Is it time for wage increases?

TheBigShort said:
The best way, in my opinion, is through wage increases. Yes, we are talking about an inflationary effect here, the cost living will go up, but the cost of (old) debt will decrease.
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So wage raises will be offset by increases in prices so no gain there. Old debt does get cheaper I agree, but those who have saved rather than borrowed are penalised. Is this fair?

TheBigShort said:
I am talking about an environment where people will save capital (for future investment, for real productivity growth) rather than borrow it into existence through new debt.
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Again, why would people save money when inflation will penalise them for doing so?
 
PGF2016 said:
I believe it's because they consume more than they can afford to. The earnings can't cover their expectations.
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That is a fair point and exactly what im talking about. The system we have is built on wage restraint and credit expansion. It has benefits but like all economic models, has its limitations. I believe we have reached, or very close to reaching, the limits of this model to such an extent that civil unrest in developed countries is starting to simmer. This is reflected in political divergences being witnessed.

PGF2016 said:
A person from a less rich economy would love to have his lifestyle. Decent job and enough time off to play hurling, football and go mountain biking. In the far East they'll work 7 days a week without having a living standard near the mechanics.
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He doesn't get time off for football and hurling. That is his own time, his employer hasn't bought that time. If he tried, it would cost him.
Thats why we develop Labour laws, permitting rest breaks, days off with pay etc. In the main western societies flourished relative to the rest of the world. Perhaps trade agreements with countries that hold the same labour standards would benefit everyone, rather than the race to the bottom.
 
Purple said:
People are living longer so wealth is not being transferred as early and housing stock is not being released as early as previously. Obviously there's not much we can do about that but it's a major cause.
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I can assure you that my parents didn't have any wealth transferred to them.

I'm sure the housing stock not being released has some affect but I think behaviour has a bigger affect.
 
TheBigShort said:
The system we have is built on wage restraint and credit expansion.
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I get the credit expansion part, but can you provide a reference for the wage restraint part? I'm not interested in something that shows what the wage rates are, but that we have a system built on wage restraint.

TheBigShort said:
Thats why we develop Labour laws, permitting rest breaks, days off with pay etc. In the main western societies flourished relative to the rest of the world.
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I have a book on my bookcase called Civilization that I am about to read ("Purple, I'll post what I think) and he identifies the 6 areas that have contributed to the West's success being: competition, science, the rule of law, consumerism, modern medicine, and the work ethic. You could argue that labour laws fall under the "rule of law", however I believe he is talking about law & order in the general sense (I'll confirm when I get to that chapter). So, if you could provide something to back up your assertion that would be welcomed.
 
Firefly said:
So wage raises will be offset by increases in prices so no gain there. Old debt does get cheaper I agree, but those who have saved rather than borrowed are penalised. Is this fair?
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Interest rates will rise.
Currently on a major Irish bank, they are offering car loans up to €30,000 at APR 8.95%.
Savings account for regular savers, at best you can get 2%
House prices in Dublin, according to Dan O'Brien in the Indo, have risen 65% since 2012.
incomes have risen 3-4,% in the same period.
It appears to me, that the debt fuelled credit expansion is still at work. Not to the same extent, because large swathes of the population over still-over indebted. This time, those who didn't get caught up badly will continue to borrow beyond their actual worth until a recession hits, and a bigger pool of people will be caught in a debt trap - the blame will fall on welfare dependents and immigrants. Threatening the EU (if it survives) this time around.
 
TheBigShort said:
Interest rates will rise.
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Perhaps not to the same extent though. Remember governments have the largest debts of all so it would not really be in the ECB's interest pushing governments over the edge due to increasing their rates.
 
Firefly said:
Perhaps not to the same extent though. Remember governments have the largest debts of all so it would not really be in the ECB's interest pushing governments over the edge due to increasing their rates.
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Absolutely, it is a precarious situation. So we can continue with the QE and hope the 'wealth effect' kicks in and drives demand through more borrowing, or,
we can borrow heavily (or for sake of argument), the surplus nations of Europe, Germany, Netherlands etc can start spending aggressively to drive demand (tearing up fiscal pact).
I prefer latter option. The debt is unsustainable. Either countries start to default, or it is reduced by inflation. Wage increases are inflationary.
 
Firefly said:
I get the credit expansion part, but can you provide a reference for the wage restraint part? I'm not interested in something that shows what the wage rates are, but that we have a system built on wage restraint.
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Wage restraint is probably my term. Typically wage moderation is the term more commonly used. Nothing wrong with it, it is a good thing, but in the face of unfettered corporate profits fuelled by credit expansion, it has created a mountain of debt, private debt and state debt.
That is the point, profits, while they are good thing, are unlimited, not taxed enough, and end up in excessively large tranches in the control of too few. The system facilitates this and we in the developed world fawn at the wealth of the 'great entrepreneurs'.
When really most of them are just ordinary hard-working people, with high developed skills and talents who were in the right place at the right time, had some luck, or stumbled onto something that they themselves had no idea how successful their idea was going to be.
 
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TheBigShort said:
Absolutely, it is a precarious situation. So we can continue with the QE and hope the 'wealth effect' kicks in and drives demand through more borrowing
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I'm against QE as I've mentioned before. As you have said it may have been a useful tool in the emergency we had, but it's sell-by date is long gone


I agree that a fiscal stimulus would benefit working people more directly than QE ever could. However, "The debt is unsustainable" in either case.

I'm not familiar with the economies of other european countries, but the program announced by the EU for fiscal spending has specifically excluded us. I think based on the fact that we have rising employment, falling unemployment, almost balanced our books, already huge government debt and that we have engaged on a massive fiscal spending policy since 2008 means we have already implemented this. By all means it could be a good option for other countries, but not for Ireland.
 
Firefly said:
By all means it could be a good option for other countries, but not for Ireland.
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Perhaps, but for it to take hold, countries like Germany cannot sit infinitely behind a fiscal pact of 3%. While I understand the sentiment of prudence, it is not always wise. There are times to spend aggressively and other times to restrain.
The 3% fiscal deficit limit is an arbitrary figure. Perhaps a rolling average 3% deficit would be more realistic, say over a seven year business cycle?
 

I think you might be mixing up a few things here. Governments are borrowing as they are spending more than they take in to keep the show on the road. Unless they reign in this spending they will need to continue to borrow. QE helps with this as they can do so at 0%. Now, in order to embark on a stimulus package (such as a large house building program) and to still keep the lights on, would require yet more borrowing. Now, if the ECB stops QE by buying up bonds at 0% then the cost to governments and taxpayers shoots up, both to keep the lights on and for the house building program. So it's not just as a case of stopping QE and embarking on a stimulus package - we might actually need QE to make the stimulus package affordable!


As for "unfettered corporate profits fuelled by credit expansion", the profits would still be unfettered. Workers would have more money for sure and should not need to borrow as much, by the borrowings would be done by the government instead in financing the stimulus package. Would you be happy then for these unfettered profits to be financed by government debt?
 

I agree with this and since 2008 that's exactly what we have done. Now we have increasing employment, falling unemployment, we're almost balancing our books and we have the fastest growing economy in Europe. If you believe in counter-cyclical fiscal policy then surely now is the time to slow down and be prudent? Afterall the EU has told us not to engage in the spending that it thinks most of the EU should..
 
By the way, I love the term "unfettered" - the People Before Logic use it all the time and it cracks me up! I'd love to know who said it first.
 
Firefly said:
Anyway, I'm off to take the kids out for dinner & ice-cream. Chat to y'all later!
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Good idea, and for fear of ending in a endless unresolvable debate, here are my calls.

Interest rates and inflation to rise quickly over next fours years.
The euro to come under severe pressure to survive (I think it will break up)
Brexit to fail, but Lisbon Treaty to fall
Wages to rise rapidly. Minimum wage here to hit €16-€18 an hour by 2020.
 
My own opinion on Firefly and TheBig Short Discussion is it time for a wage increase
TheBigShort Would Like an increase from whoever he/she is employed by he/she thinks he/she is worth it so lets have it if the employer can find the money,TheBigShort Employer will Increase all wages For all employees.
Firefly would like an increase from whoever he/she is employed/Hired by he/she thinks he/she is worth it so lets have it if the employer can find the money. there is a good chance firefly will get his increase Employer may or may not increase wages for all employees.he/she may give Firefly his pay increase not because he/she cannot get a better firefly.He/she may not want to change for lots of reasons Firefly wage increase on its own will not affect companys cost base .Best of luck to Firefly. I know plenty of Firefly In 2016 I got an Increase myself that I was not expecting Thanks to our own firefly.
Lots of Private Companies Irish and Foreign Need to move out of Ireland to a lower cost base EU Country to survive and grow.I Suspect Donald Trump Will spot the Competitive weakness in a lot of companies who at present are making Ireland Uncompetitive the are pricing tax into there wages Donald could with the stroke of a pin change all that.The EU/UK are also working on How Irish company's have an unfair competitive Advantage over there competitors At the higher end of the profit scale .We could have a lot of Distressed Business If these changes come to pass.
 
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TheBigShort I know that.I know you have no problem with our tax system taking a little more at the top rate so some can filter d own to people who work just as hard if not harder on low income creating new wealth.Some times you can be creating new wealth on low margins.
 
A little more would be a fine thing...
 
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