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Source link: http://archive.mises.org/15512/economic-schadenfreude/

Economic Schadenfreude

February 2, 2011 by

One aspect of the current economic crisis has been the comeuppance for certain firms, industries, and segments of the labor market that are overdue for correction, all made possible by their special relationships with the state. FULL ARTICLE by Christopher Westley

{ 2 comments }

Mr E February 3, 2011 at 2:26 am

Remember if labor is priced above the marginal value product of their labor unemployment results. However if inflation or money printing causes input prices to be artificially higher while demand for the final product remains the same or decreases it doesn’t mean if workers get laid that it was their fault for asking a too high a price for their labor. Additionally if we let small and mid size manufacturers fail will the new buyer be a foreign company that comes from a country with an industrial policy that backs their companies with an unlimited amount of credit that is created out of thin air?

What’s an interesting mix are the countries China, Japan and Germany. Some of these countries have an undervalued exchange rate and a higher valued exchange rate compared with the dollar. Some of these countries have lower labor costs based on paper exchange rates and higher labor costs then the US. Some also even have higher taxes then the US. Some also even have more regulation then the US. Yet all three have trade surpluses with the US. The reason being is that they have industrial policies which is the fancy name for backing the manufacturing sector with the printing press. An industrial policy can allow countries to dump products below cost abroad where money is created out of thin air to cover the cost between the price to make and price sold abroad which has the affect of putting competitors out of business and to the absorption of their capital.

Currently countries like China, Japan and Germany create money to fund production while the US creates money to fund the outsourcing of jobs, technology transfers abroad, military bases abroad and artificial consumption with debt which is not a policy for growth. As long as other countries have industrial policies trade will be distorted. There can be no real free trade or meaningful competition when other countries regularly back their private companies with unlimited amount of printing press money. The problem with the US bailing out the multinationals was that they used that newly created money out of thin air to fund the outsourcing of jobs and investment in factories abroad. So jobs were created just not as much in the US. The problem with world monetary system today is that if one country has sound money while other’s don’t, the printing press will distort trade and trade tension will rise.

Whig February 3, 2011 at 12:55 pm

I wish we could experience schdenfreude in these cases. Unfortunately, it is the bailed-out motor industry (as you show here – the union worker’s job was probably ‘saved’) or the indebted state, bailed out by central bank printing presses and the taxes taken from the productive, who never face the reckoning. Thus, it is they who are getting all the laughs and those of us who understand economics are simply reduced to tears!

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