A commenter writes:
Jeff W. said...
I have finally figured out why The Powers That Be hate immigration restriction so much. I'm sure there are a number of reasons. But one big reason is this:
Western governments for years have been trying to maximize the resources they obtain from money printing. All Western governments have been continually running deficits and financing them with newly-created fiat.
One thing that derails money printing is a wage-price spiral. That's what got going in the 1970's. Around 1979-80, Paul Volcker had to jack up interest rates very high to get inflation back under control.
In the 1980's, The Powers That Be decided that they would continue money printing, but they would also take action to head off a wage-price spiral. So...
- Continuing pressure to add women to the workforce
- Open door import policy to force down U.S. wages
- Open borders.
They succeeded. You never hear about a wage-price spiral anymore.
A protectionist trade policy and immigration restriction would get wages rising, which would make conditions difficult for the money printers. They would have to slow down or even halt their operation. That would be bad for big banks, the military-industrial complex, Social Security, and Medicare.
All of the biggest and most powerful interest groups in America support continued money printing, and that necessitates open borders to keep wages low.
You can see this in all the newspaper articles where reporters (not just pundits) say things like "low wages are good for the economy." Nobody ever talks about this, but it's stuck in people's heads. It's sort of 1970s Folk Wisdom for subscribers to The Economist.
One interesting question is whether wage-price spirals and/or cost-push inflation actually happened in the 1970s. It was endlessly debated during the 1970s whether unions were causing inflation. Interestingly, the ideological lines in the debate were often reversed in the U.S., with Milton Friedman's monetarist school absolving the AFL-CIO (because inflation had to be the fault of the Fed), while neoliberals tended to blame the unions.
Was this controversy ever resolved?
Back in the 1970s, I spent a huge amount of time thinking about macroeconomics, but I don't believe I got much return on my investment. So, I don't have much opinion on macroeconomic controversies anymore.
Perhaps America and Britain had different experiences, with Britain having stronger union power. The Labour Party was founded as a third party explicitly for the good of the trade unions. A half century later, it became the ruling party and nationalized the commanding heights of industry. This caused a subsequent conflict of interest in wage negotiations in nationalized industries: Labour as both the instrument of the unions and Her Majesty's Government, was sitting on both sides of the table, not just in effect but by definition. This led to a lot of people in Britain feeling jobbed by the Labour Party. Eventually, that led to Labour's spell in the wilderness and its reformulation as New Labour, a broad-based party.
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73 comments:
There is no doubt something to the theory that the New Right wanted to Open Borders to crush wages. On the flip ideological side It's clear that the New Left supported Open Borders to "elect a new people" and pad welfare rolls.
But the most pressing reason to Open Borders is to boost retail turnover, particularly in household formation goods (including houses), particularly in the era of declining birth rates. The easiest way to turn a profit and amortize the cost of capital is to increase turnover, extra sales go right onto the bottom line.
I am firmly of the monetarist school. If you have more money for the same number of people and goods, the price of everything has to rise equivalently. (By that logic, more people at the same time as more money means that you probably won't see the same inflationary effect. And because printing money by the government is a tax that is generally not opposed to the same extent as say, a percentage rise to the income tax, it's preferable to governments.)
Perhaps because the monetarist explanation is a more intuitive concept, it's harder to grasp for most people. It's easier to look at the unions pushing for increases in nominal wages to fight the eroding purchasing power of their dollar, and ascribe that to greed of the unions.
A high wage economy is bad for rentiers.
A "high wage" is only "high" if it's high relative to the assets in the society.
So a high wage economy means there is a more widespread distribution of assets i.e. wealth in society. Which means assets are less centralized by the rentiers.
Milton Friedman was a neoliberal.
In the 1970's there was worldwide inflation. That includes countries sending emmigrants and those receiving them.
Open borders in the US had nothing to do with it. In fact there was an amnesty for illegals in the 1980's that coincided with falling inflation.
Union membership was 25% of the workforce in 1960, now it is only 10% and most people still have a negative opinion of unions, featherbedding you know(but billionaires really really need their billion dollars). The Gini coefficient, a measure of income disparity, was .38 in 1960, which is what it is in northern Europe and Japan now, but presently, in the US it is .46, like South America now.
The unions and the American worker have never recovered from the 1980s Ronald Reagan public relations disaster involving the air traffic controllers. Most people are not in unions and parrot their anti union lines like good robots but they are totally unaware of the global vortex of self-feeding credit creation. Bill Gross the bond king said in his recent missive "Estimates suggest global credit in the financial sector exceeds $200 trillion" and "These numbers don't even count the amount of side bets or credit default swaps...which total $700-800 trillion alone."
It is not the unions that are stealing from the middle class, it is the fact that money is no longer real and value is being sucked out of your dollar by unregulated credit magicians, making 'money' with the tap of a computer key.
Anonymous: I am firmly of the monetarist school. If you have more money for the same number of people...
I'm not sure whether that was meant to be tongue-in-cheek, but I was kinda under the impression that this thread was supposed to be about precisely the set of circumstances in which you do NOT have the same number of people - in which, instead, TPTB grossly [and artificially] inflate the number of people.
jack strocchi: the era of declining birth rates
BINGO.
As Steve has often pointed out, American society didn't really change all that much during the 1960s - it wasn't until the 1970s that things went really haywire.
In particular, the Caucasian Total Fertility Rate fell off the age of a cliff between 1970 [when it was still very healthy] and 1976 [when it was suddenly suicidal]:
Statistical Handbook on the American Family
Caucasian Total Fertility Rate
page 72, Table D1-6
1970: 2.385
1971: 2.161
1972: 1.907
1973: 1.783
1974: 1.749
1975: 1.686
1976: 1.652
If you have more money for the same number of people and goods, the price of everything has to rise equivalently... Perhaps because the monetarist explanation is a more intuitive concept, it's harder to grasp for most people.
No, it's because its wrong.
"I have a question: do modern neoclassical macroeconomists assume long-run neutrality for simplicity or is there an honest belief in the concept? I say neoclassical, because it is not just Austrians who reject long-run money neutrality, but Keynes and Post-Keynesian (the most vocal critic that I have read is Paul Davidson)."
http://www.economicthought.net/blog/?p=1155
Of course, the terrible dilemma which we are now facing is that TPTB [for whatever reason, either because of Unitarian-Universalist naivete, or Papist stupidity, or Scots-Irish cunning, or all of the above] chose to replace a people of an average IQ up around 100 with a people [or peoples] of an average IQ down around 80.
Milton Friedman was a neoliberal, but always came out for immigration restrictions so long as we had a welfare state. In a 2000 interview with Peter Robinson he also made reference to the hierarchy of victimhood, and made allusions to differences in innate ability between peoples. Not a race realist, but maybe...a race pragmatist.
As far as immigration and inflation, I don't think there is anything there. The Fed returns very little to the treasury in terms of seigniorage profits. In fact, because of the computerization of personal finance, the ratio of the monetary base (the money the Fed actually "prints"), to gross spending has been falling for decades. More base money supports ever greater spending, because a given amount of base money is turned over at a faster rate, thanks to ATMs and online banking (well until the Fed started paying interest on base money in 2009). This means that $1 of new base money will lead to an ever greater amount of spending as it works its way through the economy—that is, it causes ever more price pressure. Macro is tricky for sure, but there just isn't much profit in seigniorage anymore, the usual explanation are enough to explain immigration.
-Hank the Plant
Jeff completey misses the point, we "print money" (actually, it's just a spreadsheet) because we have a trade deficit, not vice versa.
As Wynne Godley once wrote,
"More fundamentally, the budget balance is equal to the difference between the government's receipts and outlays, but it is also equal, by definition, to the sum of private net saving (personal and corporate combined) plus the balance of payments deficit.
If the private sector decides to save more, the government has no choice but to allow its budget deficit to rise unless it is prepared to sacrifice full employment; the same thing applies if uncorrected trends in foreign trade cause the balance of payments deficit to increase."
http://www.guardian.co.uk/business/2005/aug/28/politics.comment
Concur with the original post and first commenter.
There's a twofold direct subsidy of the corporate elite via an open borders policy.
The first, is wage suppression, which reduces costs. The second is creation of a new mindless iConsumer to buy one more piece of iJunk, which increases revenue.
Of course, the corporate elite privatizes the profits and socializes the costs of open borders, such as destruction of neighborhoods, failing schools, and increased crime.
The dumb, law-abiding American taxpayer pays for these socialized costs, by means such as increased taxes, or possibly life-threatening encounters with "diversity."
The wage-price spiral continued, at a lower level, in the 1980s. Only in the 1990s was it really dampened.
You could argue we still have a mild spiral today, under the rubric 'sticky prices,' as prices have continued to climb despite unemployment rates ranging from 8% to 10% percent for almost three years.
I think the “powers that be” mostly want to retain their powers, which in a democracy means pleasing the largest or most intense packages of voters.
For some time now, I have thought powerful groups advocating open borders should be viewed in transgression of antitrust law and engaged in unfair, anti-competitive wage price manipulation for the benefit of oligarchic corporations.
The Republic is in mortal danger if international companies own our representatives who thereby don't vote in the nation's best interest.
The trouble is, many people have the tendency to impute TOO much cunning and planning to the political class, and thus come up with all sorts of weird and wonderful convoluted conspiracy theories, when the truth, alas, is always much more straightforward (and perhaps not as interesting), the truth is that the political class (no matter what puffed up opinions they have about their own abilities), is simply not very bright.
Basic, basic, Economics 101, the elementary ABC stuff that should be drilled and drummed into every neophyte at the subject by rote, says this - 'The per capita income of any citizen in any economy is purely a function of the producivity per capita of the typical citizen of that economy' and further 'adding persons of lower productivity to that economy lowers productivity levels per capita, and thus per capita incomes, making people poorer rather than richer'. By 'economy', of course I mean 'nation state' -another concept the political class thinks it is 'smart' to disparage.
Anyhow, in that whole worthless, over-estimated (and destructive) subject, this is just about one maxim that is true, always will be true and always has been true, simply because it is an unfalsifiable algebraic division, or tautology if you will, it is true in the same way that 2+2=4 is true, but I dare say 'learned' economists would write page after page ream after ream of pretensious equation stuffed bullshit ('shows thet are 'smart''), to disprove the latter and show that $5 per hour Pdro and his harpy brood 'benefits' you and the US economy.
No the fact is the political class simply isn't very smart, and unfortunately they tend to be lead by the dick by politically motivated charlatans of both the left and right, who bend facts to fit favored hypotheses. The beardie-weirdies probably dceive themselves on some level, but withe politicoes, you see it's vanity, vanity all is vanity.
Polticians like to be thought of as 'smart', so like the Emperor in the fairy tale, they do what 'smart' people are 'supposed' to do ie take advice from charaltans and pretenders who write for the WSJ and 'The Economist'.
Truth be told, the Labour Party (when it actually was socialist back in the '70s), fucked up as much because of the schismatic SDP, than the disasters of Jim Callaghan and the bullying of the Trade Union movement.
In the crucial election of 1983, Thatcher would probably have been turfed out, Falklands or no Falklands, if the SDP hadn't split the left vote in Britain's FPTP electoral system.
Ironically, the defining cause of the SDP was Britain remaining in the EEC, something which the Foot/Benn socialist Labour Party promised to withdraw from.
In those days the Tories were strongly pro-Europe.
Britain's relationship with the EU has fucked up British politics for over a generation.
'Low wages are good for the economy'
Yes. Bangladesh is the living proof of that.
The 1970s inflation was due to Nixon reneging on the Gold Standard, and thus destroying the credibility of the world's entire monetary policy.
Think about it. The shit only hit the fan after 1971, and the Arabs only quadrupled oil prices because they were narked at getting worthless bits of paper in exchange for their bounty (forget about Israeli/American humiliation).
Of course, it's all Ho's revenge since the cost of Vietnam plus LBJ's bullshit plus the moonshots effectively bankrupted America and the jowly swine got down his dirty little tricks by confiscating the world's gold.
Things have never been the same since, compare to the lovely spring garden of 1945-71 to the horrid roller-coaster ever since.
And the poor old unions were turned into folk-devils and whipping boys ,by the economically illiterate and got all the blame ("...it's the same the whole world over ain't it all a bleeding shame, it's the rich what gets the pleasure, and the poor what gets the blame.." British 'Tommy' song of 1914-18 War). Basically unions can no more increase the money supply than can wet sidewalks cause rain. Union militancy was the symptom, not the cause.
The common man is getting screwed by a tiny elite of billionaires. We need a labor government in America. I'd rather have a good job and pension than a cheap iPad, and so would a lot of other people. (And yes, the monetarists are right - it's the overprinting of money to fight elective wars and keep corrupt social programs going that drives most inflation, not labor's having a just price.)
You're forgetting the other side of the plan to keep wage/price down. The exporting of manufacturing jobs. I often wondered why they worked so hard to move them.
Part of the reason was certainly to break the unions. The other reason was to stop wages from rising. Productivity of American workers was never in doubt and studies show that money made by off-shoring jobs was made by tax breaks and government handouts.
Putting consumers into massive debt was another part of the puzzle. Why bail out the banks when they could have simply paid off the mortgages of Americans? It couldn't have been much more expensive.
I would agree with but Los Angeles and Santa Ana had open borders about a decade before back in the 1970's. Los Angeles according to the census was already 28 percent hispanic mainly Meixcan but a lot came from central America mainly El Salvador because of the civil war. Santa Ana was already 48 pecent hispanic in 1980. Anaheim about 17 percent hispanic. In fact the 1980 pardon of illegal immirgants got about 400,000 from the LA area, OC about 90,000 and San Diego about 100,0000, most of these illegals came before 1980 to get Reagan's pardon.
When productivity rises it does not hurt if wages rise. It only hurts when productivity does not rise.
Economists don't seem to care than while productivity rose, wages at the bottom stagnated and only the top percent was able to pay off their debt. They don't care we've created debtor's prison again. They don't care that Americans have become both dependent on government and serfs in their own land.
It's like what has happened for the last thirty - forty years have benefited their class of people exclusively. Oh wait, it has.
And I do not even count the Mexicans who have had some monetary enrichment from coming here. Yeah, they got money which is never bad but they price they've paid is that they did not have to face their own problems.
Mexico is in the toilet partly because we've been their whipping boy and their safety valve.
Currently on BBC2 TV (UK), there is a great documentary series on called simply 'The 70s' which take a cultural and historic look back on that (unfairly) much maligned deca(ye)d.
As a nostalgia trip for me it's great, I was but a young whipper snapper then, and all talk of Ted Heath, power cuts, Lyons Maid, Raleigh Choppers etc brings back many a warm cosy feeling of wet autumnal days cosied in inddors by the grate of the coal fire.
Anyhow, there are some great strangely evocative scenes, especially of the industrial violence and anrachy that pock-marked that decade.
Great sequences of young trade unionists with long hair, big sideburns, big collared floral shirts and sheepskin coats, taking swing at coppers with tall helmets - all set to 1970s music, partcularly the riff of Gary Glitter's (persona non grata now) Rock 'n' Roll. Other shots of the typical 'old school' world war 2 vet British worker of the time. Obligatory flat cap and 'short, back and sides' haircut (brylcreemed). Wearing the stadard 'donkey jacket' of the time. Alawys shown on a bitterly cold day manning a 'picket line' (usually NUPE or TGWU), with a makeshift brazier of an old oil drum and a few lumps of broken-up pallet.
Oh! those were the days!
'Back in the 1970s, I spent a huge amount of time thinking about macroeconomics"
Me too. The wage-price spiral, I concluded, was an artifact of COLA's (automatic cost-of-living adjustments) negotiated by powerful unions in major American industries dominated by two or three major firms. This was organized labor's way of dealing with monetary inflation.
Indeed one of the undisclosed motives of monetary inflation was to get wages down -- real wages not monetary wages -- as the most practical way to arrive at a new full-employment equilibrium. The real price of labor had to fall in response to the increase in the supply of labor caused by women entering the workforce in large numbers.
Today we are in a similar situation in some ways, except now it is immigration and, indirectly, low-wage imports that is increasing the effective of labor (even as labor-saving technologies decrease the demand). The big differences now of course is that powerful labor unions no longer exist and American oligopolists prefer to outsource production to Asia.
Conclusion: there is no danger of cost-push inflation anymore. Therefore Bernanke will eventually realize that the only way to restore full-employment will be to create inflation for a few years. Real wages will fall -- continue to fall I should say -- and the standard of living of American families will continue to fall. QED
This may be true, but another factor driving falling prices without raising wages is automation. To the extent that you can replace 10 semiskilled unionized workers with two skilled nonunion-but-well-paid technicians, that can bring down costs, while also eliminating the kind of jobs that once were a good fit for guys who were bright and dilligent enough to graduate high achool, but not really cut out for college.
In the last several years, we have seen a big drop in immigration (down to zero net migration now, I think), a big injection of money into thebanking system, and not much inflation. The model that says "more money without mass immigration = inflation" seems to be contradicted by what we actually see now. The explanation I have seen is that the financial crisis pulled available money out of the system, and thus the normal process by which more money would lead to higher inflation (more credit, so more dollars chasing the same number of goods and services) hasn't happened. But honestly, I tend to find most macroeconomic explanations to have too much of the smell of just-so stories about them--whatever has been observed can always be explained by adding a few parameters to the model.
Sounds like Occam's butterknife.
It would be much more helpful in separating fact from conspiracy theories if writers included links or at least citations when making grand assertions.
For example, I might well believe retailers have played an important role in boosting immigration, if the first comment writer could link to some position papers from the National Retail Federation (or equivalent) showing plans to lobby for liberal immigration.
Without that, though, I have no idea if it's fact or fantasy and, when reading comments on all blogs, tend to assume "fantasy" unless proven otherwise.
This is a very smart post. There's evidence for this on the trade side as well. For instance, a columnist (propagandist) like Krugman writes a column a week about the lack of jobs and wage inequality. He goes into great detail about progressive tax rates and into even more detail about how government stimulus (deficit spending) is necessary to help the economy recover. But there's never a mention of the trade deficit, of our Asian trading partners gaming the system through government and currency subsidies.
Right now free trade isn't just a good thing in mainstream economics, it's a postulate. It's something you aren't even allowed to discuss without revealing yourself as a hick from the Ozarks.
Economics is driving itself into a ditch. At some point people are going to have a Freud moment, realize that they don't want to screw their mother, and that a "profession" whose sole purpose is to enable greater government debt and control isn't really very useful except to the banking masters.
low, or at least medium, wages are indeed good for the economy. Whereas exorbitant wages of various not-so-useful groups like government officials, executives, lawyers, doctors etc are a major drag on the economy. The biggest problem caused by immigration to Americans is not "low wages", it is "zero wages because no jobs available". As well as crime, corruption, economic dislocation and mismanagement etc. This does not change the significance of keeping wages at the appropriate level as opposed to whatever crazyness the farmers or the unions or the Obama may want them to be.
jack:
I suspect you are giving the elites both more credit and more uniformity of purpose than they really have. More likely, to me:
a. Many influential people in the US are Jews, thanks to the higher average IQ, culture of education and verbal argument, and financial/academic success of Jews in the US. In living memory, some evil people did their best to murder all the Jews they could lay hand on. The Jews whose families survived mostly survived because someone let them immigrate, and the overlap of Jewish refugees from Russia and Eastern Europe being the only branch of their families to survive. and he memory of many counteies turning away Jewish refugees fleeing the Nazis, makes allowing immigration an issue that resonates wirh a lot of these very influential and smart people in rhe US.
b. Businesses all over the US employ illegal immigrants. They get low wage work rhat shows up and actually works, partly because if you're used to being a campesino in El Salvador, no first world job, no matter how shitty or hard, seems all that bad. That makes a separate group of people who will push for immigration (though not immigrant rights, exactly).
I think these two facts explain immigration policy relatively well.
Now, external forces pushing down wages and prices probably do make endless deficit spending work out better, but I doubt that there's some coherent plan from on high to do this. (Also I think a lot of our deficit spending is made possible right now because other countries manufactuing stuff and selling it to us are happy to be paid in debt and ownership of US companies and other assets, as well as US government debt. If that willingness ever goes away, we will suffer a huge fall in our standard of living, I think, as we have to either cut government spending, raise taxes, or live with much more expensive imports.
female boxing but what about male synchro swimming and male
'girls gymnastics'?
The problem with this theory is that it contradicts another anti-immigration argument. You know how they say that immigration is net positive because immigrants contribute more to the economy than they consume in services? Immigration restrictionists strongly object to that. But, if your position is that the immigration is the net money sink, you can't argue that immigrants drive the wages down. A group that consumes more than it produces always causes an overall wage increase. Yes, in some areas wages will decline (lettuce pickers, computer coders), but it will be more than offset by the rise in other areas (public school teachers, prison wardens).
Don't forget that up until the Nixon administration, inflation was seen by many economists as a good thing, and public policy was to encourage a "beneficial" amount. As someone who was majoring in economics during the late 1970's, I remember some professors who still extolled the virtue of inflation in lowering unemployment and redistributing wealth.
The Keynesian theory was that there is a trade-off between inflation and employment. A little inflation tricks workers into accepting real wages that are lower than they appear. Since businesses can raise prices at any time, while labor contracts are long-term, inflation means the employer can stay one step ahead of labor.
A good explanation of this thinking is Robert J. Samuelson's book, "The Great Inflation and its Aftermath."
What Samuelson does not address is WHY policy makers thought full employment so important. IMHO, it was the riots and rising crime rates of the 1960's. The common wisdom of the time was that blacks rioted and stole because they didn't have jobs. So, the government was willing to accept high inflation in a bid to reduce black unemployment and preserve the peace.
Eventually, people began to realize that A) inflation was not harmless, and B) unemployment was not the cause of black misbehavior.
How or even if my opinions mesh with Jeff W's opinions is not clear.
Labour ruined Britain... It's the only first-world country to get money handouts of the IMF in 70s.
Tatcher saved Britain in the 80s, Labour changed to be elected again in the 90s.
Steve, you seem to be using the term "neoliberal" to refer to the Keynsians of the 1970s. I don't think that's the usual meaning of "neoliberal."
Anonymous said...
Milton Friedman was a neoliberal.
If you mean he was once a Keynsian and became a monetarist, yes. And your point is?
The idea that trade protectionism will cause wages to rise is risible. Steve may no longer care about macroeconomics, but no one who does care isn't a free trader.
Jeff is a conspiracy theorist. He thinks that the bad things that happen in life are the result of people with with bad motives having meetings to which he isn't invited.
I don't think there are are a group of people anywhere who have decided to print money. Everyone is against that. Jeff no doubt thinks that these bad guys invented the term "Quantitative Easing" to deceive the public over what they were doing. No, they invented the term to fool themselves.
When I grocery shop I often tell the checker cashier that the reason prices are so high for food is quantitative easing. Try it yourself. You will be met with looks of total stupefaction - evidence that it's the right term.
Everybody knows that printing money is bad policy. But if we just called it by this obscure euphemism we won't have to face up to our actions. It's word magic.
Similarly as good hearted Americans it's hard to keep out all those poor Mexicans who want to clean our toilets. No one wants to face the fact that these Mexican peasants will mean a permanent diminishment of our national wealth. George Bush couldn't face that fact - not because he was evil but because he was weak.
A lot of our national debt has come from unfunded liabilities. It is so much easier to give federal workers pensions by fiat than it is to make then pay like everyone else. It's what we used to call the "path of least resistance". Today it's termed "kicking the can further down the road".
A rich people can avoid thinking about hard choices. The most obvious example is education. I see that there is another education special on Fox News. There will be a spirited debate about standards, teacher's unions, and bureaucracy but no one will mention race. We don't want to think that black people are not smart, and so we don't.
Legislators like to spend money but don't like to raise taxes. So we print money. That's all there is to it. No mystery. No conspiracy. No group of financially interested Republicans who hatch plots at the country club.
France just elected a socialist so as to avoid "austerity". Paul Ryan wants to raise the Social Security age. The French want to lower it. Another example of courage from the surrender monkeys.
Weakness explains an awful lot.
Albertosaurus
This idea that "western governments' have been financing deficits w/ money printing for years" is wrong. Look at the share of national debt held by countries' central banks. Too low to matter. 15% in US in 2000 and 9% in US in 2010, for example.
I admire Sailer for not taking a position on the issue.
Don't forget the Eat Pray Love crowd. They wanted to live in the Third World, and instead of moving there, invited them in for "authentic" culture and enlightenment and cheap domestic labor.
That's a huge part of it, as much as electing a new people and crushing wages. And it is totally unique to White Western women. You don't see Chinese, Japanese, and Korean women, nor Mexican women, nor Jamaican women, longing for an influx of nerdy Finnish Engineers to "Solder, program, patent."
"It was endlessly debated during the 1970s whether unions were causing inflation."
"Was this controversy ever resolved?"
We elected a quasi-monetarist, he slammed the breaks on the printing presses, and inflation receded. Of course he also set us further down the open borders road, and moved us to foreign debt, so that is a very good question you have posed.
I think I agree with the point, though it is complicated. (Letting in more people should bid up the price of at least some commodities, resulting in some inflation, no?) -- I'd just note that one thread that gets lost in all of this is inflation isn't a one-size-fits-all linear metric. Pasting from my blog:
We measure inflation with the Consumer Price Index, which is basically an aggregate, pared down cost-of-living metric. How much it costs, month by month, to buy life’s essentials for the average consumer. If this ‘basket of representative goods and services’ goes up, we call that inflation. As a cost-of-living metric it’s pretty good, and as Krugman notes, alternate approaches turn up about the same numbers.
But ‘how far does a dollar go for the average consumer?’ and ‘how much is a dollar is worth compared to everything else?’ are very different questions.[1] Here’s my take:
When we get down to it, everyone has their own inflation rate, based on what they want and need to buy. Averages here miss a lot of trends. One trend that comes to mind is the current economic polarization and concentration of wealth. Let’s keep in mind, dollars are a commodity like any other, and inflation is just supply-and-demand. It happens when too many dollars are chasing too few goods and services. In 2012, there’s a huge oversupply of dollars held by rich people and investors; stuff that these people want to buy (investments, high-end and luxury goods and services) is getting bid way up.[2] On the other hand, in the lower tiers of society, there isn’t an oversupply of dollars. Official inflation rates are calculated based on cost of living for the majority of people— NOT, e.g., the cost of what people who hold most of the dollars want to buy. It’s an important distinction: in short, we look at inflation from the average person’s perspective, whereas we should look at it from the average dollar’s perspective.
really groundbreaking theory, here! That the rich people might use the government to lower the cost of buying labor! What extremely advanced sort of economic theorizing is this!!?? I need to take a few days to digest this lightning bolt stroke of genius. Pure innovation, here! So it really is all about economics, then? All this supposedly "liberal" social policy is really just investor-friendly economics in disguise! Wow! Stunning leap ahead in politics, my friends! We are indeed on the cusp of new advances in the common debate here, brothers!
So the Left is actually all about rightwing economics from a different angle, then? Wow. I never could have dreamed of such an exotic and yet perfectly viable theory. Never heard of such a thing. Groundbreaking!
Jeff W. doesn't know what he's talking about. Seignorage is tiny compared to the federal deficit. Devaluing the dollar DOES help debtors at the expense of creditors, but that's really only useful for one-off debts and not for continually borrowing from people who will adjust the interest rate they lend at in response to inflation.
http://www.occidentaldissent.com/2012/05/05/atlanta-the-color-of-crime/
I think the most harmful effects of unions aren't around sheer dollars-paid, but rather around ridiculous, incentive-killing and innovation-killing workplace rules. Not to mention the un-fireability of the incompetent, especially in government unions.
Incidentally, we tend to talk a lot about auto and steel unions, when the real disaster has been government unions.
On the subject of "economic myths" I agree they can be the cause of great harm. My favorite myth -- at least I see it as one -- is that corporations owe 100% of their allegiance to "shareholders."
Bullcrap. They owe their allegiance first and foremost to the countries they are based in, and then to their employees. The elevation of "Shareholders" to the be-all and end-all of corporate decisions has been a convenient screen for the Ruling Class to enrich itself massively while hollowing out the United States' manufacturing capacity.
Prostitutes always defeat puritans in democratic politics.
Well said Jack.
The need for growth is underlying drive of the elite and the poison of Western civilization, the creed of the cancer cell to paraphrase Edward Abbey.
Actually, free trade and out-sourcing did more to 'control' inflation. If anything, massive Mexican immigration and its social costs--public services and home loans--made it neccesary to print more.
And free trade is also making us print more since we don't want to pay china and japan back with real money.
Paul Mendez: The common wisdom of the time was that blacks rioted and stole because they didn't have jobs.
I like to refer to this kind of thought as an "exculpatory Liberal myth." There's a lot of them. In the context of this discussion, one would be "immigrants do the jobs that Americans won't do."
'Low wages are good for the economy'
Economy, perhaps, human beings, not so much.
I am always dumbfounded that this argument passes without comment from the left- but then again, many of the left want massive numbers of poor- it is better than the pesky generally conservative middle classees.
The economic case for race-replacing the White Majority does not exist. I mean, how could it? If you engage in an economic debate about non-white immigration, the immigration enthusiasts get to define the terms of debate. And this means that you accept the possibility that there could be an economic argument for race-replacing the White Majority. Think about it:if you accept the immigration enthusiasts economic arguments as plausible, you are basically saying that both economic theory and economic data requires the race-replacement of the White Majority. But, how could this be? It is complete nonsense. Will this economic race-replacement argument apply to the new nonwhite majority? You can be absolutely certain that the nonwhite majority would not allow this to happen...they will make absolutely crtain that Whites remain a racial minority in the US permanently.
The US has no need to import any nonwhite legal immigrants at all.
And don't forget the insane ecological consequences of the economic argument for a massive increase in nonwhite skilled legal immigrants:unending population growth within the borders of the US. Well, eventually there would be a massive ecological collapse in te US.
Severe labor scarcities are a wonderfull thing. Whites would still be 90 percent of the US population, and there wouldn't be the ultimate threat of ecologocal collapse. This is how we should be debating immigration..completely on our terms.
I guess the actual proposition behind this "proposition nation" of ours is just a business proposition at it's root. Everyone and everything is for sale for the right price.
Let's use simpler language. More immigrants = more consumers = larger economy. A larger economy is good for businesses, politicians, bureaucrats, lobbyists, financiers, and other elitists.
The downside of this larger economy is that it centralizes wealth in the hands of the few and pauperizes many, while also (through high rates of immigration) changing the cultural fabric of our society. It's bad for almost the entire population and good for an elite few who profit handsomely through ownership, management, and investment.
The only barrier to such a state of affairs is nationalism. A feeling of camraderie among the social classes, a desire to see one's country thrive, and shame associated with being against the country. Which is why Israeli and Japanese businessmen can't push massive immigration even if they wanted to.
The 1 percent feel no ethnic solidarity with the 99 percent in any Western nation (except Israel). To the extent they feel solidarity with the less advantaged, that solidarity is with minorities, gays, immigrants, and any other group that seems trendy.
"In particular, the Caucasian Total Fertility Rate fell off the age of a cliff between 1970 [when it was still very healthy] and 1976 [when it was suddenly suicidal]"
This corresponds almost exactly to the time interval during which the labor force participation of women of prime child rearing age (18-29) increased by almost 50%.
Coincidence? Of course not.
That's right, low wages are not good for White People. The lower the real wage, the lower the level of real freedom for the wage earner...this is what is commonly known as wage slavery. Completely undermines an serious notion of democracy and self-determination.
If low wages are such a good thing for millions of White Americans, why aren't they a good thing for Bill Gates,Steve Balmer,Carly Fiorino and Gearge W Bush?
I think some of you will find this interesting:Alan Geenspan in his congressional testimony a few years back was very open about why he was for massively increasing legal immigration:because it puts downward pressure on the real wage, and this would keep inflation under control (NAIRU nonesense.) Lefist Noam Chomsky has quoted Greenspan's congressional testimony in many of of his speeches and several of his books to make a point about the evil coporations and their low wage labor policy. However, he leaves out the part of Greenspan's testimony about scab nonwhite labor and real wage supression. Chomsky stops quoting Greenspan's congressional testimony at the exact point that Greenspan blathers on about the wonders of nonwhite scab labor. Whose side is Chomsky on? The Corporations in the end.
Greenspan also openly stated that though his policies might have hurt middle class americans, it made the world more equal.
Excuse me, who gave an un-elected official the 'right' use The US government to do this??
Krugman writes a column a week about the lack of jobs and wage inequality... But there's never a mention of the trade deficit, of our Asian trading partners gaming the system through government and currency subsidies."
Im sorry that's just as cartionishly wrong. Krugman is on your (and my) side.
"China is following a policy that is, in effect, one of imposing high tariffs and providing large export subsidies... what China is doing amounts to a seriously predatory trade policy...
Yet the Chinese have taken our measure, and decided that we won’t act. Until or unless that changes, we’re just whistling in the wind.
I say confront the issue head on — and if it leads to trade conflict, bear in mind that in a depressed world economy, surplus countries have a lot to lose from such a conflict, while deficit countries may well end up gaining.
http://krugman.blogs.nytimes.com/2010/08/16/killer-trade-deficits/
This is good stuff. Inflation must be the most evil policy ever. It is also ancient, the common property of all evil rulers debasing the coin. Solid money was the key to the prosperity of all kingdoms, old and new.
3000 years later we are still debating inflation. Some things really never change.
Krugman is on your (and my) side.
Where has Krugman ever come out against the infiltration of our job market by aliens?
This motivation theory doesn't make a lot of sense after a few thought experiments. Notice that the people who are most in favor of low wages (corporate leadership of the GOP, Paul Ryan, etc.) through policies like massive immigration, union busting, and NAFTA are also those most against expansionary monetary policy and a lower dollar to bring the trade deficit into balance (e.g., Rick Perry's threats to Bernanke). On the other side the people like Krugman who are talking loudest about inequality want the Fed to do much more (e.g., Bernie Sanders wants to get rid of regulated banks themselves choosing most members of the open market committee).
The reason our government and big business support unlimited immigration: The US population is in decline. All business models and tax structures are built on continued growth. Stagnation will kill the stock value of any company. Stagnation will kill tax revenue.
Growth at any long term future cost.
The idea that labor unions are responsible for inflation was very big in industrialized countries with high inflation rates like Britain and Italy in the mid-70's to early-80's period. Something that may have been responsible for that view in the US was the increasing affluence of the Democratic Party and the consequent marginalization of the old union guys in the Democratic hierarchy. Beginning in 1972, the rich college kids and their radical politics took over the party from the working class origin George Meany and Walter Reuther types.
Interesting theory, a knotty little conundrum for your average libertarian:pro-open borders but adamantly opposed to the existence and machinations of the Fed / central banks.
Interesting theory, a knotty little conundrum for your average libertarian:pro-open borders but adamantly opposed to the existence and machinations of the Fed / central banks.
Has anyone famous given us a pithy quote about libertarianism as reductio ad absurdum?
a. Many influential people in the US are Jews, thanks to the higher average IQ, culture of education and verbal argument, and financial/academic success of Jews in the US. In living memory, some evil people did their best to murder all the Jews they could lay hand on. The Jews whose families survived mostly survived because someone let them immigrate, and the overlap of Jewish refugees from Russia and Eastern Europe being the only branch of their families to survive. and he memory of many counteies turning away Jewish refugees fleeing the Nazis, makes allowing immigration an issue that resonates wirh a lot of these very influential and smart people in rhe US.
Everybody wants to pretend that ethnic cohesion (AKA "racism") isn't Jews' greatest asset. Even though it created all the assets everybody does seem to want to list.
>Alan G[r]eenspan in his congressional testimony a few years back was very open about why he was for massively increasing legal immigration: because it puts downward pressure on the real wage, and this would keep inflation under control<
Greenspan stands revealed as a conspiracy theorist.
I saw Cabaret last night. Now more than ever....
“Was this controversy ever resolved?"
I think the spiral-versus-money supply argument was resolved by the concept of the Non-Accelerating Inflation Rate of Unemployment (NAIRU).
Simply, inflation today is a continuation of yesterday’s inflation rate, except that inflation will accelerate if unemployment is below NAIRU and decelerate if unemployment is above NAIRU. In other words, it’s spiral short-term, money supply long-term.
The actual level of NAIRU must be estimated by distributed-lag regression of historical data. Problem: both the level of NAIRU and the lag coefficients may change over time, due to policy, culture or demographics.
My understanding is that demand-pull inflation took off in the 1960s because aggregate demand was pretty close to aggregate supply already and demand increased due to the Great Society and the Vietnam War.
This inflation continued (due to momentum) in to the 1970s. Then inflation got even higher through cost-push from the oil embargo and higher costs for oil and products where oil is a major input.
Unions were a relatively minor factor; but they did help sustain inflationary momentum due to long term wage contracts which factored in inflation (price/wage spiral).
The Fed, by not raising rates to push back against inflationary momentum (before Volcker), committed a sin of omission. The Fed wasn't such a major factor in starting the high inflation to begin with, they just didn't act against existing inflation as soon as they could have.
Summary: inflation was mainly demand-pull (Great Society and the Vietnam War) plus cost-push (higher oil prices).
At least that's my understanding.
~ Risto
Alan Geenspan in his congressional testimony a few years back was very open about why he was for massively increasing legal immigration:because it puts downward pressure on the real wage, and this would keep inflation under control (NAIRU nonesense.)
Does anyone have a cite for this? Thank you in advance.
Anon at 5:07
All you have to go is googe Alan Greenspan Congressional Testimony...or some variation of this with a few extra words thrown in.
Also, vdare.com covered Greenspan's Congressional testimony making a point very similar to mine.
Also, you can google Noam Chomsky Alan Greenspan Congressional testimony. Noam Chomsky quotes Greenspan right up the sentence where Greenspan makes the case for immigrant scab labor for no other reason than it puts downward pressure on the real wage of American Workers..I'm practically quoting Greenspan verbatim. Chomsky quotes Greenspan in the context of of making the case that the Corporations are evil because of stagnant-declining real wages of American Workers. Noam Chomsky was absolutetly intentionally leaving out the Greenspan's comments about the use of immigrants to push the real wage down to fight inflation. I agree with Chomsky on a lot things. But when push comes to shove, he is a mortal enemy of White American workers. You can very easily imagine a scenario where both Chomsky and Greenspan are sitting at the same table next to each other before a Congressional committee on immgration reform, both of them calling for the obliteration of US borders. By leaving out that last sentence of Greenspan's testimony,Noam Chomsky engages in bold-face pubic lying..caught red-handed aiding and abetting the psychopathic Corporations.
I want to point out that Ron Paul's position on immigration is identical to Alan Geenspan's who was a disciple and apparently the young lover of Ayn Rand. Ron Paul of course named his son Rand after the corporate whore and sexual pervert Ayn Rand..yuck.
>Ron Paul's position on immigration is identical to Alan Geenspan's who was a disciple and apparently the young lover of Ayn Rand.<
You may be confusing Alan Greenspan with psychologist Nathan Blumenthal (changed name to Nathanial Branden) as a young lover of Alyssa Rosenbaum (Ayn Rand). Greenspan helped to excommunicate Branden from The Collective, and later was excommunicated himself for acting like a central banker in his role as a central banker. Rand, as far as we know, was but little more a "sexual pervert" than is any other romance novelist who cheats on her husband with a fan - tame by current standards.
As to Rand Paul, in my opinion he has an off-puttingly robotic - Randroid? - personality, besides being a "blame the depression on the unemployed" type of creep.
Well, thanks for pointing out Foreign Policy magazine, another liberal rag, I see. There's an article on all the wonderful countries that already have homosexual marriage.
Why the hell is it that people think in order to be hip and sophisticated we should be like Euros (ohhh, sure, they really have a good thing going there, why don't we just copy their economics?) or our friendly neighbors to the north, Canadians (who are so accommodating as a people they'd assume the position for an ass-whoopin' if you asked them)?
Great mag, that.
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