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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Profits and wages

Posted by WARREN MOSLER on July 26th, 2011

Couple of things.

First, corporations currently have low propensities to spend their income, so this means we need a deficit that much larger than otherwise.

Second, this goes back to the ‘labor market’ not being what’s called a ‘fair game’.
That’s because people have to work to eat, while business only hires if it can make a desired rate of profit. So game theory tells us that real wages will stagnate without some form of external support:

Economists at Northeastern University have found that the current economic recovery in the United States has been unusually skewed in favor of corporate profits and against increased wages for workers.

 
In their newly released study, the Northeastern economists found that since the recovery began in June 2009 following a deep 18-month recession, “corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent” of that growth.
The study, “The ‘Jobless and Wageless Recovery’ From the Great Recession of 2007- 2009,” said it was “unprecedented” for American workers to receive such a tiny share of national income growth during a recovery.

http://economix.blogs.nytimes.com/2011/06/30/the-wageless-profitable-recovery/

6 Responses to “Profits and wages”

  1. Benedict@Large Says:

    So the recession has ended, and the depression has begun.

    Reply

    WARREN MOSLER Reply:

    like the miracle of making the blind man lame

    Reply

    Tom Hickey Reply:

    @Benedict@Large,

    No, it was a depression to begin with, just masked for awhile and not even very well if you look at housing and unemployment figures. This is the second leg down. And like the first Great Depression, the world is in a precarious state. This is already a global depression.

    The sad thing is that this time enough is known to avoid it, or at least greatly mitigate it. But that is not happening to the degree that is needed and the present push for austerity promises to make matters much worse. Maybe this time we will learn something.

    Reply

    WARREN MOSLER Reply:

    the problem is somehow the lesson spun was ‘stimulus’ doesn’t work, when it obviously added savings and income to the economy, to the penny.

    Reply

    Clonal Antibody Reply:

    @Benedict@Large,

    See my two replies to @JohnE here

    Reply

  2. senexx Says:

    I agree that it is quite possible to turn into a global depression (looking likely at this stage) since the EU and US seem to be gluttons for punishment and not listen to the voice of reason i.e. us. Meanwhile read this nonsense http://goo.gl/fb/xf2KZ whilst technically true, its all supply side. Much more of that on that site with explanations.

    Reply

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