Wednesday, March 01, 2006

Fake "Lock Outs" Fueling Worker's Wage Deflation

By Elaine Meinel Supkis

Yet another union unilaterally "locked out" except there is no real lock down. In the old days, factories closed. Today, a "lock out" simply prevents unionized workers from entering, scabs come in easily. Ergo: all companies are now simply eliminating the union workers, ruthlessly.

From AP:

AK Steel locked out nearly 2,700 hourly workers after their contract expired without a new agreement early Wednesday, and will use temporary workers to continue filling orders, a company spokesman said.

AK Steel Holding Corp. and its union workers disagreed over the company's demand that it be able to reduce the work force, freeze pensions and require employees to pay more of their health costs, among other issues.

Union members had recently voted to allow union leaders to authorize a strike if negotiations failed.

Salaried employees and temporary replacements will allow the company to continue meeting customers' needs for now, said company spokesman Alan McCoy.
This is in Ohio. Ohio voted for Bush, votes for GOPers all over the place, the voters there sneered at Democrats who supported unions. Well, the birds will come home to eat the carcasses. As businesses prevent inflation by dropping wages and benefits, this squeezes the workers mercilessly. Up until this year, the reckless tax cuts plus below the rate of inflation loans kept America happy and pleased with this magic money making machine that allowed us to live trillions of dollars beyond our means.

Now the brutal work of depressing worker's wages across the board begin in ernest, world-wide. All businesses must reduce "costs" and they can't do a thing about energy costs but they can cut wages which is ridiculously easy in this "free trade" environment. All one has to do is move the factory, threaten to move it or suddenly shift business goals, giving an excuse to drop workers off the cliff.

All depressions start with depressing wages.

To cover the near trillion dollar trade deficit, our government conjoured out of thin air an extra trillion dollars to squirrel away overseas. Ergo=global inflation since the dollar is the chief currency in the world. Europe is in a panic, their strong currency, thanks to Germany being allergic to inflation, is proving to be much more attractive than the dollar if one is selling energy which is what the Americans are desperately trying to devalue by spending fake money for it.

The plight of American unions is going to reverberate across the planet. In America, foolish voters in the deep south thought they were oh-so-clever when they undercut unions by passing "right to work" laws that caused many unionized businesses to relocate to where they didn't have to pay good wages. Because many industries were still unionized up north, the semi-slave labor states' workers enjoyed fairly decent wages in a low-cost environment, the dollar in the south buying more than one in the formerly prosperous north.

But as the unions expire up north and wages go south, the ruthless cost cutting is biting much harder on southern wage earners who are being undercut by foreign labor.

Hither to, all this was masked by cheap loans. Workers were given easy credit which they collectively ran up to its limit, desiring a nice lifestyle even in the teeth of declining wages. This is now being withdrawn because there is no more room for debt to grow once the value of housing begins to stall and then drop.

And drop, it will. Just like in the 1920s which saw the same sort of activity! The money from trade will still slosh around the planet but it will be of decreasing value and already, Iceland has been rocked by a collapse of their currency's value, like the USA, they run a trade deficit with the world, so they have to attract investors willing to buy their currency. This is causing ripples across the investment universe.

But it is but a tiny stone dropped into the currency cauldron.

From Joongang Daily:
With the local currency strengthening sharply against the U.S. dollar, Korea's export companies are screaming here and there. Changes in the won-dollar rate are linked directly to the exporters' gains and losses. When the companies exchange their dollar-denominated export earnings to the Korean currency, they lose money in proportion to the won's appreciation.

The won rose by 4.1 percent against the American currency during 2004 and surged 11.75 percent last year. And the local currency's value has jumped nearly 5 percent already this year. At the end of 2003, the dollar was worth about 1,200 won. Now, the dollar is worth only 960-970 won. So if a company now exports goods worth $1, the won earnings will be lower by 240 won than the won it earned in 2003. Expand that value to $10 billion, and the lost revenue amounts to 2.4 trillion won because of the currency appreciation. It is a wonder that Korean companies were able to keep on raising export volume with such a handicap.
As the dollar sinks in value, it becomes harder and harder to maintain the fiction that the dollar is strong. Japan still manages this because their corrupt American/Japanese mutual suicide pact remains nearly totally hidden from view, this being a deliberate machination. Poor Korea can't conceal a trillion useless dollars nor do they have the political power of buying American politicians in order to conspire at keeping a nifty trade imbalance going. Japan's "depression" coincided with a strong yen vis a vis the dollar thanks to Clinton and Rubin balancing the budget. The Japanese couldn't buy American political debts!

Now, it is a tidal wave. Too much of a good thing, though, since the GOP has decided to print infinite amounts of dollars and even Japan can't absorb this flow. Enter China. They happily took on this task so they could have a lever of control over American foreign policy.

Because the GOP and Bush are stupid, they don't understand this so they irritate the Chinese who are tremendously irritated this week because of Taiwan shutting down all talks on reunification. So the Chinese expect the Americans to twist arms in Taiwan on their behalf which isn't happening so they will twist our currency tail.

And this will cause a cascade of events because the dollar can't exist as a currency except if everyone claps their hands and believes in Tinkerbell who is tinkering with the value of the dollar by concealing the M3 figures, figuring that people are really stupid and won't notice the printing presses running at Mach 10 speed.

Everyone in the upper echelons may laugh at me and my silly cartoons but just remember.

Cassandra was always right.

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