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Dollar-denominated debt deflation
Stoneleigh, The Automatic Earth
Since we at The Automatic Earth generally tell people to hold cash or cash equivalents, it makes sense to expand on that a little, and to point out some of the location-specific risks of doing so. We tell people to hold cash because that is what they will need access to in order to make debt payments and to purchase the essentials of life in a society with little or no remaining credit. The value of cash domestically – in terms of goods and services in your own local area – is what matters most.
Domestic currency value relative to other currencies internationally will be very much a secondary concern for most people, as the ability to exchange one currency for another is not likely to last far into the coming era of capital controls. Currency risk is likely to become very large, and almost everyone will be better off holding whatever passes for cash wherever they happen to be.
As the price of goods and services fall, thanks to the destruction of purchasing power brought about by collapsing money supply, what cash you still have will go a lot further in terms of, say, milk and bread. Capital preserved as liquidity will go a long way. However, there are no no-risk scenarios. Apart from the obvious risks of fire, flood and theft, other risks to holding cash will grow over time. Liquidity can be as hard to hold on to as it sounds.
(3 July 2010)
This post by Stoneleigh amplifies some of the points that she made in her talk at the Transition Network conference. -KS
Is the era of cheap Chinese labour almost over?
Chris Hogg, BBC News
A string of suicides at the Foxconn plant in southern China that makes iPads and iPhones for Apple has focused attention on wages and conditions there.
Now the Taiwanese company has said it will more than double the wages of staff by October.
The announcement follows a double-digit pay increase for workers at some of the factories that supply Honda in China following their industrial action.
Some say these stories show there is a limit to what Chinese workers are willing to put up with these days, and that the era of cheap labour in China is coming to an end. But are they right?…
(13 June 2010)
With the US trapped in depression, this really is starting to feel like 1932
Ambrose Evans-Pritchard, The Telegraph
“The economy is still in the gravitational pull of the Great Recession,” said Robert Reich, former US labour secretary. “All the booster rockets for getting us beyond it are failing.”
“Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year. So what are we doing about it? Less than nothing,” he said.
California is tightening faster than Greece. State workers have seen a 14pc fall in earnings this year due to forced furloughs. Governor Arnold Schwarzenegger is cutting pay for 200,000 state workers to the minimum wage of $7.25 an hour to cover his $19bn (£15bn) deficit.
Can Illinois be far behind? The state has a deficit of $12bn and is $5bn in arrears to schools, nursing homes, child care centres, and prisons. “It is getting worse every single day,” said state comptroller Daniel Hynes. “We are not paying bills for absolutely essential services. That is obscene.”
Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high…
(4 July 2010)
Expect lots of government layoffs at state, local level
Paul Davidson, USAToday
Here’s another headwind for a sputtering job market: State and local governments plan many more layoffs to close wide budget gaps.
Up to 400,000 workers could lose jobs in the next year as states, counties and cities grapple with lower revenue and less federal funding, says Mark Zandi, chief economist for Moody’s Economy.com.
The development could slow an already lackluster recovery. Friday, the Labor Department said employers cut 125,000 jobs, mostly because 225,000 temporary U.S. Census workers completed their stints. The private sector added 83,000 jobs, fewer then expected, as the jobless rate fell to 9.5% from 9.7%….
(5 July 2010)
related: The Scariest Job Chart Ever Gets Uglier
Social enterprises ‘growing strongly’
BBC News
The UK’s social enterprises – businesses trading for social or environmental purposes – bucked the recent recession, a report has said.
Turnover at 100 of the largest such firms grew by 79% on average in the year to March, said the business information service Social Enterprise.
The report, which covered 350 firms in total, said those in south-east England saw the biggest growth, up 56%.
The East Midlands was the worst performing, with growth of only 15%.
Examples of social enterprises include the Big Issue, Jamie Oliver’s restaurant Fifteen, and the fair-trade chocolate company Divine Chocolate.
(9 June 2010)
