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Thread: Peter Schiff ... 'Less Gov't or Lower (real) Wages'

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    Default Peter Schiff ... 'Less Gov't or Lower (real) Wages'

    this is a follow-up to points raised in other threads ...

    (snip)"Less Government or Lower Wages? You Decide
    by Peter Schiff

    The nationwide revelry surrounding our apparent economic recovery was disrupted this week by the release of lower-than-expected retail sales data. However, rather than sending a chill up the spines of those hoping for a quick end to the downturn, the numbers should be welcomed. Though this may come as a surprise to most observers, lower retail sales are precisely what our economy needs.

    To return our economy to health, we must first allow market forces to ring out the excesses of the bubble years. Even government economists acknowledge that this decade's spending boom resulted from a combination of asset bubbles and the dangerous overextension of consumer credit. Yet the same economists balk at the logical need for spending to drop now that the stimuli are no longer in effect. They argue for the resumption of spending by any means, regardless of its ultimate cost. This is a recipe for momentary gain and lasting pain.

    America's economic vitality will never be restored until we rebuild our savings and pay down our debts. To build back up, we must change the pattern of capital flows from the phony economy. It is a painful process, but one that will leave our economy on a stronger foundation. Unfortunately, Americans cannot accomplish these goals unless they stop shopping, live within their means, and replenish their savings. Though this may be problematic for retailers, it is beneficial to the overall economy.

    But rather than accepting the market's medicine, our government is overriding its own citizens' responsible behavior. To do so, it has put borrowed money into consumers' pockets, and then conjured various incentives for them to go out and spend it. This process requires more government bureaucracy, more debt, and more regulation at a time when we can't afford any of it.

    In contrast, I believe that we must restore the conditions that led to our economic preeminence. We must once again become the leader in economic freedom. This entails dismantling a significant portion of our federal and state governments, repealing countless unnecessary regulations, significantly lowering and simplifying taxes, and reinstituting sound money. If we accomplish these tasks, conditions will be ripe for a lasting recovery that solidifies our place at the top of the global economic totem pole.

    However, if we neglect these reforms, and instead continue on our present course of more government and less freedom, more borrowing and less savings, more spending and less production, then our standard of living is doomed to fall. As the world cuts us off from its savings and production, we will finally be forced to live within our means. On a practical level, imagine living without easy access to the cheap and abundant goods with the "made in China" label. Imagine Walmart rolling up prices every week, while wages continue to fall. This pain would hit every American, not just retailers.

    There are two ways to rebalance the American economy. The right way is to restore competitiveness through diminished government spending, deregulation, lower taxes, and higher savings. Higher savings will facilitate capital formation, and lower taxes and fewer regulations will allow that capital to improve the competitiveness of American labor. Improved productivity and capital investment will translate into higher real wages and pave the way to higher future living standards.

    Alternatively, if we don't rebalance our economy on these terms, our foreign creditors will do it for us - and they may have no compunction about imposing harsh measures. This tough medicine will be delivered in the form of declining value for the dollar. This will effectively raise consumer prices and interest rates for all Americans and dramatically lower the real value of our wages. In other words, balance will be restored from abroad by forcing our living standards to match our diminished industrial capacity. If we cannot compete based on lower taxes and increased capital investment, our only alternative will be to do so based on cheap labor.

    Though president Obama claims that his policies will not raise taxes on average Americans, the unfortunate truth is that the effect of his policies will be to lower wages. The choice is simple: either we shrink government and enjoy higher wages, or grow government and accept lower wages. As for me, I prefer the former. However, if we do not change course soon, we will all be stuck with the latter."(snip)

    from


    In case it isn't immediately obvious, the point the author is making relates to a devaluation of the US dollar. The Lower Wages being referred to doesn't necessarily mean fewer US dollars in the weekly paycheck or a lowering of the minimum wage below the current $7.50 per hour. The Lower Wages being referred to is the full circle effect of a devaluation of the US dollar, which will result in the 'same' US consumer's $7.50 per hour ( or whatever ) pay rate actually being able to purchase far fewer goods and services. The flip side is that US exported products which are priced in a devalued future US dollar will appear to be much more affordable to global buyers paying with Yen, Yuan or Euros.

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    Default Re: Peter Schiff ... 'Less Gov't or Lower (real) Wages'

    "economic vitality will never be restored until we rebuild our savings and pay down our debts...the dangerous overextension of consumer credit... live within their means, and replenish their savings"
    I've been saying this here for years.

    "our government is overriding its own citizens' responsible behavior"
    All they'll be able to do is to help restore jobs;, the stupid over-spending is up to the rest of us.

    "restore the conditions that led to our economic preeminence. We must once again become the leader in economic freedom"
    And intellectual creativity and production

    "This entails dismantling a significant portion of our federal and state governments, repealing countless unnecessary regulations, significantly lowering and simplifying taxes..."
    Bush and Reagan tried all that and this is where we ended up. Lowering taxes is what kick-started our overspending because the govt's books could not be balanced, why should we balance ours.

    "our present course of more government and less freedom, more borrowing and less savings, more spending and less production...restore competitiveness through diminished government spending, deregulation, lower taxes, and higher savings"
    That means fewer and SMARTER government services and balancing the budget; we'll always need regulations against the "vandals at the gates".

    "being able to purchase far fewer goods"
    The fewer chinese goods, the better; we've been spending well above our abilities. Too bad if you can't afford your Xbox, no big loss.

    "balance will be restored from abroad by forcing our living standards to match our diminished industrial capacity"
    This has been happening for a few decades, until we funded the Chinese/Indians to start competing with us on an uneven ballfield. Our industrial capacity will start to be restored when we start innovating and making better and non-traditional products or non-traditionally-produced goods and services, ones that no one else can make at our productivity level. This is what got the US to what it was before the 70s and 80s.
    Last edited by threlayer; 08-25-2009 at 06:14 AM.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: Peter Schiff ... 'Less Gov't or Lower (real) Wages'

    All they'll be able to do is to help restore jobs;,
    so far at least, the vast majority of jobs 'created' by stimulus spending have been for unionized government employees i.e. teachers and bureaucrats. While these are additional jobs, they can only be funded by increasing taxes ( or gov't borrowing based on a promise of future tax increases ) since they do not create any 'value' with which to fund themselves.


    Our industrial capacity will start to be restored when we start innovating and making better and non-traditional products or non-traditionally-produced goods and services, ones that no one else can make at our productivity level. This is what got the US to what it was before the 70s and 80s.
    This is an outdated paradigm. Yes, in the future, some amazing innovations and development will take place based on US creativity and ingenuity. But as soon as that innovative product becomes marketable, the 'title' will be transferred to Ireland ( to escape US corporate taxes ), the component manufacture will be outsourced to China, thus US operations will consist of a few corporate execs, a few engineers, a few accountants, a few attorneys, and some assembly and distribution jobs. This is hardly a formula for restoration of the US economy of the 60's

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    Default Re: Peter Schiff ... 'Less Gov't or Lower (real) Wages'

    ^^ And that's why those laws need to be changed in favor of the country, rather thn the individual businesses, as well as Congressional ethics, campaign laws, etc. But I don't see that happening son.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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