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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Bobby Yellin who wrote (12687)	6/7/1998 11:41:00 PM
From: ahhaha	Read Replies (1) \| Respond to of 116791

The deflationary effect to which you refer arises from the cheapness of Asian labor. If we can buy abroad, we don't have to buy from domestic sources which charge higher prices for the same work. They have to since 70% of the cost of production is labor and domestic labor is raising its rate. If the Asians throw a temper tantrum, build A-bombs, riot for political truth, pursue 18th and 19th century specious economic strategies, and destroy their competitive advantage in order to feel their oats, those economies won't be able to supply the level of goods they did previously. What is supplied will come at a higher price. These societies and most in the world have gotten conservative and want to embrace the glories of socialism. The result of such liberal conservatism is inflation. It's easy for domestic manufacturers to raise their prices when Asian good's prices are rising. They go hand in hand. Beggar-thy-neighbor price strategy. I don't make a distinction between service and manufacturing because they have the net circumstance of parity. Service has higher compensation , but more risk of earnings visibility. Manufacturing has more security, but isn't adapted to job changing. Service jobs are easier to replace with cheaper labor and are less unionized. The bottom line is that when service or manufacturing workers see others whichever group they belong get compensation packages higher than theirs, job security is forgotten and parity at the new wage precedent is sought. That starts others thinking, "protection". They call it the wage-price spiral. When that got out of hand last time in 1971, Nixon, that free market Republican conservative, ordered wage and price controls. The great majority of economists thought that was a necessary move and the populace agreed. They all liked it. The stock market put on a dynamic upside move to show how much of a discounting mechanism it is, and how clever it is about accounting for the past, but the economy just inflated more. So in regimes foreign and domestic of psychology of rising expectations, no deflation can be exported, not relative kinds, relative in the sense the foreigners are demanding increasing rates of compensation lower than we increase our's, nor absolute kinds, foreigners inflating faster than we can or do. The Asians in particular aren't that drunk with success. They have a thousand years of poverty to gently remind them how easily the emperors can return, so they will raise their wages more slowly. At least until the inflation thing starts getting out of hand and the FED has to bust people in the chops. Then the Asians will pull the rug out from under the reeling labor monopoly and lower their wages. There's nothing Congress can do but sit and watch .