The Labor Market Is Not Self-Regulating; Governments Must Support Worker’s Fight For Higher Wages is part 2 of the 2 part interview that The Real News Network has with Heiner Flassbeck, Director of the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development (UNCTAD). Part 1 is in my previous post Low Wages And High Unemployment Are Paralyzing The Global Economy.

Quoting from Flassbeck’s remarks:

One should remember there is an interesting story in a new book that came out called The Assumptions Economists Make. The author shows that in 1948 there was a kind of Detroit consensus in the automobile industry which said that the workers should systematically get the productivity increase plus an inflation compensation. So the compensation should rise with inflation plus productivity. This was a good formula.

If you revise it a bit and say it should be a productivity trend, a four or five years’ productivity trend, should be extrapolated one year or two years, that should be reflected in nominal wages plus the inflation target of the economy, then you get a perfect formula to stabilize a growing economy and to get back into a growing economy. We have to relearn this lesson.

In these two interviews Paul Jay, the interviewer, interjects some of the arguments against what Flassbeck is arguing. This gives Flassbeck the opportunity to acknowledge the other side of the argument and to explain why it is wrong.

I am not nearly as sanguine as Flassbeck is that the situation can be turned around politiclly stating with the upcoming election for President and U.S. Senator from Massachusetts. Romney is so good at explaining the false economic doctrine and Obama is so weak on explaining the correct doctrine, that the electorate has a chance of falling for the wrong medicine, If even some economists are still plugging the old, failed doctrine, how can we get the public to be smarter than they are.

The only hope is that the the economists are blinded to reality because of what they perceive as their own short term financial interests, whereas the public has a chance to have their eyes opened by the current financial disaster for them.

The Real News Network has the video Low Wages And High Unemployment Are Paralyzing The Global Economy is the first part of a two part interview with Heiner Flassbeck Director of the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development (UNCTAD). Part 2 is in my subsequent post The Labor Market Is Not Self-Regulating; Governments Must Support Worker’s Fight For Higher Wages.

Quoting from Flassabeck’s remarks:

Let me explain that briefly. Take the United States. In the United States, which has also very low—everybody talks about high degree of inequality in the United States. But at the same time, unemployment has jumped. But it has jumped not due to high wages before, but it has jumped due to the financial crisis. But now you have high unemployment that puts pressure on wages, because the power is in the market, in the labor market, such that wage earners have nothing to negotiate for, and so they put pressure on wages. If wages fall, incomes fall for the average American household, and if incomes fall, consumption will fall. If consumption falls, investment falls, and the economy will not get out of recovery but deeper into recession.

So this is obviously a big problem with the market economies, because every good economist would say, well, if you have unemployment, then there should be pressure on wages, but if wages have never risen before and there’s nevertheless unemployment, then you’re in trouble somehow. And that is why the president and others will have big, big difficulties to get out of the slump. And that is why monetary policy does so desperate things as they’re doing now.

This is all so logical and easy to understand, but it flies in the face of what people think they know about economics.

In my list of favorite quotes, I have the following:

Mark Twain

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

This makes so much sense, that it is hard to believe there is any opposition to this.

Foolish talk about how we cannot cut anything in the military budget won’t help smart decisions to get made.

It’s also funny how the opposition keeps telling us that government doesn’t make jobs, but if we cut military spending, Massachusetts will lose jobs. Does the sitting Senator not know that the government runs the military?

I am going to have to look up which committee a Senator of 2 years seniority is the ranking member as Scott Brown claims he is. His Senate web pages list 4 committees for Senator Brown:

• Senate Committee on Armed Services – Ranking Member John McCain
• The Committee on Veterans’ Affairs – Ranking Member Richard Burr
• The Homeland Security and Governmental Affairs Committee – Ranking Member Susan Collins
• The Senate Committee on Small Business and Entrepreneurship – Ranking Member Olympia Snowe

www.govtrack.us does list some subcommittees on which Senator Brown is the ranking member.

• Senate Committee on Armed Services – Ranking Member, Subcommittee on Airland
• Senate Committee on Homeland Security and Governmental Affairs -Ranking Member, Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security

It is odd how the other candidate claims to believe in the same things Elizabeth Warren espouses here, but, when the chips are down, always manages to come up with some reason to vote the other way.

He won’t compromise his other principles, but when it comes to women’s issues he will always compromise on those.

I am also working right now to do something about that.

The video from YouTube, Why Obama Now, in my previous post The Barack Obama Who Can Explain It All, has engendered a lot of discussion.

One poster made the claim:

CLINTON DEREGULATED THE BANKS AND MADE THEM GIVE THOSE BAD MORTAGES TO THE PEOPLE WHO COULD NOT AFFORD THEM

I’d turn down the volume of the above quote, but then it would not have been faithful to the tone of the person who made the comment.  I had been arguing from memory that this was not true, but I decided to do a little research to enforce my point of view.

My research took me to the WikiPedia article on The Community Reinvestment Act.

The Community Reinvestment Act (CRA, Pub.L. 95-128, title VIII of the Housing and Community Development Act of 1977, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.^[1][2][3] Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.^[4][5]

The Act instructs the appropriate federal financial supervisory agencies to encourage regulated financial institutions to help meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation (Section 802.) To enforce the statute, federal regulatory agencies examine banking institutions for CRA compliance, and take this information into consideration when approving applications for new bank branches or for mergers or acquisitions (Section 804.)^[6]

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In July 1993, President Bill Clinton asked regulators to reform the CRA in order to make examinations more consistent, clarify performance standards, and reduce cost and compliance burden.^[51] Robert Rubin, the Assistant to the President for Economic Policy, under President Clinton, explained that this was in line with President Clinton’s strategy to “deal with the problems of the inner city and distressed rural communities”. Discussing the reasons for the Clinton administration’s proposal to strengthen the CRA and further reduce red-lining, Lloyd Bentsen, Secretary of the Treasury at that time, affirmed his belief that availability of credit should not depend on where a person lives, “The only thing that ought to matter on a loan application is whether or not you can pay it back, not where you live.” Bentsen said that the proposed changes would “make it easier for lenders to show how they’re complying with the Community Reinvestment Act”, and “cut back a lot of the paperwork and the cost on small business loans”.^[36]

Can you interpret Lloyd Bentsen’s remark, “The only thing that ought to matter on a loan application is whether or not you can pay it back, not where you live”, in a way that encourages banks to make bad loans?

No the banks are the ones who figured out, on their own, how to make money from loans that could not be paid back.

If you read the WikiPedia article there are a lot more details of the history of changes to the act. I encourage you to read the whole thing, because what I have quoted is just the part that proves my point.

Why Obama Now has animated one of Barack Obama’s speeches. Thanks to RogerS for bringing this to my attention.

In the last debate, Mitt Romney seems to have realized that he cannot sell his plans to the American people. That must be why he is pretending that he has a different plan.

Why wouldn’t we believe the future leader of a party that has refused for the last four years to do anything like what he proposed in the debate? Why wouldn’t they be able to reverse course and suddenly try to do what Obama has been trying to do and they have been blocking? I would think the fact that they have lost all credibility on these issues would be enough reason, but that’s just me. I would put more credence in what they have been trying to do when they were not running for election than what they promise to do if you only give them complete control for the next 4 years.

Remember that the “con” in conman comes from the attempt to gain your confidence in the con(fidence)man so he can be free to rob you blind.

The Real News Network has the article Chavez Wins After Massive Voter Turnout.

I thought the US media told me that Hugo Chavez was very unpopular in Venezuela. Yet the observers say the election was fair and honest, the turnout was high, and Chavez got 54% of the vote.

The opposition party was trying to sell the same complaints against a sitting president as the Republicans are trying to sell against ours. Why were 54% of Venezuelans able to see the reality? Is it because Hugo Chavez is a real socialist and the Venezuelans have seen what real Capitalism can do to them?

About the only thing that could go wrong is that the capitalists in Venezuela convince the capitalists in the USA to make another attempt on Chavez’s life. Chavez at a UN appearance didn’t say that George W. Bush had the smell of the devil without good cause.

The Real News Network has the report General Strike Solid in Greek Town Chania. The article has links to other videos covering the situation in Greece.

The video from this article is shown below:

I wonder if my cousin who has new Greek inlaws because of his daughter’s recent marriage still believes what these people tell him about how lazy the Greek citizens are and how they deserve the economic disaster that has been forced upon them.

Because these are my relatives who are giving me grief over these reports, I will refrain from my usual sarcasm except to wonder if my cousin would agree that the lazy Greek doctors ought to have their salaries cut in half and needed medical supplies withheld. Would he subscribe to the same practices to rein in medical costs in this country?

I found some Elizabeth Warren supporters who were fooled into thinking that there was even an iota of truth in Scott Brown’s false interpretation of Warren’s work on the case related to victims of asbestos related illnesses.

I recommend my previous post Fact Check: In Travelers Case, Warren Fights for Victims’ Compensation as an antidote to Brown’s unethical interpretation.

Here are two recent, related political ads from Elizabeth Warren.