Masthead graphic based on a painting by Gudrun Thriemer.

Sunday, May 31, 2009

Henry C K Liu, "Liquidity drowns meaning of 'inflation'," Asia Times Online, May 27, 2009.

[Liu does it again. This time he is defining "the basic problem of the global economy for the past three decades." Elsewhere, he develops a serious proposal for a labor mobility cartel for workers in labor-intensive industries. But here, he defines the basic problem of the global economy since the 80s:

Low wages even in boom times have landed the world in its current sorry state of overcapacity masked by unsustainable demand created by a debt bubble that finally imploded in July 2007. The whole world is now producing goods and services made by low-wage workers who cannot afford to buy what they make except by taking on debt on which they eventually will default because their low income cannot service it.

All the stimulus spending by all governments perpetuates this dysfunctionality. There will be no recovery from this dysfunctional financial system. Only reform toward full employment with rising wages will save this severely impaired economy.

How can that be done? Simple. Make the cost of wage increases deductible from corporate income tax and make the savings from layoffs taxable as corporate income.

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