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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: NOW who wrote (22893)12/5/2004 9:12:25 PM
From: Carlos Blanco  Read Replies (2) of 110194
 
but wages are not going to rise this time so how will it help?

even if wages are static, once the gov't cuts its own debt load (or actually, even if it doesn't), it has room to facilitate (at least partial) debt reduction by individuals via tax breaks or other means. they will figure out a way to bail the debtors out, even if (to quote the fed) the methods are unconventional.

also, under really strong inflations, don't underestimate the change to the general mindset. salaries and contracts indexed to inflation rates (or denominated in other currencies) become the norm. first at the level of the higher-paid earners with room to negotiate and then trickling down to average folk, and eventually mandated by government in the same way that they mandate the minimum wage today. i've personally seen all of these happen in the context of a crushed economy with high unemployment rates. ultimately, it's all driven by politics and logic/fairness are of secondary importance.

politicians always do whatever is necessary to ensure their own survival, which is dependent on people never getting to the point where they become so angry that they take up arms or vote them out of office. as such, you're guaranteed that inflating debt away will always be facilitated when enough of the population is threatened by a large debt crisis.
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