Inflation and spending habits

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dave_shelby said:
How do you make that conclusion?
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#1. Automation replaces humans so the need for human labor lowers the human competition that would cause wages to rise. There is no scarcity of labor, there is an over supply. And over supply lowers wages.

#2. Foreign labor in developing countries is much less than US labor rates. Production has followed cheap labor. This has exacerbated the over supply of US labor. The only way US labor can compete with foreign labor is matching the lower global labor rate.
 
HDRider said:
#1. Automation replaces humans so the need for human labor lowers the human competition that would cause wages to rise. There is no scarcity of labor, there is an over supply. And over supply lowers wages.

#2. Foreign labor in developing countries is much less than US labor rates. Production has followed cheap labor. This has exacerbated the over supply of US labor. The only way US labor can compete with foreign labor is matching the lower global labor rate.
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I dont see how automation suddenly changed the trajectory of the economy in 1971. Automation has been going on for well over a century. Innovation ends some jobs and opens up new jobs. When factories open it killed cottage industries and sparked migration to urban areas...to new jobs. Recent advances in technology have reduced the need for human labor in a factory but to date there are many jobs and careers opening up. There are people today concerned with AI, for example, and in certain cases it works quite magically. On an economic level however its been similar to the invention of say the threshing machine. There is some popular talk about the "end of work" and its arguable and conceivable but hasn't yet been seen.

Regarding oversupply of labor one massive change was the rise of the labor participation rate for women. This started in WW2 and eventually plateaued in the 1990s. A second factor is immigration, which is also driving down labor rates.

Foreign imports have match up to many of the graphs (https://tradingeconomics.com/united-states/imports). But that is sort of the point of the graph: the US controlled money supply after Bretton Woods moving the world to trade is USD. The question is who benefits from that - people who own corporations or the common person?
 
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Over 2% of Americans - 7 million people - lost their jobs in mass layoffs between 2004-2009. Workers without a college degree are particularly at risk. As production met automation and moved overseas, the broader citizenry enjoyed cheaper products while large sectors of the workforce were left with a loss of livelihood.
www.forbes.com

Millions Of Jobs Have Been Lost To Automation. Economists Weigh In On What To Do About It

Artificial Intelligence (AI) and automation promise to usher in a new era of inexpensive goods, effortless personalization, and freedom from tedium. Yet beneath the surface of innovation a current of economic disenfranchisement threatens to sweep society away.
www.forbes.com www.forbes.com
 
dave_shelby said:
I dont see how automation suddenly changed the trajectory of the economy in 1971. Automation has been going on for well over a century. Innovation ends some jobs and opens up new jobs. When factories open it killed cottage industries and sparked migration to urban areas...to new jobs. There are people today concerned with AI, for example, and in certain cases it works quite magically. On an economic level however its similar to the invention of the threshing machine.
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When do you think computers really started changing things?

The level of automation has increased exponentially since computers came on the scene and their effect is still growing just as fast.
 
dave_shelby said:
Regarding oversupply of labor one massive change was the rise of the labor participation rate for women. This started in WW2 and eventually plateaued in the 1990s. A second factor is immigration, which is also driving down labor rates.
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Sure, both of those are factors, but production leaving the US for cheaper foreign labor is a bigger factor.

All three factors spell doom for the guy graduating high school and getting a good job in the factory to support his family.
 
I remember Nixon who was president at the time in a speech he said, "We are going to change from a manufacturing based economy to a service based economy." I was about 20 at the time I thought is he crazy? You have to produce things to prosper.
 
Dave said:
I remember Nixon who was president at the time in a speech he said, "We are going to change from a manufacturing based economy to a service based economy." I was about 20 at the time I thought is he crazy? You have to produce things to prosper.
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When I was a kid the Reader's Digest was always on the back of the toilet tank.

I don't know why this stuck in my head, but I read in the RD way back then that by the year xxxx (I cannot recall the year) the US would be at global scale wages.
 
Yeah good factory jobs arent to be had. It hits some areas hard. I am in VA and there are more jobs now, especially compared to my parents generation when a lot of men had to travel. Traditional ag jobs cant compete. My dad worked as a machinist and it was great until the 1990s.

I guess I asked the question thinking I know the answer - it seems that the people that own the world benefit. I think that is because, both on a national and international basis, the closer your are to the FED money trough the richer you become. Thats allowed growth and consolidation through M&A, small guys bought out, independence lost. In our world, farmers were pushed by Earl Butz in the 1970s to go big or go home, which meant taking on loans to buy larger equipment and substituting loans for labor. I dont think it benefitted the average farmer.
 
I attended a workshop about 10-12 years ago. The Keynote speaker was a retired cooperative extension agent from Minnesota. He said after retirement he went back and looked. Every farmer who followed his advise to take out loans to get bigger went broke and was out of business.
 
Dave said:
I attended a workshop about 10-12 years ago. The Keynote speaker was a retired cooperative extension agent from Minnesota. He said after retirement he went back and looked. Every farmer who followed his advise to take out loans to get bigger went broke and was out of business.
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The vast majority of people making a living on farming took out loans to get bigger.
 
dave_shelby said:
it seems that the people that own the world benefit. I think that is because, both on a national and international basis, the closer your are to the FED money trough the richer you become. Thats allowed growth and consolidation through M&A, small guys bought out, independence lost.
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I would not put the Fed into the equation. Loan rates are based on your credit quality and loan amounts. Every company, all things considered equal, get the same loan rate.

That said, cheap money from the Fed did lead to more borrowing for more stock buy backs and acquisitions.
 

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