Thursday, January 3, 2008

First unambigious sign right butt cheek.

The first post I wrote was on economics. I skated around the weakening of the dollar, wrote some on the purchasing power and the meaning of irresponsible outsourcing and speculated on the importance of the inflationary signs.

Now, according to Mark Meadows at Tempus Consulting in Washington, we have stagflation.

What the shit is stagflation, you ask? It's when an economist tries to conflate two very alarming terms in order to make them seem, you know, cutesy. Stagnation is the first word being combined, in this case, the stagnation of manufacturing and business growth (read 'down-sizing, ahoy!') and the inflation of cost. If you don't know what that means for you, the first post covers in detail the inflation I've been suffering, as a model. You also might think Great Depression. The cost of everything goes up, and earning power goes down. Since we have outsourced everything from food (let's not even talk about the safety issues when your food's been to more countries than you have, and not been inspected in any of them very closely); we've outsourced clothing, growing at a phenomenal rate. In 2005, the share of the Chinese in our manufacturing there grew 46% in the first five months of the year. I'm going to do everyone a favor and skip the lecture on oil.

I picked food and clothing for the very specific reason that you need both to live, even should you happen to be lucky enough to still own your house. (I'm not even going to rehash what I had to say about the credit bubble. I hope you can hear me grinding my teeth from where you're sitting.) Let's pretend that the US does begin doing more of its own manufacturing; the travel costs on the lifestyles we're living (look at the 'Made in' stickers on your stuff, the stuff that has it) are going to rise, in a classic inflationary move, and the cost will be deflected onto the consumer, 'cause the company sure as shit is not going to swallow the cost. So the cost of food will go up, as well as the cost of gas, causing the middle-class and lower to continue to tighten their belts and begin to give up on luxury activities like going to the movies, or out to eat. Some people are, of course, going to keep doing it until they lose their home or whatever they might be wagering on (bloody stupid stock market; gambling should not be the model for responsible economic growth, no matter how pretty it looks).

The service industry has already taken a hit with their holiday sales, so the idea that this is just going to hurt a little is as equally ironic now as it was the last time I sat for three hours getting my lower back tattooed over my kidneys. Remember, this is the hysterically profit-hungry environment that (and I'm sorry, but the BLS only has statistics for the first three quarters of 2004) laid off 1,079,148 workers due to outsourcing. Outsourcing is basically better profits somewhere else. Unfortunately, the survey is anonymous for the companies, or I'd be gleefully cursing at someone stupid, right now.

Here's where I put on my tin foil lined prognostication cap: What happens when the service industry gets hit heavily?

Well, layoffs. Of course, this is a projection, but it's a projection made on the idea that the service industry is staffed with jobs that are highly outsource-able, can be done by computer, are becoming obsolete with the rise of PC shopping and communication, and are classed as tertiary sector economics. Here's an interesting fact (the truth is up for debate.) Tertiary sector activities are sometimes considered wealth using, not producing, and as such, more liable for downsizing due to outsourcing. Of course, this is from Friedman, and as such is trash advice. Unfortunately, it's popular trash advice. David Friedman's father, Milton Friedman, is the father of the Chicago School of Economics. Read The Shock Doctrine and look at Katrina if you'd like to get a good feel for the economics that father-son duo advocate.

I guess the high unemployment rates will do us some good, but if the service industry starts experiencing unemployment, it turns an entire group of workers who both do not have other skills and are not being reasonably offered the chance to get those skills, creating a class whose shot at finding work is.... minimal, to say the least.

The manufacturing jobs from the original BBC article are Secondary sector jobs, which Friedman tends to class as wealth producing (because the goods produced are owned by a class that is situated to sell them and manipulate the money more directly.) The drop could be more, but the fact that investment managers (creative money re-distributors) have broken down to call it the first definitive sign of recession (or stagflation, or whatever the hell label meant to keep everyone spending away as long as possible) is indicative of a long winter, if you know what I mean.

My advice is the same here as it would be to my neighbors, cause we are some poor bastards: trade, hoard and create community. Because the poor are who saddles the blame and cost of these kinds of things.

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