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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (68940)	8/27/2006 10:19:58 PM
From: NOW	Respond to of 110194

thanks ILD: that sounds safer!

To: ild who wrote (68940)	8/27/2006 11:58:46 PM
From: CalculatedRisk	Respond to of 110194

Real Wages Fail to Match a Rise in Productivity By STEVEN GREENHOUSE and DAVID LEONHARDT Published: August 28, 2006 nytimes.com With the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers. That situation is adding to fears among Republicans that the economy will hurt vulnerable incumbents in this year’s midterm elections even though overall growth has been healthy for much of the last five years. The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period. As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.” Until the last year, stagnating wages were somewhat offset by the rising value of benefits, especially health insurance, which caused overall compensation for most Americans to continue increasing. Since last summer, however, the value of workers’ benefits has also failed to keep pace with inflation, according to government data. At the very top of the income spectrum, many workers have continued to receive raises that outpace inflation, and the gains have been large enough to keep average income and consumer spending rising. In a speech on Friday, Ben S. Bernanke, the Federal Reserve chairman, did not specifically discuss wages, but he warned that the unequal distribution of the economy’s spoils could derail the trade liberalization of recent decades. Because recent economic changes “threaten the livelihoods of some workers and the profits of some firms,” Mr. Bernanke said, policy makers must try “to ensure that the benefits of global economic integration are sufficiently widely shared.” <MORE>

To: ild who wrote (68940)	8/28/2006 12:00:04 AM
From: CalculatedRisk	Respond to of 110194

Global Trends May Hinder Effort to Curb U.S. Inflation By EDMUND L. ANDREWS Published: August 28, 2006 nytimes.com JACKSON HOLE, Wyo., Aug. 27 — As the Federal Reserve fiercely debates how to reduce inflation within the United States, economists are warning that trends outside the country may soon make the Fed’s job much harder. In recent years, global integration has made things easier for the Fed in two ways. An explosion in low-cost exports from China and other countries helped keep prices of many products low even as Americans spent heavily and loaded up on debt. At the same time, China and other relatively poor nations reversed the normal patterns of global investment by becoming net lenders to the United States and Europe. Analysts estimate that this “uphill’’ flow of money from poor nations to rich ones may have reduced long-term interest rates in the United States by 1.5 percentage points in recent years — a big difference when home mortgage rates are about 6 percent. But as Fed officials held their annual retreat this weekend here in the Grand Tetons, a growing number of economists warned that those benign international trends could abate or even reverse. For one thing, they said, China’s explosive rise as a low-cost manufacturer does not mean that prices will fall year after year. Indeed, China’s voracious appetite for oil and raw materials has aggravated inflation by driving up global prices for oil and many commodities. Beyond that, new research presented this weekend suggested that the United States could not count on a continuation of cheap money from poor countries. Those flows could stop as soon as countries find ways to spend their excess savings at home. “Medium- and long-term interest rates are set outside of the country,’’ said Kenneth S. Rogoff, a professor of economics at Harvard University and a former director of research at the International Monetary Fund. “It’s very important to think about what to do if the winds of globalization change.’’ The warnings come as the Fed’s new chairman, Ben S. Bernanke, faces widespread skepticism among economists about his forecast for a “soft landing” — a mild slowdown that will tame inflation without costing many jobs. Inflation is already running above Mr. Bernanke’s unofficial target — 2 percent a year, excluding energy and food prices — and few analysts here say they believe the Fed will raise rates and slow growth enough to bring inflation down to its target anytime soon. “They are in a box, and they know it,” said John H. Makin, an economist at the American Enterprise Institute and a hedge fund manger. “It’s an awkward position for them to be in.” Economists presenting papers at the Fed retreat said that the central bank may be hindered as global trends that have kept inflation and interest rates lower than they would otherwise be turn less favorable. <MORE>