It is amazing what a day can bring in the every changing world of the financial markets. One day Wall Street is up because inflation is contained(?). FOMC minutes was not as hawkish as expected and a the larger than expected trade gap means more cheaply made goods and services-> higher profit margins for all. The next day Wall Street is down because inflation is contained(?). A weaker increase in retail growth, 0.3% instead of 0.7% and a lousy 5 year not auction was just too much negative news fir Wall Street to Stomach. Wall Street has its wish. Inflation and inflationary expectations are in fact contained. Richard Fisher, Dallas's Fed President, made it clear that he is “comfortable” with current pace of monetary policy. BushCo's (lack of enforcment) trade policy, “off-shoring is good for America” and GE's tax breaks should have been enough to blow the lid off of Wall Street.
Is it possible that that “wall of worry” Wall Street is climbing has in fact been made by themselves? Has Wal Street come to the conclusion that their high expectations has be met by slashing the domestic US workforce to the point were real output has been severely eroded? Nah, Wall Street will fall back on their usual excuses. You know; “geo-political risk”, high worker productivity, high energy cost, high commodity prices and of course health care cost and blame every thing on (a Republican control) Washington DC.
“Maybe I ought to get another hat”.
Wall Street shouldn't be surprised that both trade and government deficit are large. They pushed for the supply-side economic recovery package. The reason why the Employment Situation Report is not a good indicator of current economic slack is because off-shoring has thrown this report off. Using the Keynes community view:
"The traditional theory maintains, in short, that the wage bargains between the entrepreneurs and the workers determine the real wage; so that, assuming free competition amongst employers and no restrictive combination amongst workers, the latter can, if they wish, bring their real wages into conformity with the marginal disutility of the amount of employment offered by the employers at that wage. If this is not true, then there is no longer any reason to expect a tendency towards equality between the real wage and the marginal disutility of labour."
Off-shoring has removed the equality between real wages and the marginal disutility of labor. In fact, so has the large influx of illegal aliens and employers willing to hire them.
Is “Globalization and Trade” an oxymoron? The end result of trade is specialization and the end result of off-shoring is income redistribution. With regard to trade, one can ask what are the factors making one country more productive (in a single sector) than another. Neoclassical models are used to answer this question. However, no one has looked into the off-shoring/illegal alien influx effects on US economy. There is the “wave of the hand” type argument that it is good for the economy because it lowers the final price consumers pay.
I'm going to use my blog as a spring board and try to cast the off-shoring/illegal alien effects using Neoclassical model and create some sort of controversy in the economic universe.
Is it possible that that “wall of worry” Wall Street is climbing has in fact been made by themselves? Has Wal Street come to the conclusion that their high expectations has be met by slashing the domestic US workforce to the point were real output has been severely eroded? Nah, Wall Street will fall back on their usual excuses. You know; “geo-political risk”, high worker productivity, high energy cost, high commodity prices and of course health care cost and blame every thing on (a Republican control) Washington DC.
“Maybe I ought to get another hat”.
Wall Street shouldn't be surprised that both trade and government deficit are large. They pushed for the supply-side economic recovery package. The reason why the Employment Situation Report is not a good indicator of current economic slack is because off-shoring has thrown this report off. Using the Keynes community view:
"The traditional theory maintains, in short, that the wage bargains between the entrepreneurs and the workers determine the real wage; so that, assuming free competition amongst employers and no restrictive combination amongst workers, the latter can, if they wish, bring their real wages into conformity with the marginal disutility of the amount of employment offered by the employers at that wage. If this is not true, then there is no longer any reason to expect a tendency towards equality between the real wage and the marginal disutility of labour."
Off-shoring has removed the equality between real wages and the marginal disutility of labor. In fact, so has the large influx of illegal aliens and employers willing to hire them.
Is “Globalization and Trade” an oxymoron? The end result of trade is specialization and the end result of off-shoring is income redistribution. With regard to trade, one can ask what are the factors making one country more productive (in a single sector) than another. Neoclassical models are used to answer this question. However, no one has looked into the off-shoring/illegal alien influx effects on US economy. There is the “wave of the hand” type argument that it is good for the economy because it lowers the final price consumers pay.
I'm going to use my blog as a spring board and try to cast the off-shoring/illegal alien effects using Neoclassical model and create some sort of controversy in the economic universe.
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