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November 14, 2012

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Luis Enrique

interesting ... a small point, but I think the kinds of people who would clamour for politicians to "do something" about rising profits and stagnant real wages are more inclined to call for tax and spending increases, rather than tax cuts, to restore living standards.

gastro george

And why wouldn't they, because while they might obviously be gainers if wages rise and profits fall, they are still likely to be at least marginal gainers overall if spending increases and taxes also rise (= wages fall).

Luis Enrique

gg, sorry I did not mean to imply they'd be wrong to do so, I just meant lefties care more about these things and don't tend to call for tax cuts. Plus by tax increases I had in mind taxes on profits and wealth that wouldn't reduce real take-home wages much.

gastro george

Oops, I missed the tax cut bit at the end of Chris' post - that'll teach me to skim read. Yup, that's more of a Lib Dem policy, I guess, and not one you'd expect a leftie to propose.

I find it hard to stomach the BoE waffling on about the upside of increasing margins when most major companies are sitting on vast piles of cash due to the lack of investment opportunities. The economy desperately needs an increase in real wages and real disposable income. The compression that we have today is a direct cause of our "sluggish" economy, and will continue to be.

alternative investments

Companies are sitting on large piles of cash because they are indeed not seeing the investment opportunities. And the reason those opportunities are not there is the debt, the massive debt overhang. The UK has a debt to GDP of approximately 500%, and many consumers are more concerned with deleveraging then spending. Richard Koo of Nomura has a great word fot it - he calls this condition a balance sheet recession.

gastro george

It's interesting that the dismal Martin Kettle is continuing with the usual nothing-to-be-seen-here or there-is-no-alternative line - why does the Graun pay for his nothing-speak?

The main line is that of end-of-era, the inevitable decline of the west, etc. So the population must accept the inevitable suppression of wages into the distant future - as they have since the 80s.

But this is entirely in line with the needs of the financial/managerial classes - who continue to have no wage compression - indeed we've recently seen another 27% increase in FTSE director salaries.

So let's not complain, let's not think of another way, let's just accept the vampires around out throats.

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