Thursday, December 17, 2009

Are We so confused?

The entire Concept of Minimum Wage should be reevaluated by Keynesians, as the most notable part is ignored. This consists of the fact that Wage levels are differentiated by Skill levels; alteration of the Minimum Wage brings on the Shelving effect, where labor insists on separate Wage levels based upon Skill level. Skilled technicians demand a Pay raise to correspond to a increase in Minimum Wage, and the entirety of the labor force is universal in refusal of a reduction of Pay at any level. Labor relations are not as simple as Economists would outline, and Worker incentives demand a sophisticated Wage response. Economists would claim that these effects are lost over the entirety of the economy, but I have found Wage Demands lower, but fundamentally ingrained within the labor ethic.

Many will not detect a relationship between this paragraph and Post, and the previous segment. The fact of the matter is the Banks changed the nature of the mortgage contracts, by the post-acquisition of cheaper funds. The banks’ refusal to alter the contractual commitments under the impress of cheaper funds has relieved any necessary Consumer commitment to fulfillment of the obligations. Banks should realize that their refusal in effect reduced artificially the Wage Income of the mortgage holders, by their insistence on full recovery, though their Costs had lowered. I am probably the only Voice who would frame the issue in these terms, but Economists will attest that there has been a reduced Return for Wage earners paying older mortgage contracts. The Cost of borrowing Cash must stay relatively stable for Wage repayment to stay the same, without loss of Wage from Employment.

The Fed shows its confusion about the above issue through its timing of elimination of the adopted platform of financial aids. The zero interest rate should be the first to go, where a correct Cost of borrowing Cash is introduced, and stabilized by extraordinary assets purchases. Nothing will be accomplished in the financial sector until a viable Cost is given to obtainable funds. It is all a question of putting the Cart before the Horse, and the Horse is winded. Forward guidance on rates is completely off, with a necessary Statement of the willingness to adopt extreme rates to forestall Inflation missing from the discussion. Sustained economic growth cannot be realized within sustained Inflation, and the Fed needs to provide proper emphasis. lgl

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