1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar
Source link: http://archive.mises.org/13068/the-greek-plague-sticky-wages/

The Greek Plague: Sticky Wages

June 24, 2010 by

Central banks — created ostensibly to combat downturns caused by sticky prices — are the reason wages are sticky to begin with. Because workers are accustomed to losing purchasing power through central-bank inflation, they fiercely resist any reduction in nominal wages. FULL ARTICLE by David Howden

{ 10 comments }

Bogart June 24, 2010 at 10:07 am

The Greeks themselves have no choice. They simply live as best as they can by ignoring the absurdly complex regulations and taxes their government drops on them.As for the Greeks suddenly or ever really paying taxes in full, forget about it…. I have met several Greek business folks in NYC and they keep cash in the safest place they have, in their shirt pocket. They only use banks to for transactions they want seen by the government and they convert most savings to physical assets. The advantage is they can not be charged with the payment of sales taxes and the like and they only do above board transactions with non-friends. With friends they do all under the table.So the only way to reconcile the whole mess is to do exactly opposite what Obama, Ben and the ECB are doing which is to buy Greek bonds. If no one buys the bonds, the government can’t issue debts, pay people etc and Greece will be forced to clean up its act through defaulting on their current bonds and laying off government workers.

Bruce Koerber June 24, 2010 at 9:24 pm

That’s a good point. Sticky prices are the result of the Keynesian quackery and fulfil the Keynesian quackery.

ang-li June 25, 2010 at 6:15 am

TIMEO DANAE ET DONA FERENTES

P.M.Lawrence June 25, 2010 at 11:01 pm

That should be “DANAOS”.

P.M.Lawrence June 25, 2010 at 11:00 pm

“Central banks — created ostensibly to combat downturns caused by sticky prices — are the reason wages are sticky to begin with”.

Wrong. It’s one reason they are sticky now, but they were sticky even in the days of other stable prices, e.g. the 19th century bullion standards, or falling prices like Britain in the late 1920s. This was because wage earners (then, anyway) did not have much scope to settle for less before they couldn’t make ends meet.

David June 26, 2010 at 8:29 am

The solution to sticky wages is laying off workers. Wages un-stick real quick when it’s a choice between a lower wage and no wage.

Did the British govenrment perhaps intervene in this process in the late 1920s, like Herbert Hoover did?

FatBeard June 27, 2010 at 7:58 pm

The solution to sticky wages is laying off workers. Wages un-stick real quick when it’s a choice between a lower wage and no wage. David

And that is why I moved on from Austrian Economics. You guys assume that since inflation is bad (that really depends, BTW) then deflation is good. Actually, both inflation and deflation are part of the conventional money and banking paradigm that violates Deuteronomy 23:19-20.

FatBeard June 27, 2010 at 7:06 pm

Speaking of “sticky”, debt is sticky. Unless you advocate that the debt ratcheted up during the boom is forced to fall during the bust then you are addressing only 1/2 the problem. See Deuteronomy 15 and Leviticus 25 for the concept of debt forgiveness. However, many of the savers would justly complain if debtors were forgiven so here is a solution that fixes everyone:1. Set reserve requirements to 100% to shut down the counterfeiting cartel. 2. Create a sufficient amount of new legal tender and distribute it to every adult. This would:a. enable underwater home owners to pay down their mortgages to market price levels. b. compensate savers for years of artificially suppressed interest rates. c. Fix the banks in nominal terms. d. Fix state tax revenues.Inflation risk? Maybe, but if banks were put out of the counterfeiting business via a 100% reserve requirement then the only source of new money into the system would be under government control, the Fed and US Treasury.Long term solution? Allow liberty in money creation, usage, and acceptance. Government money should be legal tender for government debt only (“Render to Caesar …”) while private money would be allowed to serve the private sector.

FatBeard June 27, 2010 at 7:16 pm

[ignore above comment; white spaces was deleted]

Speaking of “sticky”, debt is sticky. Unless one advocates that the debt ratcheted up during the boom is forced to fall during the bust then he is addressing only 1/2 the problem. See Deuteronomy 15 and Leviticus 25 for the concept of debt forgiveness. However, many of the savers might justly complain if debtors were forgiven so here is a solution that fixes everyone:

1. Set reserve requirements to 100% to shut down the counterfeiting cartel.
2. Create a sufficient amount of new legal tender fiat and distribute it to every adult.

This would:
a. enable underwater home owners to pay down their mortgages to market price levels.
b. compensate savers for years of artificially suppressed interest rates.
c. Fix the banks in nominal terms.
d. Fix state tax revenues.

Inflation risk? Maybe, but if banks were put out of the counterfeiting business via a 100% reserve requirement then the only source of new money into the system would be under government control, the Fed and US Treasury.

Long term solution? Allow liberty in money creation, usage, and acceptance. Government money should be legal tender for government debt only (“Render to Caesar …”) while private money would be allowed to serve the private sector.

Matthew Swaringen June 27, 2010 at 8:22 pm

“Unless one advocates that the debt ratcheted up during the boom is forced to fall during the bust then he is addressing only 1/2 the problem.”

Yeah, they are saying Greece should default, which yes means that the debt ratcheted up also has to fall. The bond holders screwed up by giving the Greek government too much money.

Comments on this entry are closed.

Previous post:

Next post: