Jan 29, 2011

Recession Smishession! It's a conspiracy!


A recent article in the Wall Street Journal showed that most of the people who lost jobs in this most recent recession found new ones at lower pay. Over a third of these people had to take pay cuts of at least 20 percent. Pay cuts. We haven't experienced real, sustained pay cuts across a large swath of Americans since the 1930s.

But this isn't just a tragedy; it is in fact a conspiracy. The people in charge aren't just failing to prevent this from happening. They want it to happen. You see, pay cuts for workers mean that prices as a whole in the economy don't rise. There's less inflation, which means that banks and creditors make more money.

What do I mean by a conspiracy? Well, you can read all about it. It's right in the transcripts of the December 2005 Federal Open Market Committee, which is the committee of central bankers that run America (more on that below). In that meeting, Dallas Fed President Richard Fisher is complaining about the enormous quantity of Chinese goods flowing into America. He points out that this is creating 'disinflation', i.e. lowering prices and wages for Americans.

Only, he isn't complaining that there are too many Chinese imports, he is frustrated there aren't enough imports. Even though China has built special export-only ports to ship goods out of China, he says, the ports at "Long Beach and Northwest" can't absorb what China wants to sell us, because of work rules (i.e. unions). This is a huge problem, Fisher continues, because it is blocking his CEO contacts from outsourcing as much work abroad as quickly as possible. They cannot "exploit China" fast enough.

Chinese Container ship at San Francisco
You won't be surprised to hear that shipping American jobs overseas isn't a new strategy. It's been going on in earnest since the 1970s -- crushing inflation by crushing our wages.

Want more on this class on ECON 2011?  Read Dylan Ratigan's Newsvine


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