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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: GST who wrote (47767)	12/20/2005 11:38:45 AM
From: mishedlo	Read Replies (2) of 110194

You make flaky assumptions -- i.e. productivity is deflationary and CBs fear deflation because borrowers cannot pay back loans if their wages are going down. This is silly. If productivity goes up this enhances wage earning potential rather that depressing it. Productivity has soared for christ's sake. Wages have done squat, in a "recovery" no less. Wages will go to zero as productivity goes to infinity (machines replace people). Of course you do need some people to work on the machines and build them but relatively few. As I said, China lost manufacturing jobs (to nobody) the jobs just disappeared because of rising productivity. 8 people, yes EIGHT run an Alcoa Aluminum plant in Danville. Danville was thrilled to get that plant. Far less thrilled when they found it only took 8 people to operate it. Furthermore you continually and I mean continually are totally 100% block headed when it comes to job losses in a housing bust. As houses fall unemployment will rise. Those unemployed also have wages going to zero. Yes productivity SHOULD IN THEORY cause wages to rise FOR THOSE LUCKY PEOPLE THAT HAVE JOBS. The operative words are "SHOULD IN THEORY" which is negated by a global labor glut is it not? What about outsourcing to India and China do you NOT understand (besides everything?) Our productivity has more and more people employed at Walmart at low wages and fewer and fewer high end jobs. Many "high tech" jobs are being outsourced too. What about that (besides everything) do you not understand? Finally you ignore overcapacity. Mammoth overcapacity in autos, steel production, etc etc etc, more so in an upcoming housing bust. Your picture of the world requires consumer spending and housing to keep forever expanding. I say the party is over in a housing bust. You do not get it, you do not want to get it, and you will deny it even when it smacks you in the face. Mish

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