THE HOUSING BUBBLE, PSEUDO-RECOVERY, & CHEAP LABOR LOBBY

[unlawflcombatnt]

THE HOUSING BUBBLE, PSEUDO-RECOVERY, & CHEAP LABOR LOBBY

The consumer income and demand that provided the "recovery" from the recession came from increased consumer borrowing, not increased income. This was the direct product of the Greenspan-induced housing bubble. By decreasing the prime rate, he increased the dollar-value of a home that could be purchased with the same amount of money. More money could be spent on the actual selling price of the home, if less was spent on financing charges. Again, this increased the price of homes that buyers could purchase, as well as the number of buyers who could purchase homes. In turn, this increased the DEMAND for homes, which further increased the overall price of homes. This demand increase also increased assessed home values, increasing home equity value. Thus, there was an overall increase in aggregate, nationwide home equity value. This increased the amount of money available for home equity loans. This increase in money available for loans also increased money available to spend. Thus, consumers were able to increase spending, while incomes decreased.

This increase in spendable consumer wealth provided the demand necessary to keep American industry from completely collapsing. Consumers were able to spend more, in spite of declining wages. Had more attention been paid to increasing wages, and less to stimulating unnecessary investment, consumer income might have recovered. It might have recovered enough to offset the huge reduction in demand that will occur when the housing bubble bursts. Unfortunately, corporate profits and inflated equity values were the emphasis of the Bush administration, not consumer income. The inflation-adjusted wage decline has continued unabated under Bush.

Bush's labor-cost reduction policies have actually worsened the consumer income loss.The "cheap labor lobby" has succeeded in greatly reducing aggregate consumer income. They have taken advantage of simple supply-and-demand laws regarding labor. By increasing labor supply, they reduce the price of labor. By reducing labor demand, they further reduce the price of labor. Reduced "price" of labor means reduction in wages for American workers.

The "cheap labor lobby" has reduced American wages by increasing the supply of available workers and reducing the creation of jobs. This has been done by 2 general methods. The 1st method is the encouragement of unrestricted inflow of impoverished workers into the U.S. This increases the labor supply, decreasing labor cost. (There are simply more workers competing for the same number of jobs, driving wages downward.) This decreases average individual wages, as well as aggregate labor and consumer income.

The 2nd method has been OUTSOURCING. The effect of outsourcing is to open up the American labor market to competition with impoverished 3rd-world workers. American workers must now compete globally for wages with semi-slave labor in impoverished foreign countries. American labor has already lost many jobs to foreign competition. Thus, the DEMAND for American labor has also been reduced, due to the shipment of jobs out of the country. (Decreased demand for labor decreases the "price" of labor, which means American wages.) The effect of outsourcing is to decrease the number of jobs, as well as the average wage of those who have jobs. This results in decreased aggregate consumer income, causing decreased demand for American goods, and decreased demand for workers to produce goods.

The "cheap labor lobby" has thus decreased aggregate consumer income by increasing immigration and outsourcing. They have reduced labor demand, and increased labor supply. They have opened up the American labor market to competition with foreign workers. There is NO long-term benefit to ANYONE from such policy. It does not help American industry in the long-run, nor does it help American workers. Corporate America is taking short-term profit gains at the expense of a long-term consumer market decline.

This does not help foreign workers in the long-run, either. Their minuscule wage gains do not make up for the massive American wage losses. This trade-off results in an aggregate reduction in global consumer income, and global demand for production. This, in turn, results in a global reduction in labor demand. The end result is a REDUCTION in global wages, not an increase.

American labor income is not only essential to American domestic consumer demand, it is essential to global consumer demand. Many foreign economies will be hurt if their ability to export to the US declines. And this ability WILL decline if American income is insufficient to purchase their products.

The American consumer market is THE major consumer market of the world. Declining aggregate American income will reduce this market. It will reduce both the American consumer market, and the global consumer market. Bush's "cheap labor" policies are accelerating this reduction. When the "borrowing" bubble collapses, so will the consumer market. It's only a matter of time.

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com /
_____________________
Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.

Building a factory does NOT create jobs. Demand for factory production creates jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.

[Bush_Eats_Beef]

1. Since the "dot com" collapse, "real estate speculation"...

...is the only thing that has kept Silicon Valley afloat.

NOT high-paying tech jobs.

Just some motherf**ker with enough money to roll the dice on a piece of property that he'll unload a month later, without EVER MAKING A MORTGAGE PAYMENT, in order to claim a profit.

I hope these pricks hit the ground HARD when the bubble explodes.

[Sugarbleus]

3. BEB, you said in fewer words what I would have to rant about

I could not have laid it out plainer. You are spot on and this truth is what has me LIVID.

KUDOS to you BEB!! :toast:

[unlawflcombatnt]

4. Silicon Valley & Housing Bubble

Bush_Eats_Beef,

Thanks for the posting and answering a question I had about the Silicon Valley. I had wondered why I didn't hear more about the massive loss of high tech jobs in the Silicon Valley. It seemed like the media had refused to comment on it. It certainly seems like something that would have been newsworthy here in southern California. But I heard little. Apparently the only news worth reporting is that which effects the affluent "investor-class" in this country. How corporations are doing is big media news. But the layoff of 2.8 million manufacturing workers isn't newsworthy. I guess the welfare of the masses just doesn't interest major networks.

The only people doing well at present are the Multinational CEOs and housing speculators. Bush is just sickening when he states home ownership is at an all-time high. Only 17% of Californians can afford a median priced home. Is this his idea of "homes becoming more affordable?" Is this how he defines an "ownership society?"

A recent news article by a San Diego real estate agent stated that 3 out of 4 new homes bought in the San Diego area were by housing speculators. This problem is the result of Bush's economic terrorist policies, and one of it's main architects, Alan Greenspan. The Fed has dropped rates and continued to insure mortagage loans, along with 2nd and 3rd mortgage loans taken out by home speculators. The U.S. taxpayer is forced to subsidize speculators who use 2nd and 3rd home equity loans. The latter is used to make down payments on homes bought exclusively for investment. This artificially raises the demand for homes, and reduces the supply available. This supply-demand interaction is what has raised home prices. It makes it impossible for average Californians to buy homes, because many who already own homes, can afford to buy extra homes. This is being subsidized with taxpayer money, because those home loans are insured by the federal government. As a result, taxpayers are financing their own inability to afford homes.

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

_____________________________
Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.

Building a factory does NOT create jobs. Demand for production DOES create jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.

[acmejack]

2. nice piece, ufc

I agree with your observations on the blog concerning Krugman. He is all that I will miss from the NYT (actually Herbert, too). I might have been tempted to throw the $50 for access to the op-eds, but the concept of paying for Tierney is more than I can bear!

[Karenina]

5. Kick!

:kick: