bunch of drunken monkeys at a photocopiers convention.

The more worrisome news is THIS. Recently I have been seeing article with titles like “AMD to Cut 1100 jobs, remainder asked to cut pay” and “Caterpillar execs take 50% paycuts, rest getting 15% reductions”. This is BAD, BAD news. What we are going to get in this country is a crapstorm like we have never seen before. Corporate executives all across the country are drinking the Kool-aid and jumping on the bandwagon. What bandwagon is that you might ask? The “Let’s keep unemployment under 20% at all costs” bandwagon.

How are they going to do that you might ask? Well, several people I know at JC Penny corporation were “repurposed” from full time, 40 hours per week with benefits to part-time, 32 hours per week and no benefits. Like it or leave it. The companies listed earlier are using the lousy job market to reduce their costs by 15-20% on the backs of their employees. Sure, this prevents 15-20% of the workforce being laid off and it all looks good on paper, helping your fellow man keep his job and all. What does it REALLY do?

First off, the government doesn’t see these people showing up on the unemployment lines and the numbers look better. Breath a collective sigh of relief, the economy is getting better, right? NOPE! Now we have 100% of these people employed at less than they were before. 15-20% less in fact. Anyone want to guess how much of these peoples discretionery spending gets cut? My guess is 60-70%. Consumption plummets, corporate profits fall due to reduce economies of scale and stock prices continue to plummet. Instead of 15-20% of the people looking for new jobs, starting businesses, etc. Now we are all GETTING USED TO DOING WITH LESS.

This is social engineering at its best. Social engineering with a smile.

When it is all over, who wins. Well, the Government got by without having to pay loads of benefits it couldn’t afford anyhow. Corporations get crushed short term, but will recover nicely as they now have cheaper labor at home and people, well. People get screwed. Oh, yeah. the corporations flush with cash will use this opportunity just like Banks are using TARP funds. Buy up competition, push more shares to executives and take a defensive stance until someone else blinks.

Here is what I look for in the future.
1. Lower wages helping corporation through this mess while burdening workers.
2. Continued deflation of assets making acquisition by the largest corporations easier.
3. Rising unemployment, but even larger increases in the under employed.
4. Continued inflation in priority goods and consumables, food and fuel. Just because we have no money doesn’t mean that we don’t still have to eat.

It StagCraptasticFlation time.

Tags: Economy //