I don't get what the point of this is. Any government action to boost the economy during a recession "rigs the market and boosts company profits" in exactly the same way. Refusing to do this is Hoovernomics.
On Wed, Oct 9, 2013 at 9:19 AM, Louis Proyect <[email protected]> wrote: > On 10/9/13 9:48 AM, Robert Naiman wrote: > > Woot! Another victory over the Rubin-Summers cabal. Keep interest rates > > low until measured unemployment is 4%! > > > > > http://thehill.com/blogs/on-the-money/budget/327359-obama-to-nominate-yellen-as-federal-reserve-chief > > > > > http://www.newstatesman.com/business/2013/09/quantitative-easing-has-rigged-market-boosting-company-profits > > New Statesman > Quantitative easing has rigged the market, boosting company profits > > We can't go on like this... > By Stewart Cowley > Published 19 September 2013 > > In the history of industrial relations the clash between workers and > management has always come down to: "How can we be paid more for less > work?". This applies to both sides of the employment divide. The > Tolpuddle Martyrs, the first union members, were created out of a strike > to prevent a pay cut and ever since then all industrial disputes have > had at their heart wages and hours worked. > > Karl Marx recognized the conflict and condensed it into the > "‘Exploitation Rate" which essentially asks the question: ‘How many > hours a day does it take for capitalism to make a profit?’ The more > hours a day that a capitalist extracts from each worker in excess of > what is needed to cover the cost of production, the greater the > Exploitation Rate. Capitalists seek to maximize it, workers seek to > minimize it. > > At least conceptually the Exploitation Rate is a useful way to frame > your thoughts around the relationship between capital and labour. But > also it’s actually possible to get an idea how it has changed over time > especially since the onset of the recent financial crisis. Using > averages of hours worked, people employed and the profits made by US > companies as a whole you can get a handle on the time at which, on each > working day, on average, America begins to make a profit. In 2006 it was > about 12:30pm. But since then it has dropped to about 11:45am which > might not sound like very much but in the context of the working day it > is an 8 per cent increase in the Exploitation Rate. > > This effect has allowed American companies to start pumping out profits > even in the midst of one of the worse recessions that the Western world > has ever seen – the stock market has risen by over 90 per cent since its > 2009 trough, while real wages have increased by only about 1.5 per cent. > Workers now work longer and for less and the divisions between capital > and labour have increased. > > We have a terrible tendency to believe that everything in economics > reverts back to some kind of historic norm. This isn’t surprising given > that our experience confirms this; all recessions are mere blips and > normal service can be expected to resume after a brief period of time > and we return to a path of enduring and rising prosperity. But something > has changed in our economies; the nature of employment is fragile – > underemployment through increased part-time working, zero-hour contracts > and no-pay internships have fundamentally reduced the bargaining power > of labour. Rising pay isn’t going to be the thing that starts to reduce > the Exploitation Rate. > > So, if the Exploitation Rate is going to decline again, the only thing > left is an increase in company costs. Western economies (particularly > the US and UK) have benefited from ultra-low interest rates since 2008. > Long-term borrowing costs have been kept low by the use of > unconventional monetary policies like quantitative easing (QE). The > markets have, effectively, been rigged in favour of stock owners and > corporate bond borrowers and to the disadvantage of savers who receive a > fixed income from the bond markets. It’s another factor that has > increased the Exploitation Rate as interest payments haven’t eaten into > profits. > > But this is set to change. The UK has stopped its QE program and the US > is seeking an exit strategy from their Gargantuan pump-priming policy. > So if there is a threat to company profits, and by extension the stock > markets going forwards, it comes from the right-sizing of bond yields > and not from the pay demands of workers. > > To reinforce this, the shock decision by Larry Summers to withdraw as a > candidate for the top slot at the Federal Reserve caused bond yields to > fall, the US dollar to weaken and stock markets to rally. Summers had > been associated with stopping the process of QE earlier than his rival, > the current deputy chair Janet Yellen. The episode only serves to > reinforce the idea that we have a set of asset classes hopelessly > dependent on the continuation of a policy that serves no purpose other > than to perpetuate a collective desire to avoid reality. If I was Larry > Summers I’d be pretty happy right now – at least I won’t now go down in > history as the guy who bust the stock market. > > > > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- Robert Naiman Policy Director Just Foreign Policy www.justforeignpolicy.org [email protected]
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