Losers wanted

​If Italy got out of the Euro now and devalued 30%, those who are not in a position to ask for a raise would take an about 10% real pay cut; but they would be the ones whose work was at risk and they would be trading the lower wages for a lower risk of being fired, so it might be even acceptable. Of course the real problem is that there would be a reduction in foreign investment.

But the UK devaluing 30%, from a situation of near full employment; AND at the same time restricting immigration? That’s a very strange situation. Probably unprecedented. 

With so little unused capacity, even without a strong union action, nearly everyone will be able to negotiate a pay raise to keep up with inflation. 

But that means a spiral wages-inflation; with higher wages the national products aren’t more competitive, so the huge commercial deficit doesn’t get reduced (and can even increase, as many products, i.e. oil, don’t decrease in consumption proportionally to price) causing more devaluation. Rinse and repeat; inflation would virtually never stop.

So, something has to give. Where will the system snap? 

One option: savings. If the monetary and fiscal policy are kept expansive to help the economy, the fixed yield bonds outstanding now will be eaten by inflation. 
On the other end: if rates are raised and budget tightened to stop the fall, investment and the homeownining market will be the ones crushed.

Of course, the state can redirect money where he pleases. If they decide people with a surname starting in M will be taxed until the problem is solved, that will be it. 

But it has to be someone. 

Informazioni su francescodondi

Qui il mio curriculum online. "nerd score"
Questa voce è stata pubblicata in Uncategorized. Contrassegna il permalink.

Lascia un commento

Inserisci i tuoi dati qui sotto o clicca su un'icona per effettuare l'accesso:

Logo WordPress.com

Stai commentando usando il tuo account WordPress.com. Chiudi sessione / Modifica )

Foto Twitter

Stai commentando usando il tuo account Twitter. Chiudi sessione / Modifica )

Foto di Facebook

Stai commentando usando il tuo account Facebook. Chiudi sessione / Modifica )

Google+ photo

Stai commentando usando il tuo account Google+. Chiudi sessione / Modifica )

Connessione a %s...