Posted on 06/29/2009 1:48:27 PM PDT by FromLori
The deflation vs. inflation debate seems to be settling down, with everyone agreeing that we're seeing both at the same time.
The split is: Things we want to see going down are going up (oil, food) and things we want to see going up are going down (houses, wages).
In his latest piece, David Rosenberg talks wage deflation:
A survey conducted by YouGov for the Economist magazine found that 5% of respondents had taken a furlough this year and 15% had accepted a pay cut (see The Recession and Pay: The Quiet Americans on page 33 of this week’s edition).
As wages deflate, workers are looking for ways to supplement their shrinking income base, for example, by moonlighting. Indeed, a
(Excerpt) Read more at businessinsider.com ...
My brother in law was told that his health insurance that his employers usually pays half the group rate of is going to be completely paid by the employees next month and beyond.
The big deal is that the employer is not increasing anyone’s pay so essentially they are getting a pay DECREASE.
My cousin’s husband, an engineer, has to take one week per month off, without pay...and forced to take vacation time at the will of his employer.
His salary will fall over 20% this year...they have two small kids and a mortgage...very worried.
It is called stagflation.
“Everything that should be up is down, and everything that should be down is up.” Al Gore - 1992
“The big deal is that the employer is not increasing anyone’s pay so essentially they are getting a pay DECREASE.”
Just remember that it’s not the employer’s fault! Blame Big Government!
My son used to work at least 60 hrs per week, he has now been cut to 32 hrs, that is one heck of a pay check. He had saved money to take his kids on a great vacation but they’re coming here to Mom and Pop’s Free Food and Lodging Inn, instead.
The funny thing is that the kids aren’t disappointed at all, they love being here, forget Disneyland.
He has had another offer and I think he might consider taking it if it is still viable after the 1st of August but he’d have to move or live away during the week. I’m offering him our travel trailer because it would be fine for one person to live in.
Not surprised about wage deflation, when demand drops so does price.
Clearly there is asset deflation, houses especially, stocks and other investments.
But energy price increases are very troubling especially given that demand is down. This is probably due to dollar risk.
Monetary policy is HIGHLY inflationary, the Fed is monetizing Bam’s massive deficits.
Taxes are going to go up, federal, state and local.
Likelihood of one or more massive government programs being enacted (healthcare, capntrade)
To me this draws the picture of a double dip or L recession (new baseline) with high unemployment and low or negative GDP growth with certain key commodities (oil) going up in price.
What this means is a much lower standard of living for most and a new and much lower level of economic activity. The idea that we can just wait it out and things will improve is folly, they may never improve. The question is where is the bottom.
In the end there needs to be something that makes this turn around. In past recessions it has primarily been consumer spending driven, we want a new car. With all of the above it is difficult to see this happening for the next several years.
schu
I agree I think we will have a Depression myself.
ping. I’m pretty sure this is what you said was going to happen. I’ve been tearing my hair out over whether we ultimately deflate or inflate. It seemed to me one or the other had to domintate. Reading the article, this is something along the lines of what I thought you posted to me a year ago, maybe less.
Any thoughts?
Our enemies see an opportunity to hurt us, they will try to take advantage of it.
If they are successful, it will be very bad.
Hope I am wrong.
schu
My current pay cut is 15%. I’m fully expecting to take a 20% pay cut when all is said and done. I’ll be at that level for years and when I finally get my pay restored to 100% that it previously was, I’m certain I won’t get raises for years. It is going to be a belt-tightening 10 years or so.
To boot, through his socialist masters, Obowma (the one who bows to the Saudis) is doing his best to repeat all the mistakes of the Great Depression.
Wheee!
The Government in charge says they and only they can get us out of this mess.
So, be quiet, don’t whine about your coming “sacrifices” and trust in Obama.
Remember bidens prediction within 6 months the smelly one will be tested?
You could well be correct but I still see a Depression to boot.
The idea that we can just wait it out and things will improve is folly, they may never improve.
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Talk of things improving SOON is absolutely folly. I am 99% certain that things will be worse six months or twelve months from today. I am tempted to say one hundred percent certain but nobody can ever be that certain. If we go along with much more of the Obamanation’s fool stunts then most of us won’t live long enough to see things improve. The foolishness of current government actions guarantee poverty for the foreseeable future. We are like hopeless drunks who must hit bottom before things can turn up. A lot of people are going to have to learn basic economics the way my parents did, by living through some terrible times. A lot of clowns who have walked around for years thinking they are geniuses are going to have to learn that they are just fools.
Thanks for the ping. Yes, there is no middle ground anymore, either the Fed, Treasury and Goldman Sachs will engineer a new inflationary bubble or we will stagnate for a decade or more. The bubbles will mostly misallocate scarce capital and waste scarce resources causing future economic stagnation. We have barely scratched the surface for wage stagnation and it mostly lagging from last year’s downturn. My guess is we will have another round of deflationary psychology (helped along with articles like the above), oil will drop into the low 40’s, S&P into the low 800’s, and then we will take off late this year, perhaps November.
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