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record erosion of wages

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rick++

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Aug 28, 2006, 4:19:09 PM8/28/06
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The NY Times reports that wages for Americans are lowest as a fraction
of the US economic output since these statistics were recorded in the
1950s.
Traditionally wages would expand when the economy was increasing
(supposedly now).
Globalization of manufacturing and intellectual labor are the cause:

http://www.nytimes.com/2006/08/28/business/28wages.html

Only the top decile of the population is bucking this trend.

Old Pif

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Aug 28, 2006, 6:03:33 PM8/28/06
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rick++ wrote:
>
> The NY Times reports that wages for Americans are lowest as a fraction
> of the US economic output since these statistics were recorded in the
> 1950s.
>

Corporations and the government have been working cheek to cheek to
achieve that. They implement Ricardo law not defy it. Congratulations!

***********************************************************************************************
That situation is adding to fears among Republicans that the economy
will hurt vulnerable incumbents in this year's midterm elections even
though overall growth has been healthy for much of the last five years.

************************************************************************************************

I hope it will.

Straydog

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Aug 28, 2006, 9:14:11 PM8/28/06
to

----------------
This isn't particularly new. Somewhere, I can't find it now, among my
files is a quote of data showing the progress of the minimum wage AND the
buying power (reduction in value as caused by inflatio) over the last
30-35 years and it is clear that the min wage has not kept up with
inflation. It doesn't tell the whole story since for some things the
prices have come down, too.

Below is a piece which is undated, but copyrighted (see the end) in 2004
so it is from that year. Again, the situation is not good. So, we not only
have corporate CEOs beating on our heads, but Kamal Prasad telling us we
actually _need_ to become paupers, serfs, and peasants for reasons I can't
really follow other than a hidden plot to help the rich get richer and at
the expense of the poorer.

------
(Reproduced in the public interest)

Average-Wage Earners Fall Behind

By Jonathan Krim and Griff Witte

ST. CHARLES, Mo. -- Teresa Geerling is living the future of life in
the middle of the American workforce.

After years cleaning the insides of airplanes and polishing their
outsides, Geerling was laid off from American Airlines last year. The
job was physically taxing for Geerling, 50, but the nearly $32,000 annual
pay and health-care coverage helped provide a typical middle-class life in
this small midwestern community.

Now, she works the overnight shift at a local hospital as a
nurse's aide while completing course work to be certified as a medical
assistant. That would seem to be a smart move, because unlike airlines,
which are contracting, health care is one of the industries that many
economists believe could generate millions more jobs in the decades to come.

Yet rarely has Geerling's work life been so precarious.

If she can't stay on her husband's health plan, her costs for health
insurance offered by the hospital will be $200 a month, more than five
times as much as at the airline. There are no pension benefits beyond
the option for a 401(k) savings plan and few job protections. She makes
$2 an hour less than before; to have a chance at higher pay, she will
need to continually train herself in new areas.

Geerling is at the leading edge of changes that herald a new era for
millions of people earning around the national average, $17 an hour.

This new era requires that workers shoulder more responsibility
and risk on the way to financial security, economists say. It also
demands that they be nimble in an increasingly fluid job market. Those
who don't obtain some combination of specialized skills, higher education
and professional status that can be constantly adapted will be in danger
of sliding down the economic ladder to low-paying service jobs, usually
without benefits.

Meanwhile, those who secure the middle-class jobs of the 21st
century will have to make $17 an hour stretch further than ever
as they pay more for health care or risk doing without insurance
and assume much or all of the burden for their retirement.

In the lively debate about the future of U.S. jobs, many
economists and scholars acknowledge that the changes wrought by
technology and global economic forces will be painful at first. But
they say the new structure ultimately will create many kinds of jobs
as yet unimagined, in fields such as education, health care and science.

"You have to take the leap of faith that the economy will evolve and
there will be this innovation economy that comes," said John C. McCarthy, a
Forrester Research analyst who wrote a report on U.S. jobs going overseas.

Yet many observers also say that the present economic restructuring
may be more rocky than similar transitions in the past and that society
should take additional measures to ease the struggles of those caught
in the middle, especially the three-quarters of Americans who lack a
college degree.

In some ways, Geerling is one of the lucky ones, even though she
didn't go to college. At the time she was let go, American Airlines
provided training grants as part of the layoff package. The program,
which no longer exists, gave her a way to learn new skills in the
health care industry, where she had once worked.

Analysts say retraining will be key because tomorrow's
middle-class jobs are likely to be enhanced variations of today's
lower-wage jobs. Clerical positions keeping medical records, for
instance, are being transformed into higher-paying technician
jobs that are structured to involve both computer skills and the
ability to talk to doctors and nurses.

"You can't be some kid who is good with a computer and get that job
anymore," said Anthony Carnevale, senior fellow at the National Center
on Education and the Economy. The successful job seeker will be "someone
who can do the computer stuff but also knows the business."

It is that combination of technology savvy, analytical thinking and
interpersonal skills that could be the magic formula for U.S.
workers -- whether the jobs are in health care, education, financial
services or any other field. Jobs that involve all three qualities, said
Thomas A. Kochan, an MIT management professor, are hard to duplicate with
machines or with low-wage workers from abroad, putting the Americans who
fill them in a strong position to demand not just good wages, but benefits,
too.

"For workers who are performing services for people that can't be made
impersonal or sent offshore, those jobs could become much more attractive,"
he said.

Shrinking Benefits

Still, most workplace experts are skeptical that the jobs of the future
are likely to come with the same kinds of benefits as the jobs of the past.

"It's not clear how the work will change," said Peter Cappelli, a
management professor at the Wharton business school at the University
of Pennsylvania. "But any kind of security will go away."

Over the past two decades, companies have moved en masse away from
traditional pensions in which employers pay the cost and employees get
a set amount after retiring. Employer-based health care coverage has
fallen as well, not just for workers in low-wage jobs, but increasingly
for those in middle-class jobs. One analysis estimates that there were 5
million fewer jobs providing health insurance in 2004 than there were
just three years earlier. Overall, nearly 1 in 5 full-time workers today
goes without health insurance; among part-time workers, it's 1 in 4.

Those who manage to keep their benefits often must pick up their
share of the higher cost. Employee contributions for family coverage
were 49 percent higher in 2004 than they were in 2001, and contributions
for individual coverage were 57 percent higher, according to the Kaiser
Family Foundation.

Jobs that provide both a middle-class wage and benefits, even for
workers without advanced degrees, still exist, often in union environments.
But they're getting harder to find.

As technology has made global competition a reality, American workers --
particularly those who are lower-skilled -- have found themselves competing
in a far broader marketplace. Their rivals overseas often don't receive
benefits at all, or don't expect them from their employers. That puts
American companies at a competitive disadvantage.

"It's not helping employers to not be able to offer benefits," said
Jennifer Schramm, manager of workplace trends and forecasting at the
Society for Human Resource Management. But cutting back on benefits
"is something they feel they have to do for economic reasons."

Shifts in the composition of the workforce have contributed as well.
Jobs in manufacturing are more likely to come with benefits than are
jobs in the service sector.

But in the 1980s, the number of manufacturing jobs began a decline
that continues today, and factory workers were forced to look elsewhere
for a middle-class living. Many retrained and traded their spot on the
assembly line for a seat behind a desk, finding work in business services
such as sales, information technology and accounting.

Within the past decade, however, most large service firms have decided
that to succeed in a cutthroat, globalized market, they need to focus on
their core functions and leave more peripheral tasks to others.

Recently, many such tasks have been shifted to workers abroad or have
been picked up by smaller, more specialized outsourcing firms in the
United States. For those firms, providing benefits such as health care
can be difficult because they lack the necessary economies of scale,
said Harvard public health professor Katherine Swartz. In firms with
1,000 or more employees, just 1 in 10 workers lacks insurance. In
companies with fewer than 10 employees, nearly one-third lack coverage.

Even businesses that are expected to grow -- in industries such as
health care and education -- have begun to pare back the pool of workers
eligible for full benefits.

Hospitals, for instance, have responded to shifting staffing needs
by hiring itinerant care workers who travel where they're needed but
often don't have access to the same benefits as full-time nurses and
therapists who stay in one place.

Reworking America

In the political world, debate over labor market restructuring has
been dominated by finger-pointing about free trade or the ethics of
offshoring, rather than by discussion of possible solutions. But as
displaced workers fail to make the transition into new jobs that afford
them the same kind of lifestyle as their old ones, economists say that
politicians ignore the issue at their own peril.

On Capitol Hill, lawmakers have discussed the need to control health
care costs and to make sure large numbers of workers are not priced out
of coverage, but no comprehensive proposals have moved to the top of the
legislative agenda.

The White House has promoted the notion of personal reemployment
accounts, a stipend of up to $3,000 for unemployed Americans to use
for retraining, child care, moving costs or other expenses associated
with locating new work. Those who find a job within 13 weeks could keep
the leftover funds.

Another idea, championed by Brookings Institution economist Robert E.
Litan, would provide wage insurance for workers whose jobs were eliminated.
Under such a program, displaced workers who found jobs at lower salaries
would have the difference made up, for a maximum of two years.

Last year, the Labor Department launched a pilot wage insurance program
that would provide workers age 50 or older with half the difference
between their old salary and their new salary when they're forced to
take lower-paying positions following a layoff. Workers would also get
a tax credit for 65 percent of their health insurance premiums. But the
eligibility requirements are many -- the layoff, for instance, must come
because of competition from abroad. As of August, only 715 workers
nationwide had enrolled.

Some contend that such ideas only touch the edges of a looming crisis.
While they may help individual workers in the short term, they don't
address the larger difficulties faced by the workforce in adapting to
the demands of 21st century jobs. For that, these labor market experts
say, the educational system will have to continue to raise its quality
and reach a broader population.

Thomas Bradtke, a manager at Boston Consulting Group, said that for the
United States to retain its technological leadership and create new
job-producing industries, it will have to keep coming up with a large
share of the world's innovative ideas. At a time when other countries'
students are routinely testing higher than American children in science
and math, that's not a given.

"Education systems compete against each other in the long run," he said.
"Right now the U.S. is still at the leading edge of innovation, but what
if five or 10 years down the road, India has built up world-class
universities?"

Carnevale, who was a member of the White House advisory committee on
technology and adult education in the Clinton administration, argues that
the country needs the equivalent of an industrial policy focused both on
getting more people through college and on retraining them for new jobs.

Otherwise, "we could have a permanent working poor," he said. "They
don't live in America; they kind of live under it."

The Geerlings are determined to avoid that fate. Teresa Geerling said
she plans to work "as long as I have two arms and two legs."

Life for the couple has recently become more complicated, however.
Until now, she could do without the health insurance at her new job
because she was included in her husband's plan, which covers them
both for $37 per month.

But Bernie Geerling, who still works at American Airlines as a
baggage-handling supervisor, just got notice that he is scheduled to be
laid off next month. He is hoping he can transfer to another slot at the
airline somewhere else in the country, but union and company rules for
such moves are complex. "With a little hope and a little prayer here and
there, things will work out," Bernie Geerling said.

In the meantime, the Geerlings had to refinance their house after
Teresa's layoff and have "gotten in a little over our heads" with credit
card debt, she said. New carpeting and other major home-remodeling projects
are on hold.

If her husband does not get a transfer, Teresa said, they will probably
stay in the area but sell their well-tended house in a quiet residential
neighborhood and move to something smaller.

"Scary's not the word for it," she said, reflecting on the growing
number of workers she knows facing similar predicaments.

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Straydog

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Aug 28, 2006, 10:05:25 PM8/28/06
to

In connection with the decline in wages, here is another relevant file:
=====================================
Subject: The Economy in a Nutshell

2005/12/23: CPunch: Wages & Incomes Down, Poverty & Debt Up - The
Economy in a Nutshell

1. Profits are up, but the wages and the incomes of average
Americans are down.

* Inflation-adjusted hourly and weekly wages are still below
where they were at the start of the recovery in November 2001.
Yet, productivity-the growth of the economic pie-is up by 13.5%.
* Wage growth has been shortchanged because 35% of the growth
of total income in the corporate sector has been distributed
as corporate profits, far more than the 22% in previous periods.
* Consequently, median household income (inflation-adjusted)
has fallen five years in a row and was 4% lower in 2004 than
in 1999, falling from $46,129 to $44,389.


2. More and more people are deeper and deeper in debt.

* The indebtedness of U.S. households, after adjusting for
inflation, has risen 35.7% over the last four years.
* The level of debt as a percent of after-tax income is the
highest ever measured in our history. Mortgage and consumer
debt is now 115% of after-tax income, twice the level of 30
years ago.
* The debt-service ratio (the percent of after-tax income
that goes to pay off debts) is at an all-time high of 13.6%.
* The personal savings rate is negative for the first time
since WWII.


3. Job creation has not kept up with population growth, and the
employment rate has fallen sharply.

* The United States has only 1.3% more jobs today (excluding
the effects of Hurricane Katrina) than in March 2001 (the start
of the recession). Private sector jobs are up only 0.8%. At
this stage of previous business cycles, jobs had grown by an
average of 8.8% and never less than 6.0%.
* The unemployment rate is relatively low at 5%, but still
higher than the 4% in 2000. Plus, the percent of the population
that has a job has never recovered since the recession and is
still 1.3% lower than in March 2001. If the employment rate
had returned to pre-recession levels, 3 million more people
would be employed.
* More than 3 million manufacturing jobs have been lost since
January 2000.


4. Poverty is on the rise.

* The poverty rate rose from 11.7% in 2001 to 12.7% in 2004.
* The number of people living in poverty has increased by
5.4 million since 2000.
* More children are living in poverty: the child poverty rate
increased from 16.3% in 2001 to 17.8% in 2004.


5. Rising health care costs are eroding families' already declining
income.

* Households are spending more on health care. Family health
costs rose 43-45% for married couples with children, single
mothers, and young singles from 2000 to 2003.
* Employers are cutting back on health insurance. Last year,
the percent of people with employer-provided health insurance
fell for the fourth year in a row. Nearly 3.7 million fewer
people had employer-provided insurance in 2004 than in 2000.
Taking population growth into account, 11 million more people
would have had employer-provided health insurance in 2004 if
the coverage rate had remained at the 2000 level.

<http://www.counterpunch.org/mishel12232005.html>


[See also: 2005/12/21: EPI: What's wrong with the economy?
<http://www.epi.org/content.cfm/pm110> ]
==================

I also know that anyone with a sharp pensil can spin the data, too.

However, the "screw the underling" process is not new. Here is the same
thing from long ago. Look at this:

==========================

Socialism (?) in England, 1563 AD ?

Quote from "The Story of Civilization" by Will Durant, volume 7, page 47:

"The Elizabethan state legislated as zealously for the economy as for
religion. Aware that municipal restrictions on manufacture and trade were
hampering commerce and industry, it replaced communal by national
regulation. The famous Statute of Apprentices (1563 [AD]) established a
laborious code of governmental supervision and compulsion that remained
the law of England till 1815. Proposing to banish idleness and
unemployment, it required every able-bodied youngster to serve as
apprentice for seven years, for 'until a man grow into twenty-three years,
he for the most part, though not always, is wild, without judgment, and
not of sufficient experience to govern himself.' [ref given]. Every
willfully unemployed man under thirty not having an income of fourty
shillings a year could be forced to take employment as directed by the
local authorities. In the countryside all well men under sixty could be
compelled to join in harvesting. All workmen were to be hired by yearly
contract, at a kind of guaranteed annual wage. The justices of the peace
were empowered to fix maximum and minimum remuneration for every
employment in their territory; for London laborers the pay was fixed at
ninepence a day. Masters unduly dismissing employees were to
be fined forty shillings; men unlawfully quitting their jobs were
to be jailed; and no employee was to leave town or parish without
permission of his employer and the local magistrate. Hours of work were
defined as twelve per day in summer and through daylight in winter.
Strikes of any kind were forbidden under penalty of impresonment or heavy
fines."

In the very next paragraph, we read how this worked out.

"All in all, the statute had the effect of protecting the employer against
the employee, agriculture against industry, and the state against social
revolt. A guild of bricklayers at Hull inscribed at the head of its
ordinances the consoling proposition that 'all men are by nature equal,
made all by one Workman of like mire'; but nobody believed it, least of
all Cecil and Elizabeth; and it was probably Cecil who directed the
economic legislation of 1563. Its results for the working classes was to
make poverty compulsory. It proposed to readjust wages periodically to the
price of basic foods, but the magistrates commissioned to do this belonged
to the [go to next page, 48] employing class. Wages rose, but far
more slowly than prices; between 1580 and 1640 the price of necessities
climbed 100 per cent, wages 20 per cent [ref given]. During the century
from 1550 to 1650 the conditions of artisans and laborers worsened fromm
day to day. The outskirts of London 'filled up with a comparatively poor
and often vicious class, dwelling in meanest tenements,' and living in
some parts by theft and beggary. At the funeral of the Earl of Shrewsbury
(1591) some twenty thousand beggars applied for a dole."

[next paragraph]

"The government attacked these evils with ferocious laws against
mendicancy [the state of being a beggar], and a comparatively humane
series of Poor Laws (1563-1601) that acknowledged the responsibility of
the state for keeping its people from starvation...."

=================

So, here we are, in the land of the free and the home of the brave,
reading a "free" press (whatever that means), with the statue of liberty,
and all that warm-fuzzy feeling from America the Beautiful, and we've got
jobs disappearing from HERE and going OVER THERE, and what do the guys do
who are laid off? Apply for jobs what jobs that are left that pay less!
And, Kamal (and Bob Folker) somehow thinks we're all suposed to enjoy this
and approach it with happiness and enthusiasm? And, globalization is a
good thing?

Samuelson had a good question in one sentence:

--------------
They quoted Paul Samuelson (MIT) as saying "Comparative advantage
cannot be counted on to create...net gains greater than the net
losses from trade"
------------

And, yet I'm reading of vast improvements in CEO pay, director pay (now
ave $160,000/year vs $60,000 year just ten years ago) for sitting around a
conference table a couple days a year, at most, and a good slice through
the higher end professions (doctors, lawyers, etc). Sure looks like
reverse-Robbin-Hoodism (steal from the poor, give to the rich).

E (Bet) Anthony

unread,
Aug 29, 2006, 12:53:54 AM8/29/06
to
rick++ wrote:

>
>http://www.nytimes.com/2006/08/28/business/28wages.html
>
>
>
>

When the New York Times story begins with this lie, "With the economy
beginning to slow,....." why read beyond the first six words.

WASHINGTON, Aug. 28 (UPI) -- The U.S. economy has been steadily
improving since the 2001 recession with a 4 percent annual growth rate
during the first half of the year and a record low unemployment rate of
4.8 percent.

Straydog

unread,
Aug 29, 2006, 6:44:26 AM8/29/06
to

Or...I guess you have not heard yet that the real estate market has bombed
out (as has appeared in the Wall Street Journal, and many other media).
And, the serious speculations are now focused on in how many months the
stock market will bomb and by how much.

I am in a very high growth area (residential real estate, lots of it) and
the slowdown is easily visible without statistics.

Harry Thompson

unread,
Aug 29, 2006, 7:51:05 AM8/29/06
to

"Straydog" <a...@panix.com> wrote in message
news:Pine.NEB.4.63.06...@panix2.panix.com...

I just went to one of my favorite restaurants for lunch. The place was half
empty. Usually I would have to wait up to 1/2 hour for a table.

Other lunch places are suffering similarly.

Business news (NY Times, WSJ) report that restaurants are off because of the
economy. Business news attributes it to high gas prices digging in, and real
earnings for the middle class not keeping up with prices.

Hap


Straydog

unread,
Aug 29, 2006, 8:18:19 AM8/29/06
to

A lot of people read the newspapers and when the economy starts going into
a down cycle, they start cutting back. We pay attention to this, too, the
wife and I.

Russell...@wdn.com

unread,
Aug 29, 2006, 8:34:12 AM8/29/06
to

One of my favorite restaurants recently shut down. Now they
just do catering and open the place for large catered parties.
The owner came over to talk to me that last time I was in
because he wanted all his regulars to hear the news from him
personally. He said they just were not doing the business
needed to stay open and the catering business was taking
off. Restauranting is tough way to make a living.

Cheers,
Russell

Kamal R. Prasad

unread,
Aug 29, 2006, 9:11:19 AM8/29/06
to

Old Pif wrote:

> rick++ wrote:
> >
> > The NY Times reports that wages for Americans are lowest as a fraction
> > of the US economic output since these statistics were recorded in the
> > 1950s.
> >
>
> Corporations and the government have been working cheek to cheek to
> achieve that. They implement Ricardo law not defy it. Congratulations!
>

Im really glad that you accept Ricardo's laws' existence coz your posts
indicate you wwould rather legislate away all known problems -than
solve them.

> ***********************************************************************************************
> That situation is adding to fears among Republicans that the economy
> will hurt vulnerable incumbents in this year's midterm elections even
> though overall growth has been healthy for much of the last five years.
>
> ************************************************************************************************
>
> I hope it will.

you mean -you will vote out the bastards who refuse to provide
americans with all good things in life they are entitled to aka finance
the american dream? Think you will need to keep voting for the rest of
your life to achieve that.

regards
-kamal

Straydog

unread,
Aug 29, 2006, 10:22:44 AM8/29/06
to

On Tue, 29 Aug 2006, Kamal R. Prasad wrote:

>
> Old Pif wrote:
>
>> rick++ wrote:
>>>
>>> The NY Times reports that wages for Americans are lowest as a fraction
>>> of the US economic output since these statistics were recorded in the
>>> 1950s.
>>>
>>
>> Corporations and the government have been working cheek to cheek to
>> achieve that. They implement Ricardo law not defy it. Congratulations!
>>
> Im really glad that you accept Ricardo's laws' existence

I don't think you can interpret Old Pif's sentence in that way. He may say
it is happening but not necessarily accept the law.

coz your posts
> indicate you wwould rather legislate away all known problems -than
> solve them.

Legislation (i.e. law formation) is in the foundations of many religions
(eg. monotheistic "commandments", and polytheistic "rules" which are
mostly for worship and prayers and that it is important not to make the
gods unhappy, but offerings and sacrifices can be made any time.) and is
in the foundations of rulers from thousands of years ago. The main problem
of the past was to keep the king happy and that meant taxes and
conscription into armies, or else enemy kings and armies could come and
pillage, rape, steal, kill, destroy, and cause pain.

>> ***********************************************************************************************
>> That situation is adding to fears among Republicans that the economy
>> will hurt vulnerable incumbents in this year's midterm elections even
>> though overall growth has been healthy for much of the last five years.
>>
>> ************************************************************************************************
>>
>> I hope it will.
>
> you mean -you will vote out the bastards who refuse to provide
> americans with all good things in life they are entitled to

Freedom of speech, freedom of religion, all other provisions of
constitution, bill of rights, etc many nice things.

aka finance
> the american dream?

Banks and loans and deposits all finance all dreams (unless you are a
king, crook, or inherit a lot of money, or have something big to sell).

Think you will need to keep voting for the rest of
> your life to achieve that.

Actually, the big event was in the past: 1776.

And, workers got a lot of unions/rights all around 1930s and after.

Now, the robber-barron corporations and their "armies" of PR, lawyers,
lobbyists have corrupted lots of our rights and you are just feeding into
this giant game of "screw the underlings" by favoring the rich/powerful.


> regards
> -kamal
>
>

Kamal R. Prasad

unread,
Aug 29, 2006, 10:39:22 AM8/29/06
to

Straydog wrote:

> On Tue, 29 Aug 2006, Kamal R. Prasad wrote:
>
> >
> > Old Pif wrote:
> >
> >> rick++ wrote:
> >>>
> >>> The NY Times reports that wages for Americans are lowest as a fraction
> >>> of the US economic output since these statistics were recorded in the
> >>> 1950s.
> >>>
> >>
> >> Corporations and the government have been working cheek to cheek to
> >> achieve that. They implement Ricardo law not defy it. Congratulations!
> >>
> > Im really glad that you accept Ricardo's laws' existence
>
> I don't think you can interpret Old Pif's sentence in that way. He may say
> it is happening but not necessarily accept the law.
>

It is happening because Ricardo's lawa do prevail -whether you like it
or not. In order for that not to happen or fot govts to successfully
defy them, you will have to recall all econ 101 books and scratch out
the text concerning Ricardo's laws.

> coz your posts
> > indicate you wwould rather legislate away all known problems -than
> > solve them.
>
> Legislation (i.e. law formation) is in the foundations of many religions
> (eg. monotheistic "commandments", and polytheistic "rules" which are
> mostly for worship and prayers and that it is important not to make the

the pt I was making is that you seem to be approaching all problems as
things that can be solved by legislation. Good for you if it can be
-but if it cannot be, then you need to re-think your strategies.

> gods unhappy, but offerings and sacrifices can be made any time.) and is
> in the foundations of rulers from thousands of years ago. The main problem
> of the past was to keep the king happy and that meant taxes and
> conscription into armies, or else enemy kings and armies could come and
> pillage, rape, steal, kill, destroy, and cause pain.
>
> >> ***********************************************************************************************
> >> That situation is adding to fears among Republicans that the economy
> >> will hurt vulnerable incumbents in this year's midterm elections even
> >> though overall growth has been healthy for much of the last five years.
> >>
> >> ************************************************************************************************
> >>
> >> I hope it will.
> >
> > you mean -you will vote out the bastards who refuse to provide
> > americans with all good things in life they are entitled to
>
> Freedom of speech, freedom of religion, all other provisions of
> constitution, bill of rights, etc many nice things.
>

I was referring to fulfilling voters expectations about a 'decent' std
of living -when the whole freaking world is wallowing in misery.

> aka finance
> > the american dream?
>
> Banks and loans and deposits all finance all dreams (unless you are a
> king, crook, or inherit a lot of money, or have something big to sell).
>

Im referring to the state financing your american dream in the event
your productivity isn't sufficient to get you there.

> Think you will need to keep voting for the rest of
> > your life to achieve that.
>
> Actually, the big event was in the past: 1776.
>
> And, workers got a lot of unions/rights all around 1930s and after.
>
> Now, the robber-barron corporations and their "armies" of PR, lawyers,
> lobbyists have corrupted lots of our rights and you are just feeding into
> this giant game of "screw the underlings" by favoring the rich/powerful.
>

Do you have a clue how much americans import from the world to sustain
their living std today? There is nothing that you guys produce to
finance that import -and if it were that your country's natural
resources entitle you to all those goodies, then might as well not
import or export natural resources in return for those imports and
level off the trade deficit.
Here is a link to your splurge counter:-

http://www.americaneconomicalert.org/ticker_home.asp

regards
-kamal

Straydog

unread,
Aug 29, 2006, 11:57:09 AM8/29/06
to

On Tue, 29 Aug 2006, Kamal R. Prasad wrote:

>
> Straydog wrote:
>
>> On Tue, 29 Aug 2006, Kamal R. Prasad wrote:
>>
>>>
>>> Old Pif wrote:
>>>
>>>> rick++ wrote:
>>>>>
>>>>> The NY Times reports that wages for Americans are lowest as a fraction
>>>>> of the US economic output since these statistics were recorded in the
>>>>> 1950s.
>>>>>
>>>>
>>>> Corporations and the government have been working cheek to cheek to
>>>> achieve that. They implement Ricardo law not defy it. Congratulations!
>>>>
>>> Im really glad that you accept Ricardo's laws' existence
>>
>> I don't think you can interpret Old Pif's sentence in that way. He may say
>> it is happening but not necessarily accept the law.
>>
> It is happening because Ricardo's lawa do prevail -whether you like it
> or not. In order for that not to happen or fot govts to successfully
> defy them, you will have to recall all econ 101 books and scratch out
> the text concerning Ricardo's laws.

Here, its already happening. The economists are screwed up. You can read
my review of Keen's (he's an economist) book:
-----------------------
A review of-

title: Debunking Economics-The Naked Emperor of the Social Sciences
by: Steve Keen (University of Western Sydney, Austrialia)
2001, Pluto Press, reprinted 2002, 335 pp, incl index,
ISBN 1856499928 (softcover)

Three things led me to read this book: i) a reading of Griffin's
book: The Creature from Jekyll Island, which awoke in me an
appreciation of how much our economy is dependent upon our banking
and finance infrastructures, ii) the continuous appearance of
messages in our media by economists telling us that globalization
is good for us while my own experience in reading the works of
economists left me feeling that all these guys are from another
planet where word meanings are different and lines of thinking make
no sense, and iii) the suggestion of one person on a newsgroup with
the initials R.M.

Although I have a PhD, it is in biology rather than economics. This
limits my credibility and limited my ability to carefully read and
understand a large part of this book. About one half of the book is
as technical (complete with complex diagrams, graphs, tables) as
any book on economics that I've seen. I followed very little of
this material. For this part of the book, I skimmed the material at
greater rates when it was too deep for my background (roughly pages
23 to 147 where the material becomes easier to follow) and at
slower rates when it was easier to grasp. I would estimate that a
proper reading would surely require that I read about five to ten
more books on relevant economics. Moreover, this book made
reference to additional material on several websites. Otherwise,
the other half of the book is quite readable and an average reader
will get much from spending time with the book. Overall, I would
rate this book as very important.

As part of the blurb (printed on the back of the softcover), we
find the sentences: "Do economists really know what they are
talking about?" and "If you ever doubted the advice or reasoning of
economists [yeah, yeah, yeah], but haven't known how to argue
against them [yeah, yeah, yeah], 'Debunking Economics' is the book
for you [just what I wanted to hear]. It takes you inside
conventional economic theory to show that almost everything
economists believe is wrong [amazing, isn't it?]. 'Debunking
Economics' is necessary ammunition for anyone who wants to build a
decent society, rather than a dysfunctional one...." The blurb even
included some endorsements and some of them are economists,
themselves!

What I could grasp, however, showed that this author was willing to
not only complain about serious shortcomings in his own
specialization (his bibliography shows that he has published many
papers in economics journals) but give very detailed reasons for
_debunking_ a wide range of thinking in today's mainstream
economics. The applicability of the author's criticisms to real
life is easy to see from his views on many issues. A few examples
from the first twenty pages include:

p.2-3: Keen carefully explains how much of the late 20th century
world economy was formed by the influence of economists and that
much of the world has improved thereby. However, many crises took
place (1990s: LTCM, Russia, Mexico, Asia, etc), too. Keen explains
how Russia was attempting to move from a command economy to a
market economy and that Stiglitz and Arrow tried to encourage a
slow transition while other economists encouraged a rapid
transition and that imperitive won out. The result? Keen cites
Stiglitz as saying "The rapid privatization urged upon Moscow by
the IMF and the [US] Treasury Department had allowed a small group
of oligarchs to gain control of state assets... While the
government lacked the money to pay pensioners, the oligarchs were
sending money obtained by stripping assets and selling the
country's precious natural resources into Cypriot and Swiss bank
accounts (Stiglitz, 2000" [The New Republic, April 17-24, 56-60].
Keen also said (p.3) "Stiglitz tells a similar tale of the impact
economists had on the Asian crisis, where the IMF's enforcement of
austerity seriously worsened a crisis which had been initiated by
the international capital markets (Stiglitz, 1998 [The New Republic
Online, 9 September], and 2000 [see above])."

p. 8: "Economists would contend that these changes have made the
world a better place, not because economists have actually verified
that the changes have been beneficial, but because the changes have
made the real world look more like the hypothetical world of the
economic textbook.... Where problems have occured, economists
normally assert that this was because their advice was not followed
properly."

And, thus the book continues with similar major grenades launched
at major targets in the workings of economics every few pages.
Around page 148 is a major attack on Milton Friedman. Keen says
that Friedman says that "...a theory cannot be judged by its
assumptions, but only by the accuracy of its predictions." If this
is what Friedman said one day, then I, as a scientist, cannot agree
with him.

Like most books that attack a theme, any theme, this book also
offers alternative "economic schools of thought" that the author
feels are more valid than the mainstream line of thinking (called
neo-classical economics). All of these schools are in the minority
and the author gives little information to indicate that the
mainstream line of thinking is fading out or giving way to any of
the minor schools of thought and gives an insufficient introduction
to what these schools offer or why they might be more valid.
Indeed, one question I could ask is why Keen thinks he is so right
--beyond his otherwise debunking of the mainstreamers--about the
alternaltive schools being more valid. However, Keen reviews the
fact that other, hard, sciences (physics, chemistry, biology) also
had periods where different schools of thought existed or co-
existed, depending on circumstances, or evolved, or became extinct.

In connection with Keen's book, I would like to mention another
useful and relevant book I am currently reading: The Evolution of
Economic Thought (3rd ed, 1975; Harcourt Brace Jovanovich, 512 pp),
by Jacob Oser and William C. Blanchfield [both in Utica College of
Syracuse University]. This is a book with very few tables, graphs,
or diagrams (20 total). It mostly discusses all of the major
schools of economic thought. The two page bar graph, Fig 14, is a
chronology (on pages 494-5) shows a total of 18 schools of thought
and their primary authors, a total of about four dozen names, and
a chronology starting around 1700 AD. Oser and Blanchfield clearly
show that economic schools often contradicted each other, evolved
into and out of existence, were often dependent on the life
experiences of their major authors, benefitted different socio-
economic groups, were quite if not completely different from each
other, and had identifiable shortcomings or defects.


-----------------------


>> coz your posts
>>> indicate you wwould rather legislate away all known problems -than
>>> solve them.
>>
>> Legislation (i.e. law formation) is in the foundations of many religions
>> (eg. monotheistic "commandments", and polytheistic "rules" which are
>> mostly for worship and prayers and that it is important not to make the
>
> the pt I was making is that you seem to be approaching all problems as
> things that can be solved by legislation.

But, it sounded like you were approaching all problems as if no laws could
solve any problems.

Good for you if it can be
> -but if it cannot be, then you need to re-think your strategies.

Well, we can see in the future if your Indian laws against discrimination
against Dalits will make the overall situation better for India. Me, I
will not bet either way.

>> gods unhappy, but offerings and sacrifices can be made any time.) and is
>> in the foundations of rulers from thousands of years ago. The main problem
>> of the past was to keep the king happy and that meant taxes and
>> conscription into armies, or else enemy kings and armies could come and
>> pillage, rape, steal, kill, destroy, and cause pain.
>>
>>>> ***********************************************************************************************
>>>> That situation is adding to fears among Republicans that the economy
>>>> will hurt vulnerable incumbents in this year's midterm elections even
>>>> though overall growth has been healthy for much of the last five years.
>>>>
>>>> ************************************************************************************************
>>>>
>>>> I hope it will.
>>>
>>> you mean -you will vote out the bastards who refuse to provide
>>> americans with all good things in life they are entitled to
>>
>> Freedom of speech, freedom of religion, all other provisions of
>> constitution, bill of rights, etc many nice things.
>>
>
> I was referring to fulfilling voters expectations about a 'decent' std
> of living -when the whole freaking world is wallowing in misery.

I think a 'decent' standard of living is acheivable.

>> aka finance
>>> the american dream?
>>
>> Banks and loans and deposits all finance all dreams (unless you are a
>> king, crook, or inherit a lot of money, or have something big to sell).
>>
> Im referring to the state financing your american dream in the event
> your productivity isn't sufficient to get you there.

Oh, here is the issue: why do rich people get all their money and cushy
life for almost no work, and poor people work, suffer, sweat, worry, have
no job security and stay poor. How about you tell me what they get back
for all they put in. Ever hear about our Boston Tea Party?

>> Think you will need to keep voting for the rest of
>>> your life to achieve that.
>>
>> Actually, the big event was in the past: 1776.
>>
>> And, workers got a lot of unions/rights all around 1930s and after.
>>
>> Now, the robber-barron corporations and their "armies" of PR, lawyers,
>> lobbyists have corrupted lots of our rights and you are just feeding into
>> this giant game of "screw the underlings" by favoring the rich/powerful.
>>
>
> Do you have a clue how much americans import from the world to sustain
> their living std today?

Yes, here:
--------------------------------
The Economist (I hope you know that periodical) publishes in the back pages of
every issue lots of financial data. In the April 29, 2006 issue on page 101,
is a bar graph showing (title of bar graph) "Trade in commercial services"
with an asterisk which says "Transport, travel, commmunications, financial
and other services" and under the title it says "Top exporters, 2005, $bn"
and guess who is at the top? The USA, exported $350 billion in services.
The next highest exporter is Britain with $180 bil. There were 13 more
countries listed (Germany, France, Japan, Italy, Spain, China [with $80 bil],
Netherlands, _India_ [with $65 bil in services], and the rest with Canada
ending at $50 bil). The source was given as the WTO.


Just in the Tuesday, May 16, issue of the WSJ, front page, is another bar
graph on world wide farm exports. Guess what, US is at the top with $79.6
bil in exports. The whole EU exports $78.4 bil. Others in order down the
list are Canada (40.1), Brazil (30.9), China (24.1), Oz (22.1), Argentina
(17.1), and down through Russia (13.8), and Malaysia (13.1), and India not
even on the list.
-------------------------------------------

and also here:

--------------------------------

Quotes from the "Financial Times" Thursday, May 11, 2006, page 4:
article title: "Nations close on competitive US"
by Francis Williams in Geneva

Quotes:

"The US is still the world's most competitive economy...the IMD business
school says in its latest competitiveness rankings."

The sidebar lists the top economies:

1. US
2. Hong Kong
3. Singapore
4. Iceland
5. Denmark
6. Australia
7. Canada
8. Switzerland
9. Luxembourg
10. Finland

Farther down the list: UK at 21, Germany at 26, France 35, Italy near the
bottom at 56. In the last year, China went from 31 to 19, India from 39 to
29, still very far down the list. Economies that went down: Taiwan (18
from 11) and S Korea (38 from 29).

"The IMD scorecard uses 312 criteria" over a very broad range of factors.

----

Jose

unread,
Aug 29, 2006, 3:54:59 PM8/29/06
to
Harry Thompson wrote:

>"Straydog" <a...@panix.com> wrote in message
>news:Pine.NEB.4.63.06...@panix2.panix.com...
>
>
>>On Mon, 28 Aug 2006, E (Bet) Anthony wrote:
>>
>>
>>
>>>rick++ wrote:
>>>
>>>
>>>
>>>>http://www.nytimes.com/2006/08/28/business/28wages.html
>>>>
>>>>
>>>>
>>>>
>>>When the New York Times story begins with this lie, "With the economy
>>>beginning to slow,....." why read beyond the first six words.
>>>
>>>WASHINGTON, Aug. 28 (UPI) -- The U.S. economy has been steadily improving
>>>since the 2001 recession with a 4 percent annual growth rate during the
>>>first half of the year and a record low unemployment rate of 4.8 percent.
>>>
>>>
>>>
>>>
>>Or...I guess you have not heard yet that the real estate market has bombed
>>out (as has appeared in the Wall Street Journal, and many other media).
>>And, the serious speculations are now focused on in how many months the
>>stock market will bomb and by how much.
>>
>>I am in a very high growth area (residential real estate, lots of it) and
>>the slowdown is easily visible without statistics.
>>
>>
>
>I just went to one of my favorite restaurants for lunch.
>

You just went to lunch? - then post this at 6:51 A.M.!
I see why the place was half empty.

Jose

unread,
Aug 29, 2006, 3:58:51 PM8/29/06
to
Straydog wrote:

>
>
> On Tue, 29 Aug 2006, Kamal R. Prasad wrote:
>
>>
>> Straydog wrote:
>>
>>> On Tue, 29 Aug 2006, Kamal R. Prasad wrote:
>>>
>>>>
>>>> Old Pif wrote:
>>>>
>>>>> rick++ wrote:
>>>>>
>>>>>>
>>>>>> The NY Times reports that wages for Americans are lowest as a
>>>>>> fraction
>>>>>> of the US economic output since these statistics were recorded in
>>>>>> the
>>>>>> 1950s.
>>>>>>
>>>>>
>>>>> Corporations and the government have been working cheek to cheek to
>>>>> achieve that. They implement Ricardo law not defy it.
>>>>> Congratulations!
>>>>>
>>>> Im really glad that you accept Ricardo's laws' existence
>>>
>>>
>>> I don't think you can interpret Old Pif's sentence in that way. He
>>> may say
>>> it is happening but not necessarily accept the law.
>>>
>> It is happening because Ricardo's lawa do prevail -whether you like it
>> or not. In order for that not to happen or fot govts to successfully
>> defy them, you will have to recall all econ 101 books and scratch out
>> the text concerning Ricardo's laws.
>
>
> Here, its already happening. The economists are screwed up.


You want a serious and un-complicated answer for the state of the
economy? Go see where people are standing in line. It's not the
unemployment line or soup line, they are in lines cashing their payroll
check at the bank.

Old Pif

unread,
Aug 29, 2006, 9:59:19 PM8/29/06
to

Kamal R. Prasad wrote:
>
> I'm really glad that you accept Ricardo's laws' existence coz your posts
> indicate you would rather legislate away all known problems -than
> solve them.
>

There was alive discussion of "Avoiding Ricardo's Trap"
http://www.americaneconomicalert.org/view_art.asp?Prod_ID=1158 some
time ago in here. The short summary of which has been you need do
something about it. Legislate or not the story here is analogous to the
law of gravity that says that all bodies are attracted to the center of
the Earth and as a consequences everything must fall to the ground and
stay there. As you might notice however we have planes that are flying,
skyscrapers that are standing and many other examples of gravity law
defiance which is possible because alternative additional force has
been applied. Ricardo discovered a powerful force but it is only one of
the forces. There are many others. It is up to society to apply
additional forces to avoid Ricardo trap. There is no one known example
of economy without legislation, never was and never will be. This
legislation might send the population to the Ricardo trap or might help
to avoid it.

Straydog

unread,
Aug 29, 2006, 10:32:40 PM8/29/06
to

Kamal is so impressed with economics (a lot of it is dogma) and thus is
his "religion" (or "belief system") that it reminds me of how peoples,
well into the past, were much more superstitious than today. The believed
in spirits, ghosts, various gods, devils, demons, etc., and did a poor job
of figuring out cause and effect (thinking that lightning and thunder
represented unhappy gods, etc).

So, here is my "pin" to burst the economist "balloon:" We have more
economists than ever before in history, more books and journal papers on
economics that ever before in history, more differing opinions from
economists, a literature _by_ contrarian economists that _show_ that
economics is a lot of bunk (eg. Keen's book, which actually cites a number
of OTHER economists who also think economics is not all that it's cracked
up to be), and that if you can figure out if an economist is a republican
or democrat or something else, then you can predict what his predictions
will be about how to run the economy! And, none of these guys can predict
the future, anyway. Predictions are derived by asking 100 economists to
answer a poll, and report the "guess" in terms of a percentage answer.
Like a quantum in physics: one particle can be distributed in two
different potential wells simultaneously and an economist can be right or
wrong, simultaneously, or, vice-versa.

And, to give another example, I have this book: "The Evolution of Economic
Thought" 3rd ed, by Oser and Blanchfield, and I read about 2/3 of it.
There were, according to the authors, a total of about 18 different
schools of economic thought, some of which are already obsolete, and a
few that split or merged or evolved with each other, and some that grew
out of the person's own personal life experience (thus born with bias).
Most of the authors/originators of their schools of thought considered,
predictably, that their own school of thought was the _right_ one and
everyone else's was _wrong_.

I have difficulty recognizing economics as a science. Since we've been in
the world of the "information and data explosion" for some two decades
already, I hate to think where the world will be in 50 years.


nonesuch

unread,
Aug 29, 2006, 10:45:23 PM8/29/06
to

"Jose" <joda...@gignews.com> wrote in message
news:tOadnakYjIDlAWnZ...@comcast.com...

And what exactly this tells us about the state of the economy? Maybe that
workers cannot afford a bank account and therefore need to cash their
paychecks. In Mexico this is the way that the "economy" might work, as no
one can trust the mexican banks, I imagine. I think the NYT article speaks
for itself.


nonesuch

unread,
Aug 29, 2006, 11:13:45 PM8/29/06
to

"Kamal R. Prasad" <kam...@acm.org> wrote in message
news:1156862362.6...@p79g2000cwp.googlegroups.com...

>
> Straydog wrote:
>
>> On Tue, 29 Aug 2006, Kamal R. Prasad wrote:
>>
>> >
>> > Old Pif wrote:
>> >
>> >> rick++ wrote:
>> >>>
>> >>> The NY Times reports that wages for Americans are lowest as a
>> >>> fraction
>> >>> of the US economic output since these statistics were recorded in the
>> >>> 1950s.
>> >>>
>> >>
>> >> Corporations and the government have been working cheek to cheek to
>> >> achieve that. They implement Ricardo law not defy it. Congratulations!
>> >>
>> > Im really glad that you accept Ricardo's laws' existence
>>
>> I don't think you can interpret Old Pif's sentence in that way. He may
>> say
>> it is happening but not necessarily accept the law.
>>
> It is happening because Ricardo's lawa do prevail -whether you like it
> or not. In order for that not to happen or fot govts to successfully
> defy them, you will have to recall all econ 101 books and scratch out
> the text concerning Ricardo's laws.
So does the laws of supply and demand, and they principle that death and
taxes are the only sure things in life. However, this does not mean that
society (and the government) does NOT have the duty to find cures to
disease, cut taxes and, fight the Ricardo law. It is in the interest of the
corporation to follow Ricardo's bonehead approach, but it is not in the
interest of societies or the governments (except the US of course).

>
>> coz your posts
>> > indicate you wwould rather legislate away all known problems -than
>> > solve them.
>>
>> Legislation (i.e. law formation) is in the foundations of many religions
>> (eg. monotheistic "commandments", and polytheistic "rules" which are
>> mostly for worship and prayers and that it is important not to make the
>
> the pt I was making is that you seem to be approaching all problems as
> things that can be solved by legislation. Good for you if it can be
> -but if it cannot be, then you need to re-think your strategies.

Globalization was legislated, as were all the liberalization steps initially
"suggested" by the despotic international institutions better known as the
World Bank and the IMF. Social justice and exploitation are also the
product of legislation, at least in real democracies (probably not in India
though).

THe american dream (or any other dream) is not based on productivity. THe US
was making quite abit of progress in the 1950s and 1960s even thoug
productivity did not increase as much as it did the in 1990s. BTW, the US
was also fighting comunism for your benefit.


>
>> Think you will need to keep voting for the rest of
>> > your life to achieve that.
>>
>> Actually, the big event was in the past: 1776.
>>
>> And, workers got a lot of unions/rights all around 1930s and after.
>>
>> Now, the robber-barron corporations and their "armies" of PR, lawyers,
>> lobbyists have corrupted lots of our rights and you are just feeding into
>> this giant game of "screw the underlings" by favoring the rich/powerful.
>>
>
> Do you have a clue how much americans import from the world to sustain
> their living std today? There is nothing that you guys produce to
> finance that import -and if it were that your country's natural
> resources entitle you to all those goodies, then might as well not
> import or export natural resources in return for those imports and
> level off the trade deficit.
> Here is a link to your splurge counter:-

Americans are not importing that much, at least the majority of americans
are not, myself included. With the cost of imports (garbage) steadily
decreasing and other countries economies (your India and China) expanding
much faster than the US, the american market is NOT the primary target
anymore. Ask GM about that.
>
> http://www.americaneconomicalert.org/ticker_home.asp
>
> regards
> -kamal
>


Kamal R. Prasad

unread,
Aug 30, 2006, 2:13:05 AM8/30/06
to
Old Pif wrote:

> Kamal R. Prasad wrote:
> >
> > I'm really glad that you accept Ricardo's laws' existence coz your posts
> > indicate you would rather legislate away all known problems -than
> > solve them.
> >
>
> There was alive discussion of "Avoiding Ricardo's Trap"
> http://www.americaneconomicalert.org/view_art.asp?Prod_ID=1158 some
> time ago in here. The short summary of which has been you need do
> something about it. Legislate or not the story here is analogous to the

The main pt of contention is here:-
---------------------------------------------------------------------------------------------------
Ricardo held that like all other contracts, wages should be left to
the fair and free competition of the market, and should never be
controlled by the interference of the legislature. But it was this
very interference that allowed the United States to escape the
Ricardian trap. The great success story of America is the
transformation of the working class into the middle class. Trade
protectionism kept the demand for labor higher and the supply of labor
lower than the natural order favored by the classical economists.
The result was higher real incomes, as the creation of a mass market of
affluent workers supported the advancement of industrial science and
growing productivity. Unions and professionals were able to bargain
for their share of the higher profits. America became the envy of the
world. Higher incomes are always preferable to lower prices because
they impart more control to the wage-earner over how his money will be
spent, or saved.
---------------------------------------------------------------------------------------------------

Do you actually believe it is feasible to legsilate the flow of capital
across countries? Just to let you know capital does not originate in
the US for you to turn off the tap. The legislation mentioned in the
link refers to legislation inside Britain -not worldwide. You could
have a 21st century version of the corn law, which mandates that only
code written by american workers should be utilized in the US. As was
the case back then, the code will cost more to write and american
programmers will have a swell time -leaving out foreign programmers
high and dry. It was [popular and worked then -so Isuppose it could
work to some extent even now.
The only problem I see is that many of the tech goods produced in
the US are consumed by people elsewhere too. Oracle sells its database
engine world wide, and so does MSFT or Apple sell their OS and if it
weren't for export bans by the US govt, IBM would have been selling a
lot more than 53% of its products outside the US. When you sell
globally, you cannot tell the competition to clear out. If other
countries have a comparative advantage, then products made by using
their labour will out-run american products.Further, globalization is
about quid-pro-quo. US govt gets access to other markets for its
industries in return for providing market access. For every tariff you
apply, there will be retaliatory tariffs and for every product that is
sold by using american labour overseas, there will be demands to let
products in using their labour -into your market. If you believe that
as a result of all of this, you will be the loser -then as Henry
Paulson refers to it, you may want to pull up the drawbridge. You won't
have to deal with the troubles of globalization and you won't be able
to get the benefits of globalization either.

> law of gravity that says that all bodies are attracted to the center of
> the Earth and as a consequences everything must fall to the ground and
> stay there. As you might notice however we have planes that are flying,
> skyscrapers that are standing and many other examples of gravity law
> defiance which is possible because alternative additional force has

fine -I will leave it to you to legislate away problems. I just want to
let you know that nobody has managed to defy gravity to date -and
re-calling econ books to scratch out Ricardo's laws is like recalling
physics books to scratch out Newton's laws of motion. Its going to be a
major recall for sure.

> been applied. Ricardo discovered a powerful force but it is only one of
> the forces. There are many others. It is up to society to apply
> additional forces to avoid Ricardo trap. There is no one known example
> of economy without legislation, never was and never will be. This
> legislation might send the population to the Ricardo trap or might help
> to avoid it.

Do you know of any society which managed to defy Ricardo's laws -as in
render it inapplicable? Lots of protectionist measures provide
temporary relief -but in the long run, comparative advantage does
prevail -or to be precise, it has prevailed to date without exception.

regards
-kamal

Kamal R. Prasad

unread,
Aug 30, 2006, 2:49:00 AM8/30/06
to

nonesuch wrote:

It is in your interests to defy the laws of gravity and not work your
leg muscles and instead start floating in the air. Good for you if you
can do.

> >
> >> coz your posts
> >> > indicate you wwould rather legislate away all known problems -than
> >> > solve them.
> >>
> >> Legislation (i.e. law formation) is in the foundations of many religions
> >> (eg. monotheistic "commandments", and polytheistic "rules" which are
> >> mostly for worship and prayers and that it is important not to make the
> >
> > the pt I was making is that you seem to be approaching all problems as
> > things that can be solved by legislation. Good for you if it can be
> > -but if it cannot be, then you need to re-think your strategies.
>
> Globalization was legislated, as were all the liberalization steps initially
> "suggested" by the despotic international institutions better known as the
> World Bank and the IMF.

Globalization is a return to free trade that existed in the ancient
world. Things like nations, national boundaries, protectionist measures
were something new that came up in the last 2-3 or 400 yrs back. There
used to be a silk route from China to Europe, and a sea route from
India to Egypt/Arabia and from there to the Roman empire. Trade only
made regions prosperous and not poorer during ancient times.

> Social justice and exploitation are also the
> product of legislation, at least in real democracies (probably not in India
> though).

looks like you have 2 contradictions in your statement. We have an
agenda for social justice by way of legislation -but like in the US,
middlemen eat up all the money.

How will you consume if you cannot produce? Why will anyone pay you a
compensation in excess of what your services generate for him?

> was making quite abit of progress in the 1950s and 1960s even thoug
> productivity did not increase as much as it did the in 1990s.

The US experienced a surge in productivity/economic expansion during
that period. After Vietnam, it has mostly been a downhill story.

> BTW, the US
> was also fighting comunism for your benefit.

It was fighting communism for its own benefit.

> >
> >> Think you will need to keep voting for the rest of
> >> > your life to achieve that.
> >>
> >> Actually, the big event was in the past: 1776.
> >>
> >> And, workers got a lot of unions/rights all around 1930s and after.
> >>
> >> Now, the robber-barron corporations and their "armies" of PR, lawyers,
> >> lobbyists have corrupted lots of our rights and you are just feeding into
> >> this giant game of "screw the underlings" by favoring the rich/powerful.
> >>
> >
> > Do you have a clue how much americans import from the world to sustain
> > their living std today? There is nothing that you guys produce to
> > finance that import -and if it were that your country's natural
> > resources entitle you to all those goodies, then might as well not
> > import or export natural resources in return for those imports and
> > level off the trade deficit.
> > Here is a link to your splurge counter:-
> Americans are not importing that much, at least the majority of americans
> are not, myself included. With the cost of imports (garbage) steadily

You are. Just about any product you buy comes from overseas -either
wholly or in part. To quote Lou Dobbs (the urban legend of
protectionism) -97% of what you eat and wear comes from overseas. If
you can grow your own food and fuel(read ethanol), that would mark a
difference.

> decreasing and other countries economies (your India and China) expanding
> much faster than the US, the american market is NOT the primary target
> anymore. Ask GM about that.

yeah -when companies hire workers, they create consumers for their
products. Since companies have been expanding big time in India/China
-it was just a matter of time, before it creates a market for their
products too. The problem at your end is that you consume a lot more
than you produce -which reflects itself in the trade deficit mentioned
in the link below.

> >
> > http://www.americaneconomicalert.org/ticker_home.asp
> >

regards
-kamal

Noel

unread,
Aug 30, 2006, 4:57:32 AM8/30/06
to
Russell...@wdn.com wrote:

> One of my favorite restaurants recently shut down. Now they
> just do catering and open the place for large catered parties.
> The owner came over to talk to me that last time I was in
> because he wanted all his regulars to hear the news from him
> personally. He said they just were not doing the business
> needed to stay open and the catering business was taking
> off. Restauranting is tough way to make a living.

This reflects the demographic changes going on in our culture. The
walk-in customers tend to be (employed) ordinary folks. However,
catering is for rich people and/or companies.

Noel

Straydog

unread,
Aug 30, 2006, 6:16:27 AM8/30/06
to

On Wed, 29 Aug 2006, Kamal R. Prasad wrote:

> Old Pif wrote:
>
>> Kamal R. Prasad wrote:
>>>
>>> I'm really glad that you accept Ricardo's laws' existence coz your posts
>>> indicate you would rather legislate away all known problems -than
>>> solve them.
>>>
>>
>> There was alive discussion of "Avoiding Ricardo's Trap"
>> http://www.americaneconomicalert.org/view_art.asp?Prod_ID=1158 some
>> time ago in here. The short summary of which has been you need do
>> something about it. Legislate or not the story here is analogous to the
>
> The main pt of contention is here:-
> ---------------------------------------------------------------------------------------------------
> Ricardo held that like all other contracts, wages should be left to
> the fair and free competition of the market, and should never be
> controlled by the interference of the legislature.

If this is what Ricardo is saying, then it is a pipe dream unrelated to
reality. And, you would have to define the words "fair" and "free" and
"competition" in ways that are different than the layperson definitions.

But it was this
> very interference that allowed the United States to escape the
> Ricardian trap.

The Ricardian trap is not defined anywhere in this paragraph.

The great success story of America is the
> transformation of the working class into the middle class.

In at least one "school of thought" this was due to union organization of
workers AND with the help of new laws that favored labor. This is all in
labor history.

Trade
> protectionism kept the demand for labor higher and the supply of labor
> lower than the natural order favored by the classical economists.

"...natural order..." and "favored by the classical economists"? This
needs much further explanation.

> The result was higher real incomes, as the creation of a mass market of
> affluent workers supported the advancement of industrial science and
> growing productivity.

This just does not follow.

Unions and professionals were able to bargain
> for their share of the higher profits.

Only unions. "Professionals", unless you want to define it better, always
made more money.

> America became the envy of the
> world.

We had a remarkable set of circumstances that favored growth and some
books have attempted to determine the cause: from what I read, its not
that easy to analyze.

> Higher incomes are always preferable to lower prices because
> they impart more control to the wage-earner over how his money will be
> spent, or saved.

This also is not obvious since lower prices are otherwise equivalent to
higher incomes.

So, basically, the orginal paragraph is defective in many ways.

> ---------------------------------------------------------------------------------------------------
>
> Do you actually believe it is feasible to legsilate the flow of capital
> across countries?

Easy, just make cross border trade illegal. Period.

Just to let you know capital does not originate in
> the US for you to turn off the tap.

Fact: USD does originate in the USA and everyone in the world is working
to get some of it.

Question: what ever gives you the idea that capital does not originate in
the USA? You have been saying this for over a year and never explaining
it.

The legislation mentioned in the
> link refers to legislation inside Britain -not worldwide. You could
> have a 21st century version of the corn law, which mandates that only
> code written by american workers should be utilized in the US. As was
> the case back then, the code will cost more to write and american
> programmers will have a swell time -leaving out foreign programmers
> high and dry. It was [popular and worked then -so Isuppose it could
> work to some extent even now.
> The only problem I see is that many of the tech goods produced in
> the US are consumed by people elsewhere too. Oracle sells its database
> engine world wide, and so does MSFT or Apple sell their OS and if it
> weren't for export bans by the US govt, IBM would have been selling a
> lot more than 53% of its products outside the US. When you sell
> globally, you cannot tell the competition to clear out. If other
> countries have a comparative advantage,

----------------------------
The following quote is from Business Week, December 6, 2004
and from the article "Shaking up Trade Theory" by Aaron Bernstein
on pages 116 to 120. (The subtitle of the article is: "For decades
economists have insisted that the U.S. wins from globalization. Now they
are not so sure")

They quoted Paul Samuelson (MIT) as saying "Comparative advantage
cannot be counted on to create...net gains greater than the net
losses from trade"

------------------------

then products made by using
> their labour will out-run american products.Further, globalization is
> about quid-pro-quo. US govt gets access to other markets for its
> industries in return for providing market access.

Not when trade is asymmetric. India has not opened its markets yet. Japan
is still not open, either.

For every tariff you
> apply, there will be retaliatory tariffs and for every product that is
> sold by using american labour overseas, there will be demands to let
> products in using their labour -into your market.

There are all manner of ways to block markets without using tariffs.

If you believe that
> as a result of all of this, you will be the loser -then as Henry
> Paulson refers to it, you may want to pull up the drawbridge. You won't
> have to deal with the troubles of globalization and you won't be able
> to get the benefits of globalization either.

Also, don't forget that India and other countries target their exchange
rates to favor exports.

>> law of gravity that says that all bodies are attracted to the center of
>> the Earth and as a consequences everything must fall to the ground and
>> stay there. As you might notice however we have planes that are flying,
>> skyscrapers that are standing and many other examples of gravity law
>> defiance which is possible because alternative additional force has
>
> fine -I will leave it to you to legislate away problems. I just want to
> let you know that nobody has managed to defy gravity to date

He just told you: planes, skyscrapers, etc.

-and
> re-calling econ books to scratch out Ricardo's laws is like recalling
> physics books to scratch out Newton's laws of motion.

Economics "laws" are not like physics laws.

Its going to be a
> major recall for sure.
>
>> been applied. Ricardo discovered a powerful force but it is only one of
>> the forces. There are many others. It is up to society to apply
>> additional forces to avoid Ricardo trap. There is no one known example
>> of economy without legislation, never was and never will be. This
>> legislation might send the population to the Ricardo trap or might help
>> to avoid it.
>
> Do you know of any society which managed to defy Ricardo's laws -as in
> render it inapplicable? Lots of protectionist measures provide
> temporary relief -but in the long run, comparative advantage does
> prevail -or to be precise, it has prevailed to date without exception.

-------------------------------------
The following quote is from Business Week, December 6, 2004
and from the article "Shaking up Trade Theory" by Aaron Bernstein
on pages 116 to 120. (The subtitle of the article is: "For decades
economists have insisted that the U.S. wins from globalization. Now they
are not so sure")

They quoted Paul Samuelson (MIT) as saying "Comparative advantage
cannot be counted on to create...net gains greater than the net
losses from trade"

--------------------------------------

> regards
> -kamal
>
>

Straydog

unread,
Aug 30, 2006, 6:36:19 AM8/30/06
to

I think what is floating in air is India. All this business just falls
into your lap, without any work on your part, as nothing other than due
to the exchange rate.

>>>
>>>> coz your posts
>>>>> indicate you wwould rather legislate away all known problems -than
>>>>> solve them.
>>>>
>>>> Legislation (i.e. law formation) is in the foundations of many religions
>>>> (eg. monotheistic "commandments", and polytheistic "rules" which are
>>>> mostly for worship and prayers and that it is important not to make the
>>>
>>> the pt I was making is that you seem to be approaching all problems as
>>> things that can be solved by legislation. Good for you if it can be
>>> -but if it cannot be, then you need to re-think your strategies.
>>
>> Globalization was legislated, as were all the liberalization steps initially
>> "suggested" by the despotic international institutions better known as the
>> World Bank and the IMF.
> Globalization is a return to free trade that existed in the ancient
> world.

The word _globalization_ is a very funny word since trade existed in
ancient times. Whether that trade was _free_ or, what, "not free" depends
on what could have made it "not free" trade. And, what could make trade
"not free"? Laws, rules, business practices, and bureaucratic
organizations meant to favor particular interests. In ancient times, a few
guys put their fruits into a boat, rowed their boat to a foreign beach,
and communicated to the foreigners "we have this, what do you have?" and
all of those laws, rules, practices, and bureaus did not exist. Maybe that
is what you mean by "free trade."

Things like nations, national boundaries, protectionist measures
> were something new that came up in the last 2-3 or 400 yrs back.

There was trade 4,000 years ago, at least.

There
> used to be a silk route from China to Europe, and a sea route from
> India to Egypt/Arabia and from there to the Roman empire. Trade only
> made regions prosperous and not poorer during ancient times.

You might also want to correct yourself by understanding that only the
merchants made money and the only ones who could afford to pay the money
were the rich people. And, the rich people were the landlords and
merchants. The poor people had nothing. They had nothing until barely
1800s, and then we had a real middle class in early 1900s.

>> Social justice and exploitation are also the
>> product of legislation, at least in real democracies (probably not in India
>> though).
>
> looks like you have 2 contradictions in your statement.

Social justice is good (comes from laws). Exploitation is bad (eg. H1B,
also comes from laws). No contradiction there.

We have an
> agenda for social justice by way of legislation

It needs enforcement.

-but like in the US,
> middlemen eat up all the money.

And, so the middlemen are one of the rich.

You have not backed up this statement anywhere, ever.

Why will anyone pay you a
> compensation in excess of what your services generate for him?

Its not "in excess." ~95% of the US economy has its sources and consumers,
inside its borders.

>> was making quite abit of progress in the 1950s and 1960s even thoug
>> productivity did not increase as much as it did the in 1990s.
> The US experienced a surge in productivity/economic expansion during
> that period. After Vietnam, it has mostly been a downhill story.

Statement unsupported by data.

>> BTW, the US
>> was also fighting comunism for your benefit.
>
> It was fighting communism for its own benefit.

Oh, does that mean communism benefited all of you Indians in India?

>>>> Now, the robber-barron corporations and their "armies" of PR, lawyers,
>>>> lobbyists have corrupted lots of our rights and you are just feeding into
>>>> this giant game of "screw the underlings" by favoring the rich/powerful.
>>>>
>>>
>>> Do you have a clue how much americans import from the world to sustain
>>> their living std today? There is nothing that you guys produce to
>>> finance that import -and if it were that your country's natural
>>> resources entitle you to all those goodies, then might as well not
>>> import or export natural resources in return for those imports and
>>> level off the trade deficit.
>>> Here is a link to your splurge counter:-
>> Americans are not importing that much, at least the majority of americans
>> are not, myself included. With the cost of imports (garbage) steadily
>
> You are. Just about any product you buy comes from overseas

Only electronics and gadgets. 99.5% of my retirement house came from US
sources. 100% of my Toyota Camry was built in the USA. The vast majority
of the food I eat comes from US labels on the food.

-either
> wholly or in part.

So, your sentence above is a big lie.

To quote Lou Dobbs (the urban legend of
> protectionism) -97% of what you eat and wear comes from overseas.

I'd like to know where he gets that from.

If
> you can grow your own food and fuel(read ethanol), that would mark a
> difference.

Ethanol? US production of ethanol is increasing rapidly.

>> decreasing and other countries economies (your India and China) expanding
>> much faster than the US, the american market is NOT the primary target
>> anymore. Ask GM about that.
>
> yeah -when companies hire workers, they create consumers for their
> products.

And when companies fire workers, they destroy consumers, too, for their
products, and the globalists (and you) don't talk about that.

Since companies have been expanding big time in India/China
> -it was just a matter of time, before it creates a market for their
> products too.

Its already happening. India/China are becoming another USA. And, all with
USD and US business.

> regards
> -kamal
>
>

Old Pif

unread,
Aug 30, 2006, 7:00:02 AM8/30/06
to

Kamal R. Prasad wrote:
>
> Do you actually believe it is feasible to legislate the flow of capital
> across countries?
>

Yes, I do. If by legislation you mean well balanced system of tariffs
and taxes. Plus some internal measure that favor small and medium size
business that don't outsource.

The very recent successful example of that has been mentioned here -
lowering taxes for return capital. In just one year a record amount of
capital has been flown back to the country that stimulated internal job
growth. Ideally the inflow of capital must not be taxed at all and the
outflow of the capital must be heavily taxed. The US has big enough
internal market to live without low labor cost countries. The capital
flow between regions with comparable labor cost does not create social
problems. So, combined market of US, Canada, Europe and Japan gives
corporations a lot of space and freedom without destruction of the
domestic level of living.

Old Pif

unread,
Aug 30, 2006, 7:03:27 AM8/30/06
to

Kamal R. Prasad wrote:
>
> Do you know of any society which managed to defy Ricardo's laws -as in
> render it inapplicable? Lots of protectionist measures provide
> temporary relief -but in the long run, comparative advantage does
> prevail -or to be precise, it has prevailed to date without exception.
>

Scandinavia for one and the rest of Europe to lesser extent. And the US
for some part of the XX century.

Harry Thompson

unread,
Aug 30, 2006, 8:25:00 AM8/30/06
to

"Jose" <joda...@gignews.com> wrote in message
news:TZidnbOCJYEMBmnZ...@comcast.com...

> Harry Thompson wrote:
>>
>>I just went to one of my favorite restaurants for lunch.
>
> You just went to lunch? - then post this at 6:51 A.M.!
> I see why the place was half empty.

Jose, your response to me is the most dishonest I've seen in years.

As a matter of fact, the "just" refers to the day before, which is close
enough for my point.

You are dishonest. Consciously dishonest. Plonk.


Harry Thompson

unread,
Aug 30, 2006, 8:26:56 AM8/30/06
to

"Jose" <joda...@gignews.com> wrote in message
news:TZidnbOCJYEMBmnZ...@comcast.com...
> Harry Thompson wrote:
>>
>>I just went to one of my favorite restaurants for lunch.
>
> You just went to lunch? - then post this at 6:51 A.M.!
> I see why the place was half empty.

Jose, your response to me is the most dishonest I've seen in years.

Old Pif

unread,
Aug 30, 2006, 8:39:27 AM8/30/06
to

Straydog wrote:
>
> And, to give another example, I have this book: "The Evolution of Economic
> Thought" 3rd ed, by Oser and Blanchfield, and I read about 2/3 of it.
> There were, according to the authors, a total of about 18 different
> schools of economic thought, some of which are already obsolete, and a
> few that split or merged or evolved with each other, and some that grew
> out of the person's own personal life experience (thus born with bias).
> Most of the authors/originators of their schools of thought considered,
> predictably, that their own school of thought was the _right_ one and
> everyone else's was _wrong_.
>
> I have difficulty recognizing economics as a science. Since we've been in
> the world of the "information and data explosion" for some two decades
> already, I hate to think where the world will be in 50 years.
>

Economics is an interesting examples of a system with the governing
equations changing over time and at will. Or one can say switching
between the theories. The most important question is not which one is
correct but which one dominates at this particular moment. Might be
more than one in that case chaos is likely to happen.

It works like this: people (those who are in control) adopt certain
theory to drive the system. They can not predict all the consequences -
the system is too complex - so they drive it until unforeseen (for
them) consequences show up. Then they change the theory.

Kamal R. Prasad

unread,
Aug 30, 2006, 9:18:45 AM8/30/06
to

Old Pif wrote:

> Kamal R. Prasad wrote:
> >
> > Do you actually believe it is feasible to legislate the flow of capital
> > across countries?
> >
>
> Yes, I do. If by legislation you mean well balanced system of tariffs
> and taxes. Plus some internal measure that favor small and medium size
> business that don't outsource.
>

Trust me -you cannot. There is a hell lot of capital that can be
invested in India/Chian etc.. assuming you hold all of the capital
investe din the US hostage. Most of the money invested in the tech
sector in the US has come from OUTSIDE the US. As long as India or
China is willing to let foreign capital come into the country and as
long as that money doesn't belong to the US govt/public -there is
nothing you can do to prevent the money from being invested herein. The
money doesn't get routed from the US for it to make its way froma 3rd
country to India/China -that you can turn off the routing switch.

> The very recent successful example of that has been mentioned here -
> lowering taxes for return capital. In just one year a record amount of
> capital has been flown back to the country that stimulated internal job
> growth. Ideally the inflow of capital must not be taxed at all and the

and what if foreign investors want their money out? Your govt has
always invited foreign direct investment by assuring investors of
safety.

> outflow of the capital must be heavily taxed. The US has big enough
> internal market to live without low labor cost countries. The capital

If you pay more for labour, you experience higher cost of living aka
inflation. To keep pace with inflation, your salaries will also have
to rise for which productivity and in turn profits will have to rise.

> flow between regions with comparable labor cost does not create social
> problems. So, combined market of US, Canada, Europe and Japan gives
> corporations a lot of space and freedom without destruction of the
> domestic level of living.

Fine. Pl go ahead with your ideas of saving the first world. As
regards scandinavia and Europe, they do face the same problems you do.
Id like someone from scandinavia to attest here that comparative
advantage doesn't apply in his/her country.

regards
-kamal

Straydog

unread,
Aug 30, 2006, 1:56:57 PM8/30/06
to

On Wed, 30 Aug 2006, Kamal R. Prasad wrote:

>
> Old Pif wrote:
>
>> Kamal R. Prasad wrote:
>>>
>>> Do you actually believe it is feasible to legislate the flow of capital
>>> across countries?
>>>
>>
>> Yes, I do. If by legislation you mean well balanced system of tariffs
>> and taxes. Plus some internal measure that favor small and medium size
>> business that don't outsource.
>>
>
> Trust me -you cannot.

You don't have to trust me, just read the papers. China has initiated
several processes to monitor, control, and block new FDI into China. All
on paper.

There is a hell lot of capital that can be
> invested in India/Chian

Currently the flow of capital into China is ten times what is going into
India.

etc.. assuming you hold all of the capital
> investe din the US hostage. Most of the money invested in the tech
> sector in the US has come from OUTSIDE the US.

Today's WSJ shows a very interesting article and graph and the graph shows
that while profits from China's exports is going upward at a higher rate
every year, the fraction of those exports that come from foreign-owned
business is also going upward at the same rate. In other words, for the
last two years, China's "cut" has been constant, and the foreign owned
fraction is what is going up.

As long as India or
> China is willing to let foreign capital come into the country

It has already slowed down.

and as
> long as that money doesn't belong to the US govt/public

All depends on whether there are any indirect payments to China via 3rd
party contractors to the defense department.

-there is
> nothing you can do to prevent the money from being invested herein.

The Dubai attempted purchase of our port business was blocked. The CNOOC
attempt to buy one of our oil companies was blocked.

The
> money doesn't get routed from the US for it to make its way froma 3rd
> country to India/China

All kinds of illicit trade is already going on. Faked shipping manifests.
I even picked up a brand new brochure from our local post office about
money laundering using money orders. They can't be traced. In the future I
see all kinds of ID being required and the thresholds coming down.

> -that you can turn off the routing switch.

Very easy to turn off the routing switch. India just stopped Coke and
Pepsi, at least in some regions, over chemical contamination claims and
the other story is that you can't get any water at all in India that
doesn't have contamination.

Then, a few grains of ag products (I think rice) showed up as with altered
DNA in Japan and Europe. All imports are now banned just like a switch.

>> The very recent successful example of that has been mentioned here -
>> lowering taxes for return capital. In just one year a record amount of
>> capital has been flown back to the country that stimulated internal job
>> growth. Ideally the inflow of capital must not be taxed at all and the
>
> and what if foreign investors want their money out? Your govt has
> always invited foreign direct investment by assuring investors of
> safety.

Just like India?

>> outflow of the capital must be heavily taxed. The US has big enough
>> internal market to live without low labor cost countries. The capital
>
> If you pay more for labour, you experience higher cost of living aka
> inflation. To keep pace with inflation, your salaries will also have
> to rise for which productivity and in turn profits will have to rise.

Did you ever hear the story that if productivity goes to high, then
production outruns demand, leading to price collapse, then businesses go
out of business? That is in economics textbooks, too.

>> flow between regions with comparable labor cost does not create social
>> problems. So, combined market of US, Canada, Europe and Japan gives
>> corporations a lot of space and freedom without destruction of the
>> domestic level of living.
>
> Fine. Pl go ahead with your ideas of saving the first world. As
> regards scandinavia and Europe, they do face the same problems you do.
> Id like someone from scandinavia to attest here that comparative
> advantage doesn't apply in his/her country.

How about from a Nobel-prize economist......

----------------
The following quote is from Business Week, December 6, 2004
and from the article "Shaking up Trade Theory" by Aaron Bernstein
on pages 116 to 120. (The subtitle of the article is: "For decades
economists have insisted that the U.S. wins from globalization. Now they
are not so sure")

They quoted Paul Samuelson (MIT) as saying "Comparative advantage
cannot be counted on to create...net gains greater than the net
losses from trade"
---------------------

> regards
> -kamal
>
>

Jose

unread,
Aug 30, 2006, 6:40:43 PM8/30/06
to
nonesuch wrote:

It tells you that people are not standing in unemployment or soup lines.

Jean Smith

unread,
Aug 30, 2006, 6:54:04 PM8/30/06
to
In article <1156943925.2...@e3g2000cwe.googlegroups.com>,

"Kamal R. Prasad" <kam...@acm.org> wrote:

> Fine. Pl go ahead with your ideas of saving the first world. As
> regards scandinavia and Europe, they do face the same problems you do.
> Id like someone from scandinavia to attest here that comparative
> advantage doesn't apply in his/her country.

Doesn't US subsidized agribusiness always win? I noticed this when the adoption
of peanut farming in Africa was promoted as a success of foreign aid. It was
until Congress got wind of it. The Doha Round failed on agriculture issues, as I
understood it.

But speaking of wages there's a story about Pinedale, Wyoming. The Bureau o Land
Mangement has let out so many permits for oil and gas drilling that businesses
downtown are working their workers double shifts and the sheriff is complaining
about not being losing his officers because neither wants to pay the $35/hr that
the oil industry days to high school graduates.

--
Bomb http://www.npr.org/templates/story/story.php?storyId=5635330
http://www.gregpalast.com/ http://money.cnn.com/news/economy/index.html
http://www.cnn.com/2006/WORLD/meast/08/11/mideast.main/
http://cagle.msnbc.com/news/fiore/main.asp

nonesuch

unread,
Aug 30, 2006, 10:27:27 PM8/30/06
to
Jose (if that is your name) needs to go back to school. Here is little
piece
http://select.nytimes.com/search/restricted/article?res=F30715F6355B0C7B8CDDA10894DE404482

and another one on not going to the soup kitchen

http://select.nytimes.com/search/restricted/article?res=F5081FF8385B0C728FDDAE0894DE404482

The administration of course things are rossy because the unemployment rate
is so low. Besides, this is not the topic we are on.

"Jose" <joda...@gignews.com> wrote in message

news:oMOdnaNpIKJ6jmvZ...@comcast.com...

nonesuch

unread,
Aug 30, 2006, 10:41:08 PM8/30/06
to

"Kamal R. Prasad" <kam...@acm.org> wrote in message
news:1156920540....@e3g2000cwe.googlegroups.com...
First of all, the force of gravity does not exist. IT is a manifestation of
curvature in the space time caused by objects in the Universe, according to
relativity. Second, why can't all the above economics principles work
within the confines of a single nation, country or empire? It did for 4000
years. THis is the heart of being a liberal. What is important is not
that the economic laws that rule the behavior of businesses and nations, but
how people want to steer the economy in order to maximize and distribute
benefits. Something similar happens in the science of Chemistry: Everyone
acknowledges the laws of thermodynamics, but nobody does research on that
anymore, it is considered a settled matter. SImilarly, the economy can be
manipulated in such a way as to apply the RIcardo's law asymptotically, for
example we may never pay the national debt or balance the budget again, but
no one will complain as it is not affecting their own livelihood. After
all, these problems have been around since the 1970s and so far there has
not been another depression.
What needs to happen to Indians is that the need to wake up and realize that
a good life also means family time, healthy labor environment, low crime
rates and education. THey have been so poor for so long that they would
take whatever bone the corporations throw at them ,and they are even glad
because of that. India is still plagued by problems of social inequity,
terrorism, poor facilities. How much of the new found wealth is going for
addressing these problems is anybody's guess.

Kamal R. Prasad

unread,
Aug 31, 2006, 1:34:17 AM8/31/06
to

Jean Smith wrote:

> In article <1156943925.2...@e3g2000cwe.googlegroups.com>,
> "Kamal R. Prasad" <kam...@acm.org> wrote:
>
> > Fine. Pl go ahead with your ideas of saving the first world. As
> > regards scandinavia and Europe, they do face the same problems you do.
> > Id like someone from scandinavia to attest here that comparative
> > advantage doesn't apply in his/her country.
>
> Doesn't US subsidized agribusiness always win? I noticed this when the adoption
> of peanut farming in Africa was promoted as a success of foreign aid. It was
> until Congress got wind of it. The Doha Round failed on agriculture issues, as I
> understood it.
>

Yes -protectionism provides short term relief against gravity and the
Doha round did fail because of farm subsidies by the US. But I was
talking of being immune to the law of comparative advantage i.e.e defy
gravity in its entirety, just by electing the right set of leaders or
formulating the right set of policies.

> But speaking of wages there's a story about Pinedale, Wyoming. The Bureau o Land
> Mangement has let out so many permits for oil and gas drilling that businesses
> downtown are working their workers double shifts and the sheriff is complaining
> about not being losing his officers because neither wants to pay the $35/hr that
> the oil industry days to high school graduates.
>

How does that contradict any asertions? If the price of oil is high,
then the input costs can absorb the cost of american labour and
besides, one doesn't have to compete for this i.e. it is not a
relocatable industry. The only manpower that can be utilized is one
that is available locally.

regards
-kamal

Straydog

unread,
Aug 31, 2006, 1:59:44 AM8/31/06
to

On Thu, 30 Aug 2006, Kamal R. Prasad wrote:

>
> Jean Smith wrote:
>
>> In article <1156943925.2...@e3g2000cwe.googlegroups.com>,
>> "Kamal R. Prasad" <kam...@acm.org> wrote:
>>
>>> Fine. Pl go ahead with your ideas of saving the first world. As
>>> regards scandinavia and Europe, they do face the same problems you do.
>>> Id like someone from scandinavia to attest here that comparative
>>> advantage doesn't apply in his/her country.
>>
>> Doesn't US subsidized agribusiness always win? I noticed this when the adoption
>> of peanut farming in Africa was promoted as a success of foreign aid. It was
>> until Congress got wind of it. The Doha Round failed on agriculture issues, as I
>> understood it.
>>
>
> Yes -protectionism provides short term relief against gravity and the
> Doha round did fail because of farm subsidies by the US.

That is a big lie, again. It failed because India would not open its
markets and many countries that manipulated their exchange rates to
benefit only their exports would not drop their tariffs. And, all these
trouble-maker countries wanted to set up loopholes in the Doha round. Its
now in several papers I read.

But I was
> talking of being immune to the law of comparative advantage i.e.e defy
> gravity in its entirety,

Defy gravity? I keep showing you this simple sentence and you have always
ignored it (and Samuelson has a Nobel Prize in economics):
----------------------


The following quote is from Business Week, December 6, 2004
and from the article "Shaking up Trade Theory" by Aaron Bernstein
on pages 116 to 120. (The subtitle of the article is: "For decades
economists have insisted that the U.S. wins from globalization. Now they
are not so sure")

They quoted Paul Samuelson (MIT) as saying "Comparative advantage
cannot be counted on to create...net gains greater than the net
losses from trade"

--------------------


just by electing the right set of leaders or
> formulating the right set of policies.
>
>> But speaking of wages there's a story about Pinedale, Wyoming. The Bureau o Land
>> Mangement has let out so many permits for oil and gas drilling that businesses
>> downtown are working their workers double shifts and the sheriff is complaining
>> about not being losing his officers because neither wants to pay the $35/hr that
>> the oil industry days to high school graduates.
>>
>
>

Jean Smith

unread,
Aug 31, 2006, 3:06:38 AM8/31/06
to
In article <1157002457.8...@b28g2000cwb.googlegroups.com>,

I'm sure that's why they've built a three story motel for their workers and
marked it booked for years. They live there already.

The story was on the HDnet version of the evening news BTW. It might be repeated

http://www.cnn.com/2006/WORLD/meast/08/11/mideast.main/
http://cagle.msnbc.com/news/fiore/main.asp

Kamal R. Prasad

unread,
Aug 31, 2006, 10:52:58 AM8/31/06
to

Straydog wrote:

> On Mon, 28 Aug 2006, rick++ wrote:
>
> > The NY Times reports that wages for Americans are lowest as a fraction
> > of the US economic output since these statistics were recorded in the
> > 1950s.

> > Traditionally wages would expand when the economy was increasing
> > (supposedly now).
> > Globalization of manufacturing and intellectual labor are the cause:
> >
> > http://www.nytimes.com/2006/08/28/business/28wages.html
> >
> > Only the top decile of the population is bucking this trend.
> >
> ----------------
> This isn't particularly new. Somewhere, I can't find it now, among my
> files is a quote of data showing the progress of the minimum wage AND the
> buying power (reduction in value as caused by inflatio) over the last
> 30-35 years and it is clear that the min wage has not kept up with
> inflation. It doesn't tell the whole story since for some things the
> prices have come down, too.
>

..and the reason why you have inflation (and inflation targetting by
the US federal reserve) is because increasing money supply does not
lead to an increase in wealth, but increases the amt of money available
to transact in wealth. The notion of 'the world loves our currency' or
'india is a bowl of dust' will not suffice to wish away any
macro-economic problems or finance your spending binge.

> Below is a piece which is undated, but copyrighted (see the end) in 2004
> so it is from that year. Again, the situation is not good. So, we not only
> have corporate CEOs beating on our heads, but Kamal Prasad telling us we
> actually _need_ to become paupers, serfs, and peasants for reasons I can't
> really follow other than a hidden plot to help the rich get richer and at
> the expense of the poorer.
>

I did recommend in another post that every american (who isn't
extraordinary but does work that can be offshored) should opt for
minimum wage adjusted for inflation. It could amount to all s/w
engineers in the US working for $20/hr. Thats better than burger
flipping and even better than being unemployed. At $20/hr you wouldn't
even have to worry about H1Bs flooding the market. Their purchasing
power in India will be comparable to H1Bs.


regards
-kamal

> ------
> (Reproduced in the public interest)
>
> Average-Wage Earners Fall Behind
>
> By Jonathan Krim and Griff Witte
>
> ST. CHARLES, Mo. -- Teresa Geerling is living the future of life in
> the middle of the American workforce.
>
> After years cleaning the insides of airplanes and polishing their
> outsides, Geerling was laid off from American Airlines last year. The
> job was physically taxing for Geerling, 50, but the nearly $32,000 annual
> pay and health-care coverage helped provide a typical middle-class life in
> this small midwestern community.
>
> Now, she works the overnight shift at a local hospital as a
> nurse's aide while completing course work to be certified as a medical
> assistant. That would seem to be a smart move, because unlike airlines,
> which are contracting, health care is one of the industries that many
> economists believe could generate millions more jobs in the decades to come.
>
> Yet rarely has Geerling's work life been so precarious.
>
> If she can't stay on her husband's health plan, her costs for health
> insurance offered by the hospital will be $200 a month, more than five
> times as much as at the airline. There are no pension benefits beyond
> the option for a 401(k) savings plan and few job protections. She makes
> $2 an hour less than before; to have a chance at higher pay, she will
> need to continually train herself in new areas.
>
> Geerling is at the leading edge of changes that herald a new era for
> millions of people earning around the national average, $17 an hour.
>
> This new era requires that workers shoulder more responsibility
> and risk on the way to financial security, economists say. It also
> demands that they be nimble in an increasingly fluid job market. Those
> who don't obtain some combination of specialized skills, higher education
> and professional status that can be constantly adapted will be in danger
> of sliding down the economic ladder to low-paying service jobs, usually
> without benefits.
>
> Meanwhile, those who secure the middle-class jobs of the 21st
> century will have to make $17 an hour stretch further than ever
> as they pay more for health care or risk doing without insurance
> and assume much or all of the burden for their retirement.
>
> In the lively debate about the future of U.S. jobs, many
> economists and scholars acknowledge that the changes wrought by
> technology and global economic forces will be painful at first. But
> they say the new structure ultimately will create many kinds of jobs
> as yet unimagined, in fields such as education, health care and science.
>
> "You have to take the leap of faith that the economy will evolve and
> there will be this innovation economy that comes," said John C. McCarthy, a
> Forrester Research analyst who wrote a report on U.S. jobs going overseas.
>
> Yet many observers also say that the present economic restructuring
> may be more rocky than similar transitions in the past and that society
> should take additional measures to ease the struggles of those caught
> in the middle, especially the three-quarters of Americans who lack a
> college degree.
>
> In some ways, Geerling is one of the lucky ones, even though she
> didn't go to college. At the time she was let go, American Airlines
> provided training grants as part of the layoff package. The program,
> which no longer exists, gave her a way to learn new skills in the
> health care industry, where she had once worked.
>
> Analysts say retraining will be key because tomorrow's
> middle-class jobs are likely to be enhanced variations of today's
> lower-wage jobs. Clerical positions keeping medical records, for
> instance, are being transformed into higher-paying technician
> jobs that are structured to involve both computer skills and the
> ability to talk to doctors and nurses.
>
> "You can't be some kid who is good with a computer and get that job
> anymore," said Anthony Carnevale, senior fellow at the National Center
> on Education and the Economy. The successful job seeker will be "someone
> who can do the computer stuff but also knows the business."
>
> It is that combination of technology savvy, analytical thinking and
> interpersonal skills that could be the magic formula for U.S.
> workers -- whether the jobs are in health care, education, financial
> services or any other field. Jobs that involve all three qualities, said
> Thomas A. Kochan, an MIT management professor, are hard to duplicate with
> machines or with low-wage workers from abroad, putting the Americans who
> fill them in a strong position to demand not just good wages, but benefits,
> too.
>
> "For workers who are performing services for people that can't be made
> impersonal or sent offshore, those jobs could become much more attractive,"
> he said.
>
> Shrinking Benefits
>
> Still, most workplace experts are skeptical that the jobs of the future
> are likely to come with the same kinds of benefits as the jobs of the past.
>
> "It's not clear how the work will change," said Peter Cappelli, a
> management professor at the Wharton business school at the University
> of Pennsylvania. "But any kind of security will go away."
>
> Over the past two decades, companies have moved en masse away from
> traditional pensions in which employers pay the cost and employees get
> a set amount after retiring. Employer-based health care coverage has
> fallen as well, not just for workers in low-wage jobs, but increasingly
> for those in middle-class jobs. One analysis estimates that there were 5
> million fewer jobs providing health insurance in 2004 than there were
> just three years earlier. Overall, nearly 1 in 5 full-time workers today
> goes without health insurance; among part-time workers, it's 1 in 4.
>
> Those who manage to keep their benefits often must pick up their
> share of the higher cost. Employee contributions for family coverage
> were 49 percent higher in 2004 than they were in 2001, and contributions
> for individual coverage were 57 percent higher, according to the Kaiser
> Family Foundation.
>
> Jobs that provide both a middle-class wage and benefits, even for
> workers without advanced degrees, still exist, often in union environments.
> But they're getting harder to find.
>
> As technology has made global competition a reality, American workers --
> particularly those who are lower-skilled -- have found themselves competing
> in a far broader marketplace. Their rivals overseas often don't receive
> benefits at all, or don't expect them from their employers. That puts
> American companies at a competitive disadvantage.
>
> "It's not helping employers to not be able to offer benefits," said
> Jennifer Schramm, manager of workplace trends and forecasting at the
> Society for Human Resource Management. But cutting back on benefits
> "is something they feel they have to do for economic reasons."
>
> Shifts in the composition of the workforce have contributed as well.
> Jobs in manufacturing are more likely to come with benefits than are
> jobs in the service sector.
>
> But in the 1980s, the number of manufacturing jobs began a decline
> that continues today, and factory workers were forced to look elsewhere
> for a middle-class living. Many retrained and traded their spot on the
> assembly line for a seat behind a desk, finding work in business services
> such as sales, information technology and accounting.
>
> Within the past decade, however, most large service firms have decided
> that to succeed in a cutthroat, globalized market, they need to focus on
> their core functions and leave more peripheral tasks to others.
>
> Recently, many such tasks have been shifted to workers abroad or have
> been picked up by smaller, more specialized outsourcing firms in the
> United States. For those firms, providing benefits such as health care
> can be difficult because they lack the necessary economies of scale,
> said Harvard public health professor Katherine Swartz. In firms with
> 1,000 or more employees, just 1 in 10 workers lacks insurance. In
> companies with fewer than 10 employees, nearly one-third lack coverage.
>
> Even businesses that are expected to grow -- in industries such as
> health care and education -- have begun to pare back the pool of workers
> eligible for full benefits.
>
> Hospitals, for instance, have responded to shifting staffing needs
> by hiring itinerant care workers who travel where they're needed but
> often don't have access to the same benefits as full-time nurses and
> therapists who stay in one place.
>
> Reworking America
>
> In the political world, debate over labor market restructuring has
> been dominated by finger-pointing about free trade or the ethics of
> offshoring, rather than by discussion of possible solutions. But as
> displaced workers fail to make the transition into new jobs that afford
> them the same kind of lifestyle as their old ones, economists say that
> politicians ignore the issue at their own peril.
>
> On Capitol Hill, lawmakers have discussed the need to control health
> care costs and to make sure large numbers of workers are not priced out
> of coverage, but no comprehensive proposals have moved to the top of the
> legislative agenda.
>
> The White House has promoted the notion of personal reemployment
> accounts, a stipend of up to $3,000 for unemployed Americans to use
> for retraining, child care, moving costs or other expenses associated
> with locating new work. Those who find a job within 13 weeks could keep
> the leftover funds.
>
> Another idea, championed by Brookings Institution economist Robert E.
> Litan, would provide wage insurance for workers whose jobs were eliminated.
> Under such a program, displaced workers who found jobs at lower salaries
> would have the difference made up, for a maximum of two years.
>
> Last year, the Labor Department launched a pilot wage insurance program
> that would provide workers age 50 or older with half the difference
> between their old salary and their new salary when they're forced to
> take lower-paying positions following a layoff. Workers would also get
> a tax credit for 65 percent of their health insurance premiums. But the
> eligibility requirements are many -- the layoff, for instance, must come
> because of competition from abroad. As of August, only 715 workers
> nationwide had enrolled.
>
> Some contend that such ideas only touch the edges of a looming crisis.
> While they may help individual workers in the short term, they don't
> address the larger difficulties faced by the workforce in adapting to
> the demands of 21st century jobs. For that, these labor market experts
> say, the educational system will have to continue to raise its quality
> and reach a broader population.
>
> Thomas Bradtke, a manager at Boston Consulting Group, said that for the
> United States to retain its technological leadership and create new
> job-producing industries, it will have to keep coming up with a large
> share of the world's innovative ideas. At a time when other countries'
> students are routinely testing higher than American children in science
> and math, that's not a given.
>
> "Education systems compete against each other in the long run," he said.
> "Right now the U.S. is still at the leading edge of innovation, but what
> if five or 10 years down the road, India has built up world-class
> universities?"
>
> Carnevale, who was a member of the White House advisory committee on
> technology and adult education in the Clinton administration, argues that
> the country needs the equivalent of an industrial policy focused both on
> getting more people through college and on retraining them for new jobs.
>
> Otherwise, "we could have a permanent working poor," he said. "They
> don't live in America; they kind of live under it."
>
> The Geerlings are determined to avoid that fate. Teresa Geerling said
> she plans to work "as long as I have two arms and two legs."
>
> Life for the couple has recently become more complicated, however.
> Until now, she could do without the health insurance at her new job
> because she was included in her husband's plan, which covers them
> both for $37 per month.
>
> But Bernie Geerling, who still works at American Airlines as a
> baggage-handling supervisor, just got notice that he is scheduled to be
> laid off next month. He is hoping he can transfer to another slot at the
> airline somewhere else in the country, but union and company rules for
> such moves are complex. "With a little hope and a little prayer here and
> there, things will work out," Bernie Geerling said.
>
> In the meantime, the Geerlings had to refinance their house after
> Teresa's layoff and have "gotten in a little over our heads" with credit
> card debt, she said. New carpeting and other major home-remodeling projects
> are on hold.
>
> If her husband does not get a transfer, Teresa said, they will probably
> stay in the area but sell their well-tended house in a quiet residential
> neighborhood and move to something smaller.
>
> "Scary's not the word for it," she said, reflecting on the growing
> number of workers she knows facing similar predicaments.
>
>
>
> Would you like to send this article to a friend? Go to
> http://www.washingtonpost.com/ac2/wp-dyn/admin/emailfriend?contentId=A37628-2004Dec30&sent=no&referrer=emailarticle
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nonesuch

unread,
Aug 31, 2006, 4:33:33 PM8/31/06
to

"Kamal R. Prasad" <kam...@acm.org> wrote in message
news:1157035978....@i3g2000cwc.googlegroups.com...

Straydog wrote:

> On Mon, 28 Aug 2006, rick++ wrote:
>
> > The NY Times reports that wages for Americans are lowest as a fraction
> > of the US economic output since these statistics were recorded in the
> > 1950s.
> > Traditionally wages would expand when the economy was increasing
> > (supposedly now).
> > Globalization of manufacturing and intellectual labor are the cause:
> >
> > http://www.nytimes.com/2006/08/28/business/28wages.html
> >
> > Only the top decile of the population is bucking this trend.
> >
> ----------------
> This isn't particularly new. Somewhere, I can't find it now, among my
> files is a quote of data showing the progress of the minimum wage AND the
> buying power (reduction in value as caused by inflatio) over the last
> 30-35 years and it is clear that the min wage has not kept up with
> inflation. It doesn't tell the whole story since for some things the
> prices have come down, too.
>

..and the reason why you have inflation (and inflation targetting by
the US federal reserve) is because increasing money supply does not
lead to an increase in wealth, but increases the amt of money available
to transact in wealth. The notion of 'the world loves our currency' or
'india is a bowl of dust' will not suffice to wish away any
macro-economic problems or finance your spending binge.

Aaaah? Is it not the reason for the reluctance to increase the minimum wage
is precisely that inflation has been "in check"? OTOH, very low inflation
justifies increases in wages as their impact on the price index will be
quite low. Once again Kamal is changing the subject when he is proven
wrong. The issue is the distribution of profits from private corporations,
not what a government bank does to control inflation. BTW, the Federal
Reserve does not care about wealth!

> Below is a piece which is undated, but copyrighted (see the end) in 2004
> so it is from that year. Again, the situation is not good. So, we not only
> have corporate CEOs beating on our heads, but Kamal Prasad telling us we
> actually _need_ to become paupers, serfs, and peasants for reasons I can't
> really follow other than a hidden plot to help the rich get richer and at
> the expense of the poorer.
>

I did recommend in another post that every american (who isn't
extraordinary but does work that can be offshored) should opt for
minimum wage adjusted for inflation. It could amount to all s/w
engineers in the US working for $20/hr. Thats better than burger
flipping and even better than being unemployed. At $20/hr you wouldn't
even have to worry about H1Bs flooding the market. Their purchasing
power in India will be comparable to H1Bs.

* How about eliminating the H1Bs altogether? SInce when is the US supposed
to let anybody who wants to come into the country in? I bet that India has
more restrictive inmigration policies than USA. This is what the whole
debate about illegal aliens is: a) they lower wages by not following the
rule of law; b) they do not pay taxes and by utilizing public services they
are a burden to the states and the Feds. The H1Bs fulfill no other
"positive" role but to increase the margin of profits or corporations; the
rest of society pays the price in lower tax collection, less services, lower
quality of education, no environmental safeguards, etc.

regards
-kamal

> Š 2004 The Washington Post Company
>
> --0-2059231908-1156814051=:9913--


Jose

unread,
Aug 31, 2006, 5:15:53 PM8/31/06
to
Sorry but I don't subscribe to that rag. You got something showing
people standing in unemployment or soup lines?

Straydog

unread,
Aug 31, 2006, 8:00:05 PM8/31/06
to

On Thu, 31 Aug 2006, Kamal R. Prasad wrote:

>
> Straydog wrote:
>
>> On Mon, 28 Aug 2006, rick++ wrote:
>>
>>> The NY Times reports that wages for Americans are lowest as a fraction
>>> of the US economic output since these statistics were recorded in the
>>> 1950s.
>>> Traditionally wages would expand when the economy was increasing
>>> (supposedly now).
>>> Globalization of manufacturing and intellectual labor are the cause:
>>>
>>> http://www.nytimes.com/2006/08/28/business/28wages.html
>>>
>>> Only the top decile of the population is bucking this trend.
>>>
>> ----------------
>> This isn't particularly new. Somewhere, I can't find it now, among my
>> files is a quote of data showing the progress of the minimum wage AND the
>> buying power (reduction in value as caused by inflatio) over the last
>> 30-35 years and it is clear that the min wage has not kept up with
>> inflation. It doesn't tell the whole story since for some things the
>> prices have come down, too.
>>
>
> ..and the reason why you have inflation (and inflation targetting by
> the US federal reserve)

Just like India targets its exchange rate, and I already provided a URL
link to a piece authored by an Indian that says just that. And, just 3
days ago, another article in WSJ about how your RBI also targets its own
inflation.

is because increasing money supply does not
> lead to an increase in wealth,

As I've explained to you so many times now, such processes as fractional
reserve banking increases wealth and if you ever start reading about
banking this explanation is very easy to find.

but increases the amt of money available
> to transact in wealth.

Although you have given absolutely no explanation of what wealth is but
claim it has nothing to do with money, I _will_ explain wealth to _you_:
it is anything of value, including but not limited to money, that people
will give money to get. However, as wealth increases, there must also
increase money or else there will be deflation.

> The notion of 'the world loves our currency'

That notion is a true notion since it is a real absolute fact that the US
actually does receive goods and services from anywhere in the world in
exchange for USD. You have not yet named ANYONE who will not take USD for
business.

or
> 'india is a bowl of dust'

And, if you think USD are so worthless, then I will cite economist
opinions that indicate that _most_ of India's 8+% growth in the last few
years is due _mostly_ to incoming USD.

will not suffice to wish away any
> macro-economic problems or finance your spending binge.

As if Indian has no serious problems of its own, and India is growing
withOUT any economic help from the outside of its borders (i.e. the USA).

>> Below is a piece which is undated, but copyrighted (see the end) in 2004
>> so it is from that year. Again, the situation is not good. So, we not only
>> have corporate CEOs beating on our heads, but Kamal Prasad telling us we
>> actually _need_ to become paupers, serfs, and peasants for reasons I can't
>> really follow other than a hidden plot to help the rich get richer and at
>> the expense of the poorer.
>>
>
> I did recommend in another post that every american (who isn't
> extraordinary but does work that can be offshored) should opt for
> minimum wage adjusted for inflation.

What you have continuously recommended for well over one year now is the
voluntary impoverishment of all US people, and I take it that you would
like even our rich people to give up their money, mansions,
BMWs/Mercedes/SUVs, yachts, planes, and all other things of value, etc.

It could amount to all s/w
> engineers in the US working for $20/hr. Thats better than burger
> flipping and even better than being unemployed.

Our official UE is about 5% just similar to India's official UE, and
within 1-2 percentage points of most other country's UE.

At $20/hr you wouldn't
> even have to worry about H1Bs flooding the market.

With an official poverty rate in the USA at about 20%, one person in five
cannot have an official decent standard of living. Wage rates, as I've
said many times, cannot be discussed without discussiong tax rates, rent
rates, and price structures.

Their purchasing
> power in India will be comparable to H1Bs.

The rise in India's middle class is being paid for by the US middle class.

Kamal R. Prasad

unread,
Sep 1, 2006, 1:47:14 AM9/1/06
to

nonesuch wrote:

it very much does. You can feel it if you jump from the top of a
building.

> IT is a manifestation of
> curvature in the space time caused by objects in the Universe, according to
> relativity.

where did you read that?

> Second, why can't all the above economics principles work
> within the confines of a single nation, country or empire?

It can -provided you close your doors to the world around you.
Americans import and export -sometimes to their own benefit and
sometimes to others' benefit. You can put an end to international trade
vis-a-vis your country -and you will win some, lose some. The best way
to start doing that is to create a self-sustained economy.

> It did for 4000
> years. THis is the heart of being a liberal. What is important is not

where? which country closed its doors for the past 4000 yrs? Trade
across kingdoms/civilizations was by default enabled during ancient
times, and with the rise in nationalism/socialism -it came to an end or
was curbed for the past 100-200 yrs.

> that the economic laws that rule the behavior of businesses and nations, but
> how people want to steer the economy in order to maximize and distribute
> benefits. Something similar happens in the science of Chemistry: Everyone
> acknowledges the laws of thermodynamics, but nobody does research on that
> anymore, it is considered a settled matter. SImilarly, the economy can be

you can raise taxes or generate more employment by spurring investment
and that will reduce disparity of income.

> manipulated in such a way as to apply the RIcardo's law asymptotically, for

For Ricardo's laws to be thrown out of the window or for it to succumb
to manipulation -you will have to do something extraordinary and
assuming you succeed, all econ books will have to be recalled to update
the text on comparative advantage.

> example we may never pay the national debt or balance the budget again, but
> no one will complain as it is not affecting their own livelihood. After

Debtors don't like to pay off the debt and would rather forget it. Its
the creditors who think otherwise and prevail over debtors.

> all, these problems have been around since the 1970s and so far there has
> not been another depression.

There are some macro indicators that suggest your economy is on the
verge of a collapse. Good for you if it doesn't happen as seems to have
not happened since 1970 or so.

> What needs to happen to Indians is that the need to wake up and realize that
> a good life also means family time, healthy labor environment, low crime
> rates and education.

As job oppurtunities improve, they will also acquire a sense of
entitlement like americans. Crime rate is inversely propertional to job
growth and greater resources enable the state to mandate mass
education. Its not a coincidence that most poor countries have a high
illiteracy rate.

> THey have been so poor for so long that they would
> take whatever bone the corporations throw at them ,and they are even glad
> because of that.

Wages are decided by demand and supply -not just for americans, but for
everybody including Indians. Corporations may throw a bone or pay
throught their nose depending on how badly they need the services.

> India is still plagued by problems of social inequity,
> terrorism, poor facilities. How much of the new found wealth is going for
> addressing these problems is anybody's guess.
>

some of it -by way of NGOs, social organizations. Taxpayer money is
usually subverted by politicians, beaurocrats, middlemen etc and does
not reach the intended recepients -very much like the US.

regards
-kamal

Kamal R. Prasad

unread,
Sep 1, 2006, 2:14:57 AM9/1/06
to

nonesuch wrote:

No -thats an excuse not to increase minimum wage.

> justifies increases in wages as their impact on the price index will be
> quite low. Once again Kamal is changing the subject when he is proven
> wrong. The issue is the distribution of profits from private corporations,

they don't consider it necessary to distribute their profits and pay
wages based on demand/supply of manpower.

> not what a government bank does to control inflation. BTW, the Federal
> Reserve does not care about wealth!
>

it cares about inflation which happens when you increase money supply
to fuel consumer spending.

> > Below is a piece which is undated, but copyrighted (see the end) in 2004
> > so it is from that year. Again, the situation is not good. So, we not only
> > have corporate CEOs beating on our heads, but Kamal Prasad telling us we
> > actually _need_ to become paupers, serfs, and peasants for reasons I can't
> > really follow other than a hidden plot to help the rich get richer and at
> > the expense of the poorer.
> >
>
> I did recommend in another post that every american (who isn't
> extraordinary but does work that can be offshored) should opt for
> minimum wage adjusted for inflation. It could amount to all s/w
> engineers in the US working for $20/hr. Thats better than burger
> flipping and even better than being unemployed. At $20/hr you wouldn't
> even have to worry about H1Bs flooding the market. Their purchasing
> power in India will be comparable to H1Bs.
>
> * How about eliminating the H1Bs altogether?

That is fine with me.

> SInce when is the US supposed
> to let anybody who wants to come into the country in?

The WTO has something called level 4 trade in services -wherein
foreigners can walk into any WTO signatory country on a service visa.
If the US signs it, it will gain market access to India, but american
workers will have more competition on their hands via a service visa.
The H1B is a voluntary effort by the US govt to bring in labour from
overseas in speciality occupations. They weren't obliged to do so and
can scrap it anytime they like without breaking any agreements.

> I bet that India has
> more restrictive inmigration policies than USA.

It has highly restrictive/non-existent immigration policies -but has a
liberal work permit regime.
Anyone can find himself a job in India and apply for a work permit.
There are no quotas and no restriction that the employer should look
for a citizen ebfore hiring a foreigner. Its the employer's money and
he can hire/fire whosover he likes either inside or outside the
country.

> This is what the whole
> debate about illegal aliens is: a) they lower wages by not following the
> rule of law;

The law has been written by corrupt politicians to make hispanics look
like in violation so that they can form a captive workforce which works
hard lest the employer have them deported/arrested for not doing a good
job.

> b) they do not pay taxes and by utilizing public services they
> are a burden to the states and the Feds.

They do pay taxes and most of them contribute in excess of what they
consume from the govt. Their contribution makes its way to people
higher up the value chain and leaves out citizens lower down the value
chain. It means an employer of illegals or a manager supervising them
benefits from their hard work and so do consumers of their services. It
also improves competitiveness of the US agricultural sector by making
US produce competitive in commodity markets.

> The H1Bs fulfill no other
> "positive" role but to increase the margin of profits or corporations; the

..and to increase the competitiveness of the american workforce which
earns higher salaries than their overseas counterparts without working
that much harder, and better/cheaper prioducts for their employers'
customers.

> rest of society pays the price in lower tax collection, less services, lower
> quality of education, no environmental safeguards, etc.
>

No -they pay above average taxes -but lower than what an american would
have, if he was hired instead of the H1B.

regards
-kamal
-

minnesotti

unread,
Sep 1, 2006, 5:17:39 AM9/1/06
to
Even in our organisation, there is an erosion of wages when people get
hired at the positions one level lower than they traditionally got.
This means that there is an even greater overproduction of PhD holders.

I applied for two jobs with my current employer, one of them is junior,
and another is a more senior position. I was interviewed for the junior
position which was rumoured to be aimed at my junior colleague. I had
10 more years of work experience and a postgraduate degree (which he
did not have and which was a desirable selection criterion). I thought
I was bound to win.

Guess what happened ? The management cancelled the position. Obviously,
the things did not go the way the management wanted them to go. This is
happened for the second time when the management cancelled the
position. You can imagine what words I have reserved for this kind of
behavior.

..

Straydog

unread,
Sep 1, 2006, 8:13:03 AM9/1/06
to

It sounds to me, possibly, like there are different forces at higher
levels and when one force tries to get something, the other force trys to
cancel it. So, if the second force does cancel the attempt, then the first
force withdraws. Or, it is nothing but random actions getting random
reactions and it just wastes resources.

>
> ..
>
>

Kamal R. Prasad

unread,
Sep 1, 2006, 10:17:43 AM9/1/06
to

Straydog wrote:

> On Thu, 31 Aug 2006, Kamal R. Prasad wrote:
>
> >
> > Straydog wrote:
> >
> >> On Mon, 28 Aug 2006, rick++ wrote:
> >>
> >>> The NY Times reports that wages for Americans are lowest as a fraction
> >>> of the US economic output since these statistics were recorded in the
> >>> 1950s.
> >>> Traditionally wages would expand when the economy was increasing
> >>> (supposedly now).
> >>> Globalization of manufacturing and intellectual labor are the cause:
> >>>
> >>> http://www.nytimes.com/2006/08/28/business/28wages.html
> >>>
> >>> Only the top decile of the population is bucking this trend.
> >>>
> >> ----------------
> >> This isn't particularly new. Somewhere, I can't find it now, among my
> >> files is a quote of data showing the progress of the minimum wage AND the
> >> buying power (reduction in value as caused by inflatio) over the last
> >> 30-35 years and it is clear that the min wage has not kept up with
> >> inflation. It doesn't tell the whole story since for some things the
> >> prices have come down, too.
> >>
> >
> > ..and the reason why you have inflation (and inflation targetting by
> > the US federal reserve)
>
> Just like India targets its exchange rate, and I already provided a URL
> link to a piece authored by an Indian that says just that. And, just 3

It doesn't. It maintains a trading band to ward off speculators.
Speculators profit from change in price -without benefitting anybody.
So, it is in public interest for central banks to fend off speculators.
The strong dollar policy -as I have told and pointed to irrefutable
evidence umpteen times -is YOUR govt's making. If you want to bring
parity -then you need to tell your govt to reach an agreement with
Indian govt to make a 1 time change that will be honoured by both
parties as oopposed to swings in exchange rates back and forth from
which speculators will benefit.

> days ago, another article in WSJ about how your RBI also targets its own
> inflation.
>

yeah -it does because all money is annotated paper, irrespective of
whether it is US dollar bills or Indian rupees.
Wealth = trade-able goods/services and currency has no residual value
in terms of what trade-able goods/services one can buy with the note.

> is because increasing money supply does not
> > lead to an increase in wealth,
>
> As I've explained to you so many times now, such processes as fractional
> reserve banking increases wealth and if you ever start reading about
> banking this explanation is very easy to find.
>

it doesn't. You can lower the CRR as low as you like. Other than
putting banks' financial health at risk, it will not lead to an
increase in wealth.

> but increases the amt of money available
> > to transact in wealth.
>
> Although you have given absolutely no explanation of what wealth is but

Wealth is trade-able goods/services which can be traded for any other
goods/services one wishes to consume.
In order to trade them in, one can use an intermediary called money
-but that is just an intermediary. Tomorrow if all american
companies/exporters shut down it will not be possible to print more
money and continue with your splurge,. To buy things as a nation, you
need to sell something in return. If you don't buy anything -you won't
need to sell anything. If you sell nothing but hand out US dollar bills
in return for goods/services -it leads to a trade deficit and makes you
a debtor nation -which is what you are.

> claim it has nothing to do with money, I _will_ explain wealth to _you_:
> it is anything of value, including but not limited to money, that people

not including money.

> will give money to get. However, as wealth increases, there must also
> increase money or else there will be deflation.
>

and without an increase in wealth, if you increase money supply -it
leads to inflation.

> > The notion of 'the world loves our currency'
>
> That notion is a true notion since it is a real absolute fact that the US
> actually does receive goods and services from anywhere in the world in
> exchange for USD. You have not yet named ANYONE who will not take USD for
> business.
>

They take it for now -but may not continue doing so. By taking it,
they don't necessarily buy your diea of the world loving your currency.
Currency is just an intermediary with which they buy other things like
gold, US mortgages etc.. The latter is trade-able goods aka wealth and
the former is annotated paper with zero residual value.

> or
> > 'india is a bowl of dust'
>
> And, if you think USD are so worthless, then I will cite economist
> opinions that indicate that _most_ of India's 8+% growth in the last few
> years is due _mostly_ to incoming USD.
>

It isn't. Its growing because the country generates trade-able services
which are desired by consumers overseas. One can opt to pay in euros or
us d or any other currency or in terms of commodity futures too. BTW
-the USD you like so much - will come back to you coz we have a high
consumption rate and buy stuff like ford cars, ibm and hp computers ,
ge washing machines.

> will not suffice to wish away any
> > macro-economic problems or finance your spending binge.
>
> As if Indian has no serious problems of its own, and India is growing
> withOUT any economic help from the outside of its borders (i.e. the USA).
>

It is growing regardless of whether the US wishes to help and whether
you elect someone who will decide not to help us. How you pay for
services is not relevant as much as paying for it in terms which will
in return allow us to buy something else.

> >> Below is a piece which is undated, but copyrighted (see the end) in 2004
> >> so it is from that year. Again, the situation is not good. So, we not only
> >> have corporate CEOs beating on our heads, but Kamal Prasad telling us we
> >> actually _need_ to become paupers, serfs, and peasants for reasons I can't
> >> really follow other than a hidden plot to help the rich get richer and at
> >> the expense of the poorer.
> >>
> >
> > I did recommend in another post that every american (who isn't
> > extraordinary but does work that can be offshored) should opt for
> > minimum wage adjusted for inflation.
>
> What you have continuously recommended for well over one year now is the
> voluntary impoverishment of all US people, and I take it that you would

Im recommending that you get over the sense of entitlement. In order
for americans to be entitled to something by way of citizenship -they
need something like a fountain of wealth to finance it. Saudi Arabia
has a fountain of oil (trade-able goods) to finance their citizenry
-and some other countries do too. If you don't have something along the
same lines, then you need to think in terms of 'why will employers pay
me so much unless I provide them with something (services) worth a lot
more?'
Assuming you do conclude that your citizenship or worse skin colour
doesn't entitle americans to any brownie points -you will realize that
its better to accept competitive wages than to lose one's job. And
given that many americans piss in their pants at the sight of
competition -its better that they all gravitate towards minimum wage
(adjusted for inflation).

> like even our rich people to give up their money, mansions,
> BMWs/Mercedes/SUVs, yachts, planes, and all other things of value, etc.
>

depends on how they got it. You may want to go in for a progressive tax
system wherein taxes increase exponentially with increase in income.

> It could amount to all s/w
> > engineers in the US working for $20/hr. Thats better than burger
> > flipping and even better than being unemployed.
>
> Our official UE is about 5% just similar to India's official UE, and
> within 1-2 percentage points of most other country's UE.
>

so why should you be crying about it?

> At $20/hr you wouldn't
> > even have to worry about H1Bs flooding the market.
>
> With an official poverty rate in the USA at about 20%, one person in five
> cannot have an official decent standard of living. Wage rates, as I've
> said many times, cannot be discussed without discussiong tax rates, rent
> rates, and price structures.
>

if wages fall, rents will also fall and with a progressive tax
mechanism -it will pay to earn less. A lot of what goes into
rents/mortgages is a result of increased money supply which translates
to increased wages.

> Their purchasing
> > power in India will be comparable to H1Bs.
>
> The rise in India's middle class is being paid for by the US middle class.
>

it isn't. The export sector is paid for by corporations many of which
are registered in the US. For the US middle class to pay for India's
rise, they will need to be holders of significant amounts of
wealth/assets in which case, they might as well stop working paycheque
to paycheque or worry about inflatiomn, bankruptcies etc.. That export
sector in India doesn't contribute significantly to India's GDP or
support a large section of Indian society. You need to get over the
notion of being owners of a fountain of weslth into which all other
countries are tapping into. If people here didn't slog it out -they
wouldn't be getting any of the money flowing this way.
They get that wealth because they generate services -not because you
decided to do charity while your own house is in flames.

> --0-15611913-1157068805=:29835--

BroTher zAchary

unread,
Sep 1, 2006, 12:50:33 PM9/1/06
to

Kamal R. Prasad wrote:

>
> > This is what the whole
> > debate about illegal aliens is: a) they lower wages by not following the
> > rule of law;
>
> The law has been written by corrupt politicians to make hispanics look
> like in violation so that they can form a captive workforce which works
> hard lest the employer have them deported/arrested for not doing a good
> job.
>
> > b) they do not pay taxes and by utilizing public services they
> > are a burden to the states and the Feds.
>
> They do pay taxes and most of them contribute in excess of what they
> consume from the govt.

No, they don't. They are part of the underground, cash economy.

Straydog

unread,
Sep 1, 2006, 7:41:58 PM9/1/06
to

Here, read this:
---------
From a...@panix.com Mon Jul 31 23:03:41 2006
Date: Mon, 31 Jul 2006 23:03:41 -0400
From: Straydog <a...@panix.com>
Newsgroups: alt.computer.consultants, alt.politics.economics, sci.econ,
sci.research.careers
Subject: India: Manipulates its exchange rate to benefit itself...


(Large article farther below)

Being that Kamal Prasad has made endless accusations against the USA,
including against our "inflated" USD, our (he says) nonexistent "fountain
of wealth", and our too high standard of living, and that we manipulate
our currency (how about China?), slurs against US society regarding
slavery and other offensiveness, and being that tons of pro-India
propaganda has been plastered all over these newsgroups for 1-2 years, or
more, I have done a little homework on why Indian labor, as paid for
through the exchange rate (a key factor, I think, in the developed
world's problems with cheap labor), is generally cheaper than in the
developed world. Here is one paper (authored by Indians) and its reference
(obtained through Google) that talks about part of this in detail. The
formating is a rough conversion from HTML, and the tables are destroyed,
and the original URL ended in 404, but you can grasp the gist of the paper
from reading the text. See below....

==============================

Used this (is is sent without a cr line break):

http://scholar.google.com/scholar?hl=en&lr=&q=cache:Wf_eMT9_wogJ:www.icrier.res.in/pdf/Srivastava.PDF+history+of+rupee+exchange+rate

The URL below did not work for me. Below is the textized version of the
HTML document that Google obtained.
============Below is provided by Google=======
This is the html version of the file
http://www.icrier.res.in/pdf/Srivastava.PDF.
*G o o g l e* automatically generates html versions of documents as we
crawl the web.

/Google is neither affiliated with the authors of this page nor
responsible for its content./

These search terms have been highlighted: *history * *rupee *
*exchange * *rate *

------------------------------------------------------------------------
*Page 1*

*SOME IMPLICATIONS OF REAL *EXCHANGE **RATE* *
*TARGETING IN INDIA*
*Urjit R. Patel*
*Reserve Bank of India*
*Pradeep Srivastava*
*Indian Council for Research on International Economic Relations*
October 1997
(Revised)
/*Abstract*/
/The paper examines some macroeconomic implications of *exchange **rate*
policy against the /
/broader backdrop of structural adjustment programmes. In particular,
the evolving/
/implications for inflation and the real interest *rate* arising from
short-run policies regarding/
/the real *exchange **rate* (RER) are analysed for the Indian economy,
which is undergoing/
/cautious but substantial liberalisation of financial markets and the
external sector. The/
/paper also investigates the role of important macroeconomic
(behavioural and policy)/
/variables in explaining the long-run movements of the RER in India. /
JEL classification: F41.
------------------------------------------------------------------------
*Page 2*

*Foreword*
Most countries today view high export growth as critical for their
development efforts.
Consequently, nominal *exchange* rates are often formulated with a view
to targeting some
real *exchange **rate* that will make exports competitive.
In the wake of the South-East Asian crisis, India's exports are likely
to come under
increasing competitive pressure as these economies recover from the
post-crisis liquidity
squeeze to fully exploit the benefits from their sharply depreciated
currencies. *Exchange*
*rate* management and real *exchange **rate* targeting are likely,
therefore, to acquire greater
importance than usual for policy makers in India in the coming months.
A policy of real *exchange **rate* targeting usually aims at controlling
the level of real
*exchange **rate* either in an effort to keep it at a constant level in
the face of domestic or
external shocks or to achieve a different (typically more depreciated)
level. However,
despite government efforts to target the real *exchange **rate*, it is
also true that the real
*exchange **rate* is not a policy tool in the long run. Thus, real
*exchange **rate* targeting is only
possible in the short to medium term; deviations from the long run
equilibrium have
macroeconomic costs. Specifically, policies of depreciating the nominal
*exchange **rate* to
achieve more depreciated levels of the real *exchange **rate* can lead
to higher levels of
inflation in the economy when capital mobility is low. In case of high
capital mobility, these
costs are manifest in higher real interest rates in the economy.
This paper by Urjit R. Patel and Pradeep Srivastava investigates the
macroeconomic costs of real *exchange **rate* targeting in India to
assess the extent to which
nominal depreciation can result in higher inflation or real interest
rates in the economy.
Since nominal depreciation can affect the real *exchange **rate* only
temporarily, the paper
also analyzes the determinants of real *exchange **rate* in India over
the long run.
It is hoped that the rigorous analytical framework of this paper will
help clarify the
complex issues arising from *exchange **rate* management in an open
economy.
*(Isher Judge Ahluwalia)*
Director & Chief Executive
ICRIER, New Delhi
------------------------------------------------------------------------
*Page 3*

1
*SOME IMPLICATIONS OF REAL *EXCHANGE **RATE* TARGETING IN INDIA*
*I.*
*Introduction*
Beginning with the Southern Cone countries of Latin America in the 1970s,
structural adjustment programs have now been implemented in an
overwhelming majority of
countries worldwide. In India, structural reforms were initiated
tentatively in the mid-eighties
and more substantially following the external account crisis in 1991.
1
.
The consequent
transformation of the economy, resulting from increasing liberalisation
of the external and
financial sectors, is likely to pose new challenges for the Indian
policy makers. This paper
focuses on one such issue by analysing important links between *exchange
**rate* policies
and domestic financial variables. A defining characteristic of the
Indian reforms (and some
earlier Asian experiments) has been the cautious pace of adjustment
relative to the `shock
therapy' of Eastern Europe or the rapid liberalisation undertaken in
some Latin American
countries. The Indian economy is currently on the threshold of full
capital account
convertibilty which will be a culmination of a process initiated as many
as six years ago.
This slow transition, therefore, provides an excellent opportunity to
study the evolving links
between the external economy and domestic financial variables. To that
extent, the
analysis presented here is also of some interest to many other countries
that too are
attempting similar adjustment towards greater integration into the
global economy.
The importance of *exchange **rate* management is related to the fact
that the
emphasis, in most structural adjustment programs, on boosting export-led
growth by
increasing the country's competitiveness has meant that *exchange
**rate* policies and the
real *exchange* rates are increasingly viewed as critical determinants
of a country's
performance. When not fully flexible - as in most developing countries -
nominal *exchange*
rates are often formulated by governments with a view to target some
real *exchange **rate*
(defined as the price of domestic goods relative to foreign prices). A
policy of `real
*exchange **rate* targeting' usually aims at controlling the level of
the real *exchange **rate*,
either in an effort to keep it at a constant level in the face of
domestic or external shocks, or
achieve a different (typically more depreciated) level (Calvo et. al.
(1995)).
A good example of RER targeting is provided by Brazil where, since 1968, the
nominal *exchange **rate* was changed by small percentages at irregular
intervals of time,
depending upon the inflation differential between Brazil and the United
States (Calvo et. al.
(1995)). Other Latin American countries have also followed such rules:
for example,
Colombia between 1986 and 1990, and Chile between 1985 and 1992.
RER targeting does not appear to be confined to Latin American countries
alone. In
1.
For comprehensive formal analysis and discussion of the crisis, and the
reform
programme undertaken in its aftermath, see Buiter and Patel (1992; 1997).
------------------------------------------------------------------------
*Page 4*

2
Table 1 below we present deviations of the nominal (bilateral)
*exchange* rates from the PPP
*exchange* rates for four Asian countries (Malaysia, Indonesia, Korea
and China). The latter
are computed as the ratio of nominal *exchange **rate* times P
*
(U.S. CPI) to P (the domestic
CPI), and set equal to the actual value of the *exchange **rate* in
1980. Values for the
subsequent years are updated from this date onwards. It is found that
China, Korea and
Indonesia have aggressively sought to keep their currencies increasingly
`undervalued'
against the U.S. Dollar; in other words, compensating for higher
inflation alone does not
fully explain the extent of the relevant currency's decline in value.
Malaysia, on the other
hand, has kept its RER at a relatively constant level. For example, from
1987-1995,
Malaysia maintained its currency at approximately 10% discount from the
RER of 1980.
Table 2 presents similar data on the nominal (bilateral) *exchange
**rate* in India over
the same period computed using the method above. It is seen that for
most of the sample
period, i.e., 1980/81-1996/97,
2
.
the observed *exchange **rate* was dramatically undervalued
relative to the PPP *exchange* rates. This is more sharply evident in
Figure 1 which shows
the behavior of the real *exchange **rate* in India using monthly data
for 1980:1-1997:3.
3
.
The
nominal *exchange **rate* and the PPP *exchange **rate* are also shown
in the same figure.
Between 1980 and 1996, the RER in India has more than doubled. As noted
above, this
period has been characterized by substantial changes in policies,
beginning in 1985 and
accelerating in 1991. However, it can be seen that the gap between the
nominal and the
PPP *exchange* rates has widened steadily since 1981, with the period
after 1987 showing a
significant increase in the gap. This is, of course, linked to the large
devaluations in 1991
and 1993. Thus, the *rate* of devaluation in India since 1981 has far
exceeded the inflation
differentials between India and the rest of the world, the latter
proxied here by the US *rate*
of inflation. This would be consistent with attempts by the government
to target the RER
and enhance India's external competitiveness.
Needless to say, the doubling of the RER does not by itself indicate
targeting by the
government. Indeed, one could argue it shows just the reverse: that the
economy has been
buffeted by adverse shocks that entail a depreciating RER for
equilibrium, and that the
government has passively allowed the shocks to pass through into the
RER. However, it is
difficult to conceive of such major adverse shocks to the economy in the
past 15 years. In
particular, for most of the 1990s, the monsoons have been good, price of
oil stable,
changes in external terms of trade relatively small, and fiscal deficits
relatively
conservative.
4
.
Indeed the most significant shocks to the economy have been in the form of
large-scale policy reforms in the 1990s. Following Dornbusch and Werner
(1994), however
one could argue that the trade and financial reforms undertaken in India
should result in a
stronger currency, i.e., a real appreciation. Finally, as seen during
October 1995 to
2.
The Indian financial year runs from April to March.
3.
The monthly real *exchange **rate* data pertaining to India, throughout
the paper, is the
inverse of the IMF index of the real effective *exchange **rate*.
4.
In comparison, especially, to the second half of the 1980s.
------------------------------------------------------------------------
*Page 5*

3
February 1996, the Reserve Bank of India (RBI) has not fought shy of
aggressively seeking
to maintain values of the *rupee* it has deemed appropriate. In response
to intense
downward pressure on the *Rupee*, the RBI undertook net sales of foreign
currency of
almost U.S.$ 1.7 billion during this period, along with complementary
measures such as
withdrawal of liquidity from the money market.
5
.
Similarly, over the first half of 1997, the RBI
bought more than U.S.$5 billion to prevent the *Rupee's* nominal
appreciation. Implicit in
such aggressive defense is a target *exchange **rate* held "correct" by
the monetary
authorities. This policy commitment on part of RBI is also stated
explicitly in its 1995/96
Annual Report as "(T)he broad objective of the *exchange **rate* policy
will be to ensure a
reasonably stable real effective *exchange **rate*".
6
.
7
.
Despite governments' efforts at targeting the RER, it is also true that
the RER is not
a policy tool in the long run (Edwards (1995)). In particular, nominal
devaluations /per se/
cannot alter the long run behaviour of the RER in the neoclassical
framework. Examining
the behaviour of real *exchange* rates in the aftermath of 29
devaluation episodes, Edwards
(1989) finds that there are significant real effects one year after
devaluation but these
effects erode completely beyond the third year. Thus, targeting of the
RER is only possible
in the short to medium term, and the deviations from long run
equilibrium have
macroeconomic costs. In the long run, the RER depends upon real and
financial
fundamentals of the economy including government fiscal variables,
levels of capital stock,
total factor productivity, etc.
In this paper, we analyse both these issues related to the RER behaviour
in the
Indian context. Specifically, the analysis focuses on two primary
questions: (i) what are the
long run determinants of the RER? That is, what structural variables
predicted by theory
display a stable long-run relationship with the RER in India? And, (ii)
what are the
macroeconomic implications of RER targeting? As discussed later, RER
targeting in the
short run can lead to substantial increases in the *rate* of inflation
or the real interest rates in
the economy. The extent to which this is borne out by the Indian
experience is evaluated
empirically in this paper.
5.
RBI Annual Report 1995/96, p. 86.
6.
Op. cit., p. 86.
7.
Targeting the RER would also imply that inflation differentials between
the domestic
and world economy would precede changes in the nominal *exchange* rates.
Consequently, for India we evaluated the incremental predictive content
of inflation
differentials for *exchange **rate* changes using Granger tests of
causality with the
inflation level in the US as a proxy for world inflation. When the
sample included the
period 1963-1996, no significant evidence of Granger causality was found
in either
direction. For the period since 1985 only, inflation differentials show
one-way
Granger causality vis-ร -vis the nominal effective *exchange* rates at 1%
level of
significance.
------------------------------------------------------------------------
*Page 6*

4
The outline of the paper is as follows. In the next section, we look at
the short-run
aspects of RER management and investigate the impact of RER targeting on
the real
interest rates and the *rate* of inflation in the economy. It is worth
noting that the latter
exercise is somewhat complicated by the fact that the period of
substantial regime shift in
policy stance covers only the previous 10 years or so. Our results
should, in that sense, be
viewed as preliminary in nature with the full evidence yet to be played
out in the economy.
In section III we look at the long-run aspects of RER behaviour in India
by analysing the
structural variables that display stable relationships with the RER.
This is done by using
cointegration analysis. Finally, section IV contains some concluding
remarks and
implications for policy.
*II.*
*Macroeconomic Impact of RER Targeting*
Neoclassical theory suggests that, in an open economy, either the money
supply or
the nominal *exchange **rate* can serve as a nominal anchor. Such an
anchor is deemed
necessary for macroeconomic stability since, in the long run at least,
all nominal variables
will converge to the pre-set *rate* of growth of either the money supply
or the *exchange **rate*.
However, a consequence of RER targeting is that both the *exchange
**rate* and the money
supply become endogenous. In other words, targeting the RER establishes
a feedback
from domestic inflation to the nominal *exchange **rate* and, therefore,
countries adopting
such rules sacrifice the role of nominal *exchange **rate* (and of the
money supply) as
nominal anchor. An obvious question, then, is what are the inflationary
consequences of
RER targeting? This question is of particular concern for policy makers
in India given the
polity's low tolerance for price increases, and it constitutes the focus
of the analysis in this
section.
A number of recent studies have analysed the inflationary consequences
of RER
targeting. Lizondo (1993), for example, uses a model with both domestic
and foreign
financial assets to show RER targeting leads to higher inflation since
domestic inflation and
the RER are linked through seigniorage or the inflation tax.
8
.
Specifically, the demand for
non-traded goods depends positively on the real *exchange **rate*
(defined as the price of
traded goods to non-traded goods) and real private wealth. Real private
wealth, in turn,
depends negatively on revenues from the inflation tax. The higher the
inflation tax
payments, the lower is the private sector demand for nontradables, and
thus the higher is
the real *exchange **rate* that equilibrates the nontradables market.
Hence, equilibrium in the
nontradables market requires that the steady-state inflation *rate* be
that which generates,
through its impact on inflation tax revenues, a level of real private
wealth which is
consistent with the targeted real *exchange **rate*. Thus, attaining a
more depreciated RER
requires higher inflation tax payments, which in turn implies a higher
*rate* of inflation.
9
.
8.
See also Montiel and Ostry (1991).
9.
Implicit is the assumption that inflation elasticity of money demand is
less than one
(i.e., higher inflation implies greater inflation tax revenues), and
that the seigniorage
revenues are spent by the government on tradables goods.
------------------------------------------------------------------------
*Page 7*

5
If there is no capital mobility, it can also be shown using the same
framework that a
temporary depreciation of the currency can be achieved without
significantly affecting the
inflation *rate*, but instead resulting in higher interest rates. Thus,
for example, the targeting
of a more depreciated real *exchange **rate* will require, for
equilibrium in the nontradables
market, a one-time increase in the price level with a concomitant
decrease in household
wealth. Subsequently, the ensuing current account surplus would be
sterilised by the
monetary authority by offsetting decreases in net domestic assets (i.e.,
sale of government
bonds). This would result in higher rates of interest which would also
mitigate the incipient
excess demand pressures in the nontradables market.
10
.
An alternative mechanism is shown by Calvo et. al. (1995) to also lead
to higher
inflation in response to RER targeting. In particular, inflation affects
the relative price of
intertemporal consumption through changes in the nominal *rate* of
interest. The nominal
interest *rate* affects the price of consumption since money is required
to buy goods. Hence,
if inflation and thus the nominal *rate* of interest, are expected to be
lower in future than
today, the consumption of traded goods falls relative to the future.
Since consumption of
non-traded goods cannot change, because their output is assumed
constant, the *exchange*
*rate* depreciates to accommodate the lower consumption of traded goods.
Therefore,
targeting a more depreciated RER requires that inflation be higher today
than in the future.
The main empirical implications of these theoretical models are twofold.
First, since
the impact of policy makers on the RER is only transitory, the behaviour
of the RER will be
characterised by temporary shocks that represent, /inter alia/, attempts
at targeting.
11
.
Second, if there is some degree of capital mobility in the economy,
inflation will accelerate
during periods in which the RER is depreciated relative to its permanent
`steady-state'
level. Otherwise, if there is no capital mobility, the impact will be on
the real interest rates
instead.
Although officially India, until recently, had a completely closed
capital account, and
even now it is only partially open, some capital flows have always taken
place through the
curb (informal or black) market. This is partially borne out by the
difference in the value of
the *Rupee* between the curb *rate* and the official *rate*. Some
evidence for these *rate*
differentials is provided in Table 3 where it can be seen that the
premium in the curb market
during some years was as high as 50 percent. However, the transactions
in the parallel
market need not only represent arbitrage between the domestic and
international financial
10.
Note that household consumption in these models depends upon disposable
income, interest *rate* and household wealth. The transmission mechanism
described here is a modified version of that in Montiel and Ostry (1992) who
postulate interest parity even in the absence of capital mobility and
focus instead on
parallel *exchange* rates.
11.
Note that the RER can also be affected by other types of temporary
shocks in the
economy.
------------------------------------------------------------------------
*Page 8*

6
markets; it is widely believed that they also include repatriation of
cash income and profit to
evade taxes. The specific extent to which capital is mobile in practice
in the Indian case is,
therefore, an empirical issue.
Before undertaking the empirical analysis below, we check the time-series
properties of the RER and inflation over the period 1980-1996. The
results are presented
in Table 4 and show that the RER, as expected, has one unit root.
12
.
The *rate* of inflation,
on the other hand, is a stationary variable with no deterministic trend,
i.e., it is level
stationary.
*II.1*
*Relative Magnitude of Temporary Shocks to the RER*
Using monthly data for the period 1980-1996, we use Cochrane's (1988)
methodology to determine the relative importance of temporary and
permanent shocks to
the RER in India. This technique provides a measure of the persistence
of shocks to a
variable by examining the variance of its long differences. In
particular, suppose that a
variable y can be represented in the following manner:
Y
t
= ยตY
t-1
+ u
t
, where u
t
N(0,รจ
2
).
(4.1)
Now if Y follows a pure random walk, then ยต = 1 and the variance of its
n-differences grows
linearly with the difference, i.e.,:
var(Y
t
- Y
t-n
) = nรจ
2
.
(4.2)
If ยต < 1 and Y is a stationary process, the variance of its
n-differences is given by:
var(Y
t
- Y
t-n
) = รจ
2
(1-ยต
2n
)/(1-ยต
2
).
(4.3)
The ratio (1/n)var(Y
t
- Y
t-n
)/var(Y
t
- Y
t-1
) is equal to one if Y follows a random walk process
and converges to zero if Y is stationary. If Y has both permanent and
temporary
components, the ratio will converge to the ratio of the variance of the
permanent shock to
the total variance of Y. Consequently, the closer that ratio is to
unity, the lower is the
relative importance of temporary shocks.
Table 5 summarises the findings of the application of the Cochrane
procedure to the
monthly RER series. It is found that temporary shocks are important in
explaining the
variance of the RER; they explain close to 30 percent of the variance.
Therefore, we may
safely conclude that temporary shocks play an important role in the
behaviour of the RER in
India. Note again that this methodology does not allow discriminating
between the sources
12.
The tests, which are explained in detail at the bottom of Table 4, are
due to
Kwiatkowski, Phillips, Schimdt and Shin (1992) and Phillips and Perron
(1988). The
former has stationarity as the null and the latter has a unit root as
its null.
------------------------------------------------------------------------
*Page 9*

7
of these shocks. Consequently, not all of these temporary shocks can be
attributed to
`temporary policy shocks' such as devaluations; other shocks, such as to
the terms of trade,
for example, could also lead to temporary movements in the RER away from
its permanent
trend component.
*II.2*
*RER Targeting and *Rate* of Inflation*
We use two methods to assess the proposition that inflation will
accelerate when the
authorities attempt to depreciate the real *exchange **rate* beyond its
equilibrium level. In the
first case, we test whether nominal devaluations used by authorities
translate into changes
in prices in the economy, i.e., the *exchange **rate* `pass through'
into domestic inflation. A
positive finding, namely that there is significant *exchange **rate*
pass through would not allow
much direct inference about the impact of real *exchange **rate*
targeting on inflation.
However, a finding that *exchange **rate* changes do not significantly
affect the *rate* of
inflation in the economy would suggest the likelihood that RER targeting
may not be
inflationary. As shown in the estimated regression below, this is indeed
the case for our
sample.
Pass-through Regressions of Inflation on Devaluation
รฐ =
0.02
*
+ 0.07 ร~De - 0.01 ร~De
-1
+ 0.07 ร~De
-2
(4.72) (1.21) (-0.11) (1.1)
R
2
= 0.04 DW = 1.88
and,
รฐ =0.02
*
+ 0.09
**
ร~De - 0.03 ร~De
-1
+ 0.09
**
ร~De
-2
- 0.001 ร~De
-3
+ 0.12 รฐ
-1
-
(4.4) (1.69) (-0.67) (1.75) (-0.02) (0.96)
0.49
*
รฐ
-2
+ 0.03 รฐ
-3
(-4.54) (0.31)
R
2
= 0.32 DW = 1.91,
------------------------------------------------------------------------
*Page 10*

8
where รฐ= *rate* of inflation; ร~De=*rate* of depreciation; and figures in
parentheses are t-
statistics.
*
Significant at 1% level of significance
**
Significant at 10% level of significance
The first equation above shows the results of regressing inflation only
on the current
and lagged values of nominal *exchange **rate* depreciation. Although
there is no residual
autocorrelation, the fit is quite poor with a low R-square and
insignificant coefficients. In the
second equation, we also include lagged values of inflation as
explanatory variables. The
result is a higher R-square and somewhat greater statistical
significance of the coefficients
of *exchange **rate* depreciation. However, while lagged inflation is
significant at 1% level of
significance, the coefficients of depreciation are barely significant at
the 10% level. These
results are qualitatively similar for alternative specifications using
different lag lengths for
the right hand side variables and show that nominal depreciation has had
little to no impact
on the *rate* of inflation in India during the past 15 years.
A more direct method for testing the impact of RER targeting on
inflation involves a
two-step approach used, for example, by Calvo et. al. (1995). First,
employing the
Beveridge-Nelson technique, the *exchange **rate* is decomposed into its
`permanent' (or
steady-state) component and `temporary' (or cyclical component).
13
.
The identifying
criterion for this technique is that the former captures the
nonstationary component of the
variable, while the latter captures its stationary element. Second, we
examine the pairwise
correlations between the cyclical component of the real *exchange
**rate* and inflation (which
was also shown to be a stationary variable).
Since the inverse of the IMF index of the real *exchange **rate* is used
here, an
increase in the index denotes a real /depreciation/. Thus, when the
cyclical component is
negative, the actual *exchange **rate* is `overvalued' relative to its
equilibrium steady-state
level. Therefore, we should observe a positive correlation between
inflation and the
cyclical or temporary component of the real *exchange **rate*. Table 6
presents estimated
correlations between inflation and the RER, as well as its cyclical
components. For the full
sample, covering 1980-1996, inflation is positively correlated with both
the RER and its
cyclical component. The correlation, however, is significant only at 10%
level of
significance and is completely insignificant if we look at the period
prior to the liberalisation
13.
The trend-cycle decomposition of the RER was obtained using the
Beveridge and
Nelson (1981) technique as modified by Cuddington and Winters (1987). After
appropriate differencing, the best fit for the monthly RER series was
obtained from
an ARMA (0,1) process.
------------------------------------------------------------------------
*Page 11*

9
reforms in the economy. These results are consistent with those of the
pass-through
regressions reported above. In contrast, however, the gradual opening up
of the economy
seems to have been accompanied by a greater correlation between
inflation and the
cyclical component of RER: for the post-reform period, the correlation
is somewhat higher
and significant at the 1% level of significance.
Overall, therefore, the results suggest a relatively benign trade-off
between
*exchange **rate* targeting and domestic inflationary pressures at least
over the pre-reform
period. Combined with the earlier finding, that temporary shocks are
important in
explaining variability of the RER, we may safely conclude that India has
had modest
success in RER targeting, although this may be increasingly more
difficult as the reforms
proceed and the economy continues to open up. These findings also
suggest that the
official controls on capital flows have been relatively successful in
preventing such flows in
practice. Another reason why RER targeting has been successful vis-ร -vis
inflation lies in
the fact that the nominal depreciations needed for the purpose of RER
targeting have been
relatively small since the underlying inflation *rate* in India has been
low in comparison with
many other developing countries. Futhermore, the recourse to running the
printing presses
for residual financing of the fiscal deficit has been modest in India in
comparison to, say,
some Latin American countries, which also happen to actively pursue a
policy of
maintaining PPP by continually changing their nominal *exchange* to
correct for higher
inflation.
------------------------------------------------------------------------
*Page 12*

10
*II.3*
*RER Targeting and Real *Rate* of Interest*
Given lack of major impact on inflation in India, has targeting the RER
affected the
real rates of interest instead? The theoretical framework discussed
earlier suggests that,
absent high capital mobility, real interest rates would increase if the
RER is depreciated
aggressively. This is indeed the case in India for the period since
1992, as reported in
Table 7. It is found that the correlation between the cyclical component
of the real effective
*exchange **rate* and the real interest *rate* is reasonably high at 0.36.
14
.
Since the sample is
too small to determine whether or not the real rates of interest display
a unit root, Table 7
presents correlation of temporary component of RER with both the level
of real interest *rate*
as well as its deviations from a deterministic trend. The latter is also
found to be quite high
at 0.40; both correlations are significant at 1% level of significance.
In sum, therefore, as would be expected in a relatively closed economy,
the impact
of RER targeting has been less on inflation and more on the real rates
of interest. In
evaluating the impact of RER on real interest rates, the period since
1992 was used
because it coincided with the onset of financial liberalisation,
including a gradual freeing up
of the interest-*rate* structure. Prior to that period, most interest
rates in the economy were
regulated and not market determined. As India moves closer to completely
market-
determined interest rates, the impact of RER targeting on the real
interest rates is likely to
be even higher.
*III.*
*Long-Run Behaviour of RER: A Cointegration Analysis*
As noted earlier, the RER is not a policy tool in the long run
notwithstanding
government efforts at targeting; nominal devaluations /per se /cannot
alter the RER over the
long run. Theoretically, the RER at any point in time depends upon a
number of
fundamental and policy variables as evident from the numerous models of RER
determination in the literature.
15
.
Thus, determining the relevant set of economic variables
that underlie the RER behaviour remains an empirical issue. This
section, consequently,
investigates the long-run determinants of the RER in India.
16
.
In the absence of large scale capital flows, as in India with her
relatively closed
capital account, the focus of models of RER determinants is in the goods
market. The
models typically specify the Salter-Swan framework with tradables and
non-tradables
sectors in the economy. The supply in the non-tradables sector is fixed
by the assumption
of full employment and the real *exchange **rate*, given by the ratio of
price of tradables to
non-tradables, is determined by the non-tradables' price clearing that
market. A number of
variables suggested by these theoretical models are considered in the
empirical analysis
below. These are:
14.
The interest *rate* we use is the inter-bank call money *rate*.
15.
See, for example, Edwards (1989), and Faruqee (1995).
16.
The trade weighted real effective *exchange **rate* index compiled by
the Reserve
Bank of India is used in the empirical analysis.
------------------------------------------------------------------------
*Page 13*

11
(i) /Investment/GDP ratio (I/GDP)/: If more investment goes into the
non-tradables sector,
such as the high proportion of public investment in India, then
increases in I/GDP would
lead to greater supply of non-tradables, implying a lower price of
non-tradables and a RER
depreciation.
(ii) /Seigniorage/GDP ratio (Sgn/GDP)/: In the simplest case, an
increase in seigniorage
leads to higher domestic inflation and, ceteris paribus, a RER
appreciation, especially if
government revenues are spent on nontradables. However, other models
suggest that an
increase in seigniorage would lead to lower household wealth, implying a
lower demand for
nontradables and thus an RER depreciation. Implicit in this argument is
the assumption
that the government does not return the inflation-tax revenue as lump
sum transfers to
households and, instead, spends the revenue on tradable goods.
(iii) /Terms of trade (TOT)/: TOT, defined as the ratio of unit value of
imports to the unit value
of exports, have an inverse relationship with the RER. An adverse shock
to the TOT,
raising the prices of imports, for example, leads to a depreciation of
the RER. Most
traditional models emphasise the income effect generated by the change
in the external
terms of trade. A deterioration in the TOT reduces real income and
results in a decline in
the demand for nontradable goods. Therefore, to restore equilibrium the
relative price of
nontradables has to decline (i.e., there has to be an equilibrium real
depreciation).
(iv) /Fiscal deficit/GDP ratio (Def/GDP)/: A higher fiscal deficit is
associated with greater
spending on non-tradables, which therefore leads to RER appreciation.
(v) /Capital inflows (Cap/GDP)/: Greater capital inflows lead to
appreciation of the RER due
to greater demand in the market for non-tradables.
(vi) /Tariffs/: An increase in tariff is usually found to result in an
appreciation of the real
*exchange **rate*. If exportable goods, importable goods and nontradable
goods are
substitutes /everywhere /in demand (a sufficient condition), an increase
in tariff will increase
the demand for nontradable goods.
17
.
The traditionally accepted view has been that a
reduction in tariffs in a small country will require a real depreciation
to maintain external
balance. A lower tariff will reduce the domestic price of importables,
and consequently
increase the demand for imports, which will, in turn, generate an
external imbalance. Now
assuming that the Marshall-Lerner conditions hold, this will require a
real devaluation to
restore equilibrium.
17.
If, on the other hand, there is complementarity in consumption, it is
possible that
either an imposition of, or an increase in, tariffs will generate a real
equilibrium
depreciation.
------------------------------------------------------------------------
*Page 14*

12
Since the central consideration in the present exercise involves
identification and
estimation of the long-run relationship between the RER and its
fundamental determinants,
a natural conceptual framework is provided by cointegration analysis. As
a matter of
definition, a set of N difference-stationary variables is said to be
cointegrated if there exists
at least one linear combination of these variables that is stationary.
The stationary linear
combination is called the cointegrating vector and defines their
long-run relationship.
Intuitively, cointegrated variables may drift apart temporarily but must
converge
systematically over time. Thus, the real *exchange **rate* may be
subject to numerous
temporary shocks but its behaviour in the long-run would be
systematically related to these
fundamentals.
In the analysis below, we deploy a two-step procedure for testing for
the existence of
cointegrated relationships. As first step, we check the order of
integration of the variables
and present the results in Table 8. The RER, the seigniorage-GDP ratio,
the investment-
GDP ratio, the implied tariff level, the TOT and foreign capital
flow-GDP ratio are broadly
found to be all I(1) variables, i.e., they are difference stationary. In
the second stage we
determine whether the above variables are related by one or more common
cointegrating
vectors.
18
.
It is found that for the full small sample period (1960/61-1995/96)
there is one
common cointegrating vector (in logarithmic form) that relates RER, the
seigniorage-GDP
ratio (Sgn/GDP), the investment-GDP ratio (I/GDP), implied tariff level,
the terms of trade
(TOT) and foreign capital inflow-GDP ratio (Cap/GDP).
19
.
We failed to obtain a common
cointegrating vector when the fiscal deficit-GDP ratio was included.
Table 9 reports the
standardised eigenvectors and adjustment coefficients, denoted by,
respectively รข and รก
in the usual notation. The first column of รข is the estimated
cointegrating vector, which can
be written in the following form:
RER = รฃ
0
- 1.42 I/GDP - 0.71 Sgn/GDP - 1.09 TOT
+ 1.09 Tariff + 10.86 Cap/GDP.
18.
The procedure put forward by Johansen (1988) and Johansen and Juselius
(1990)
is used.
19.
Since inflows were negative in some years, we could not take the log of
cap/gdp.
Note that, although not reported, cointegration tests with productivity
as one of the
variables were also undertaken and showed the existence of a
cointegrating vector.
However, productivity data for India is available for a much shorter
period (1973/74-
1992/93), than covered in the results reported here.
------------------------------------------------------------------------
*Page 15*

13
All coefficients have their anticipated (or at least plausible) signs.
The RER
appreciates with an increase in capital inflows and an increase in
protection. On the other
hand, it depreciates due to an increase in the investment-GDP ratio, an
increase in
seigniorage and a worsening in the terms of trade. The coefficients in
the first column of รก
in Table 9 measure the feedback effect of the (lagged) disequilibrium in
the cointegrating
relation onto the variables in the vector autoregression. In particular,
0.05 is the estimated
feedback coefficient for the (log of the) RER equation. The numerical
value seems to imply
slow adjustment to remaining disequilibrium in the system.
*IV.*
*Concluding Remarks*
This paper has investigated the evolving links between *exchange **rate*
policies and
domestic financial variables in India, an economy undertaking cautious
liberalisation of its
financial and external sectors. It also considers long-run determinants
of real *exchange*
rates in India where a primary finding is that several macroeconomic
variables seem to
impinge on the RER through the period 1960/61-1995/96. In particular,
the results indicate
the importance of capital flows and trade protection in causing an
appreciation of the
equilibrium RER should not be overlooked. On the other hand, as the
investment ratio
rises in the years to come as a consequence of the reforms that are
being introduced, the
RER should depreciate.
The analysis in the paper shows that real *exchange* targeting has more
than a
transitory effect in case of India. In particular, inflation has not
accelerated when nominal
devaluations are used as a policy tool to enhance competitiveness of
domestic exporters.
Consequently, unlike in many Latin American countries, RER targeting has
been relatively
successful in India without substantial costs in terms of higher
inflation. However, the
relatively benign trade-off between RER targeting and inflation may
deteriorate as reforms
lead to greater degree of capital mobility. Furthermore, in the past
three years or so, the
economy has had to endure higher real interest rates at least partly as
a consequence of
RER targeting. The main point is that RER targeting does have costs in
terms of less than
desirable implications for the economy as a whole and that these need to
be kept in mind
when deciding to what extent should central bank-led devaluations /per
se /be deployed.
------------------------------------------------------------------------
*Page 16*

14
In highlighting the growing links between *exchange **rate* policies and
domestic
financial variables, the paper has focused on an issue that has not
attracted attention
before in the Indian context but which is likely to acquire increasing
policy significance in
the near future. For most of its *history* India has, at least
officially, maintained a closed
capital account. More recently, as part of the on-going reforms, the
capital account has
been partially opened up for two classes of investors, namely foreign
institutional investors
(FIIs) and non-resident Indians (NRIs), and currently plans have been
drawn up to achieve
full convertibility of the Indian *Rupee* in three years. As shown by
the results in the paper, it
cannot be guaranteed that policy induced changes in the nominal
*exchange **rate* will be as
beneficial for the purpose of RER targeting in the new environment. A
more sustainable
policy would be to have a multi-pronged approach based on the structural
determinants of
equilibrium RERs, which include the relative openness of the trade
regime, investment *rate*,
the government's fiscal stance and productivity.
------------------------------------------------------------------------
*Page 17*

15
/*REFERENCES*/
Beveridge, S. and C. Nelson, 1981, "A new approach to decomposition of
economic time
series into permanent and transitory components with particular
attention to the
measurement of the business cycle", /Journal of Monetary Economics/, 7,
151-174.
Buiter, W.H. and U.R. Patel, 1992, "Debt, deficits and inflation: An
application to the public
finances of India", /Journal of Public Economics /47, pp. 171-205.
Buiter, W.H. and U.R. Patel, 1997, "Budgetary aspects of stabilization
and structural
adjustment in India: The painful road to a sustainable
fiscal-financial-monetary plan",
(Chapter 16) in M. Blejer and T. Ter-Minassian, Eds., /Macroeconomic
Dimensions of Public /
/Finance, Essays in Honour of Vito Tanzi/, (Routledge, London).
Calvo, G., C. Vegh and C. Reinhart, 1995, "Targeting the real *exchange
**rate*: Theory and
evidence", /Journal of Development Economics/, 47, 97-133.
Cochrane, J., 1988, "How big is the random walk in GNP?", /Journal of
Political/
/Economy/,96, 893-920.
Cuddington, J.T. and L. A. Winters, 1987, "The Beveridge-Nelson
decomposition of
economic time series: A quick computational method", /Journal of
Monetary Economics/, 19,
125-127.
Dickey, D. and W. Fuller, 1981, "Likelihood ratio statistics for
autoregressive time series
with a unit root", /Econometrica/, 49, 1057-1072.
Dornbusch, R. and A. Werner, 1994, "Mexico: Stabilization, reform and no
growth",
Brookings Papers on Economic Activity, vol.1, pp.253-288.
Edwards, S., 1989, /Real *Exchange* Rates, Devaluation and Adjustment
/(MIT Press,
Cambridge, MA).
Edwards, S., 1995, Comment in /Brookings Papers on Economic Activity/,
2, 277.
Faruqee, H., 1995, "Long-run determinants of the real *exchange
**rate*", /IMF Staff Papers/,
42, 1, 80-107.
Johansen, S., 1988, "Statistical analysis of cointegrating vectors",
/Journal of Economic/
/Dynamics and Control/, 12, 231-254.
------------------------------------------------------------------------
*Page 18*

16
Johansen, S. and K. Juselius, 1990, "Maximum likelihood estimation and
inference on
cointegration - with applications to the demand for money", /Oxford
Bulletin of Economics/
/and Statistics/, 52, 169-210.
Kwiatkowski, D., P.C.B. Phillips, P. Schmidt and Y. Shin, 1992, "Testing
the null hypothesis
of stationarity against the alternative of a unit root: How sure are we
that economic time
series have a unit root?", /Journal of Econometrics/, 54, 159-178.
Lizondo, J.S., 1993, "Real *exchange **rate* targeting under imperfect
asset substitutability",
/IMF Staff Papers/, 40, 829-850.
Montiel, P.J. and J. Ostry, 1991, "Macroeconomic implications of real
*exchange **rate*
targeting in developing countries", /IMF Staff Papers/, 38, 872-900.
Montiel, P.J. and J. Ostry, 1992, "Real *exchange **rate* targeting
under capital controls: Can
money provide a nominal anchor?", /IMF Staff Papers/, 39, 58-78.
Patel, U.R. and P. Srivastava, 1997, "The real *exchange **rate* in
India: Determinants and
targeting", Center for Economic Performance (London School of Economics)
Working
paper No. 323, January.
Phillips, P.C.B. and Pierre Perron, 1988, "Testing for a unit root in
time series regression",
/Biometrica/, 75, No. 2, pp. 335-346.
*Table 1*
*Deviation of nominal *exchange* rates from PPP *exchange* rates for*
*Indonesia, Korea, China and Malaysia*
*a.*
(in percent)
*Year*
*Indonesia*
*Korea*
*China*
*Malaysia*
1981
1.8
11.5
-6.5
-0.6
1982
5.1
12.5
-9.9
-1.0
1983
11.8
13.0
-10.9
-0.4
1984
18.5
10.8
-11.9
-0.7
------------------------------------------------------------------------
*Page 19*

17
1985
19.9
9.6
-5.1
-3.9
1986
23.3
10.6
-0.6
-4.9
1987
30.4
9.8
4.6
-8.2
1988
35.5
13.9
25.7
-9.4
1989
37.7
14.9
38.1
-11.3
1990
47.6
18.5
33.4
-13.6
1991
55.3
24.5
34.5
-13.4
1992
62.4
28.4
41.9
-12.0
1993
73.6
30.8
60.3
-11.4
1994
84.2
36.0
88.4
-10.3
1995
96.6
38.3
119.8
-8.1
1996
110.6
41.3
133.1
-7.2
*a.*
Plus sign indicates domestic currency is undervalued.
------------------------------------------------------------------------
*Page 20*

18
*Table 2*
*Deviation of nominal *Rupee*-U.S. Dollar *exchange **rate* from PPP
*exchange **rate**
*b.*
(in percent)
*Year*
*Deviation*
1981/82
0.7
1982/83
-2.1
1983/84
3.1
1984/85
5.7
1985/86
8.1
1986/87
10.8
1987/88
15.6
1988/89
19.2
1989/90
22.1
1990/91
28.9
1991/92
38.7
1992/93
47.9
1993/94
57.2
1994/95
71.6
1995/96
79.8
1996/97
86.7
*b.*
Plus sign indicates domestic currency is undervalued.
------------------------------------------------------------------------
*Page 21*

19
*Table 3*
*Black Market Premium, Indian *Rupee*-U.S. Dollar *Exchange **Rate**
*c.*
*Year*
**Rupee*-*
*U.S.$*
*Ex. *Rate**
*Black Market*
*U.S.$*
*Ex. *Rate**
*Black Market*
*Premium*
*(in percent)*
1963/64
4.8
6.8
41.8
1969/70
7.5
11.5
53.3
1971/72
7.5
7.3
-2.9
1973/74
7.4
9.3
24.9
1979/80
8.1
8.8
8.2
1980/81
7.9
8.5
7.5
1981/82
9.0
11.0
22.7
1982/83
9.7
12.0
24.1
1985/86
12.2
13.1
7.1
1991/92
24.5
26.5
8.3
1993/94
31.4
34.5
10.0
1994/95
31.4
34.5
10.0
1995/96
33.4
36.4
9.0
*c.*
The black market *exchange **rate* is available for certain days only;
therefore, the figures in
the first column of the table should only be taken as indicative. The
data has been collected
and kindly made available to us by the archives section of *Vyapar
*newspaper published in
Bombay.
------------------------------------------------------------------------
*Page 22*

20
*Table 4*
*Unit root tests: 1980:1-1996:12*
*Series*
*Z( )*
*Z(t )*
*Z(*
*3*
*)*
/*Real *exchange **rate**/
Level
6.638
1.261
-7.95
-2.56
4.01
First difference
0.329
0.261
-152.80
-11.27
63.20
/*Inflation*/
0.208
0.109
-114.1
-8.94
40.21
*Critical values (95%)*
*0.463*
*0.146*
*-25.1*
*-3.66*
*7.16*
/*Note:*/
(i) The two KPSS statistics, รง
รฌ
and รง
รด
, are based on the following:
Y
t
= ร(r)t + ร~C
t
+ รฅ
t
where
ร~C
t
= ร~C
t-1
+ u
t
;
u
t
i.i.d.(0, รณ
u
2
)
where Y
t
is modeled as the sum of a deterministic trend, a random walk and a
stationary
error, รฅ
t
; the initial value of ร~C
t
is treated as fixed and serves the role of an intercept. To test
for level stationarity instead of trend stationarity (รง
รด
) , ร(r) is set equal to zero and the
residuals are from a regression of Y on only the intercept. This
statistic is denoted by รง
รฌ
.
Kwiatkowski, Phillips, Schmidt and Shin (1992) provide critical values
for tests of both level
and trend stationarity.
(ii) The Phillips-Perron statistics, Z(รข), Z(t
รข
), Z(ร-
3
), are based on:
Y
t
= รก
0
+ รก
1
t + รข(L)Y
t-1
+ u
t
.
------------------------------------------------------------------------
*Page 23*

21
These are derived in Phillips and Perron (1988) for the null that รข=1 and รก
1
=0. Z(t
รข
) makes
use of the t-statistic on รข, t
รข
(for รข=1), and Z(ร-
3
) is the regression F-test of Dickey and Fuller
(1981).
------------------------------------------------------------------------
*Page 24*

22
*Table 5*
*Temporary and random walk components of the real *exchange **rate**
*1980:1-1996:12*
(1/n) รจ
n
2
/รจ
1
2
for various n (where n are months)
24
48
72
96
1.673
1.504
0.863
0.733
*____________________________________________________________________________________________*
*Table 6*
*Pairwise Correlations: Inflation and Real *Exchange **Rate**
*d.*
*Full*
*Sample*
*Pre-*
*Reform*
*Post-*
*Reform*
/*Inflation*/
Real *exchange **rate*
0.12
(1.64)
0.13
(1.57)
0.17
(2.33)
Cyclical component of
the real *exchange **rate*
0.12
(1.64)
0.13
(1.57)
0.17
(2.33)
------------------------------------------------------------------------
*Page 25*

23
*d.*
Figures in parantheses are t values.
------------------------------------------------------------------------
*Page 26*

24
*Table 7*
*Pairwise Correlations: Real Interest *Rate* and Real *Exchange **Rate**
*e.*
*Post-*
*Reform*
/*Real interest *rate**/
Real *exchange **rate*
0.41
(2.88)
Cyclical component of
the real *exchange **rate*
0.36
(2.47)
/*Cyclical component of real interest *rate**/
Real *exchange **rate*
0.40
(2.80)
Cyclical component of
the real *exchange **rate*
0.36
(2.47)
*e.*
Figures in parantheses are t values.
------------------------------------------------------------------------
*Page 27*

25
*Table 8a*
*Unit root tests (level)*
*f.*
*: 1960/61-1995/96*
*Series*
*Z( )*
*Z(t )*
*Z(*
*3*
*)*
Real *exchange **rate*
1.291
0.187
-10.68
-2.40
2.92
Fis.def.-GDP ratio
1.176
0.238
-7.76
-2.21
2.29
Inv.-GDP ratio
1.181
0.083
-17.86
-3.27
5.22
Seigniorage-GDP ratio
1.146
0.041
-37.61
-7.25
18.73
Implied tariff
0.821
0.072
-11.85
-2.55
3.71
Terms of trade
0.255
0.190
-5.38
-0.92
1.63
Capital flows/GDP
0.409
0.340
-16.66
-3.28
5.29
Critical values (95%)
0.463
0.146
-25.1
-3.66
7.16
*Table 8b*
*Unit root tests (first difference): 1960/61-1995/96*
*Series*
*Z( )*
*Z(t )*
*Z(*
*3*
*)*
Real *exchange **rate*
0.075
0.054
-30.86
-5.56
13.28
Fis.def.-GDP ratio
0.121
0.084
-37.35
-6.69
19.46
Inv.-GDP ratio
0.059
0.052
-40.09
-7.58
23.42
Seigniorage-GDP ratio
0.032
0.025
-49.98
-16.38
50.90
Implied tariff
0.099
0.057
-27.44
-4.60
9.88
Terms of trade
0.281
0.103
-25.74
-3.78
7.00
Capital flows/GDP
0.097
0.048
-42.24
-10.20
27.13
Critical values (95%)
0.463
0.146
-25.1
-3.66
7.16
*f.*
The two KPSS statistics, รง
รฌ
and รง
รด
, are explained at the bottom of Table 4.
------------------------------------------------------------------------
*Page 28*

26
*Table 9*
*A Cointegration Analysis of the Indian RER: 1960/61-1995/96*
*Eigenvalues Hypotheses*
*g.*
*ยบmax*
*95% crit. val.*
*ยบtrace*
*95% crit. val.*
r=0
41.4*
107.8*
rโ~Iค1
32.87
66.43
rโ~Iค2
15.36
33.57
rโ~Iค3
8.074
18.21
rโ~Iค4
6.949
10.13
rโ~Iค5
3.185
3.185
*Standardised eigenvectors*
RER
1.000
0.275
2.549
2.941
0.239
-12.18
inv-GDP
1.419
1.000
-13.01
4.021
-0.387
-1.449
TOT
1.094
0.491
1.000
-1.124
-0.036
-11.11
tariff
-1.089
-0.126
14.68
1.000
-0.126
-8.248
cap-GDP
-10.86
-2.870
-291.6
32.55
1.000
-232.2
sgn-GDP
0.7102
-0.140
-0.640
0.441
0.039
1.000
*Standardised adjustment coefficients ร~F*
RER
0.052
-0.018
-0.004
-0.034
-0.073
-0.001
inv-GDP
-0.033
-0.543
0.009
-0.025
0.070
0.000
TOT
-0.087
-0.822
-0.012
0.006
-0.032
0.004
tariff
-0.029
-0.109
-0.009
-0.024
0.351
0.004
cap-GDP
-0.007
0.045
0.001
0.001
-0.005
0.000
sgn-GDP
-0.921
0.917
-0.011
-0.258
0.083
0.006
g.
r denotes number of cointegrating vector(s).
*
Null rejected at 95% level.
---------


> It maintains a trading band to ward off speculators.

You don't even have a fully convertible Rupee and everyone knows this.

> The strong dollar policy -as I have told and pointed to irrefutable
> evidence umpteen times -is YOUR govt's making.

You have not pointed to anything.

If you want to bring
> parity -then you need to tell your govt to reach an agreement with
> Indian govt to make a 1 time change that will be honoured by both
> parties as oopposed to swings in exchange rates back and forth from
> which speculators will benefit.

It won't happen unless the US pegs its currency, just like China, and
cheats, just like India and eight other countries mentioned in media
articles I will soon type up and post.

>> days ago, another article in WSJ about how your RBI also targets its own
>> inflation.
>>
> yeah -it does because all money is annotated paper, irrespective of
> whether it is US dollar bills or Indian rupees.

Yeah, what you like to do is point your finger at the USA, but you just
can't look in the mirror.

> Wealth = trade-able goods/services and currency has no residual value
> in terms of what trade-able goods/services one can buy with the note.

You still have not named anything that can't be bought, by US or anyone,
with USD.

>> is because increasing money supply does not
>>> lead to an increase in wealth,
>>
>> As I've explained to you so many times now, such processes as fractional
>> reserve banking increases wealth and if you ever start reading about
>> banking this explanation is very easy to find.
>>
>
> it doesn't. You can lower the CRR as low as you like. Other than
> putting banks' financial health at risk, it will not lead to an
> increase in wealth.

You have not explained anything.

>> but increases the amt of money available
>>> to transact in wealth.
>>
>> Although you have given absolutely no explanation of what wealth is but
>
> Wealth is trade-able goods/services which can be traded for any other
> goods/services one wishes to consume.

You left out _value_, which is actually in my definition, below.

> In order to trade them in, one can use an intermediary called money
> -but that is just an intermediary. Tomorrow if all american
> companies/exporters shut down it will not be possible to print more
> money and continue with your splurge,.

You still don't understand fractional reserve banking. That is where most
money is literally created. Its in Griffin's book, and its in all the bank
books on how banking works.

> To buy things as a nation, you
> need to sell something in return.

No, you can give gold or silver or oil. And, you used the word "sell"
instead of "trade" so you are not even consistent with yourself.

If you don't buy anything -you won't
> need to sell anything. If you sell nothing but hand out US dollar bills
> in return for goods/services -it leads to a trade deficit and makes you
> a debtor nation -which is what you are.

As if India has no debt? Just read the newspapers.

>> claim it has nothing to do with money, I _will_ explain wealth to _you_:
>> it is anything of value, including but not limited to money, that people
> not including money.
>
>> will give money to get. However, as wealth increases, there must also
>> increase money or else there will be deflation.
>>
> and without an increase in wealth, if you increase money supply -it
> leads to inflation.

And, as of right now, your India's inflation is 5% per year, and your
gasoline prices went up 8% several months ago.

>>> The notion of 'the world loves our currency'
>>
>> That notion is a true notion since it is a real absolute fact that the US
>> actually does receive goods and services from anywhere in the world in
>> exchange for USD. You have not yet named ANYONE who will not take USD for
>> business.
>>
>
> They take it for now -but may not continue doing so.

For the moment, I'm not worried.

By taking it,
> they don't necessarily buy your diea of the world loving your currency.

Oh, yes they do because it is the easiest currency to get.

> Currency is just an intermediary with which they buy other things like
> gold, US mortgages etc..

Currency buys wealth, wealth buys currency. What is the problem in your
brain?

The latter is trade-able goods aka wealth and
> the former is annotated paper with zero residual value.

You still have not given a single, real, credible, factual example or
thing that the USD will not buy.

>> or
>>> 'india is a bowl of dust'
>>
>> And, if you think USD are so worthless, then I will cite economist
>> opinions that indicate that _most_ of India's 8+% growth in the last few
>> years is due _mostly_ to incoming USD.
>>
>
> It isn't. Its growing because the country generates trade-able services
> which are desired by consumers overseas.

And, if you didn't have overseas customers, you would not have 8% growth.
Its in The Economist and Financial Times articles.

One can opt to pay in euros or
> us d or any other currency or in terms of commodity futures too.

Nobody turns down USD. Name anyone that will not sell to USD.

BTW
> -the USD you like so much - will come back to you coz we have a high
> consumption rate and buy stuff like ford cars, ibm and hp computers ,
> ge washing machines.

Good, I think its a good idea that USD comes back to the US from India.
You guys got such a free ride the last 5-10 years. All that money falling
into India for zero work and a cheap, undervalued Rupee. Just like China
pegged its Yuan to undervalue compared to the USD. Their exports shoot up,
their imports never happen because no one can afford to buy imports.
Everyone knows this.

>> will not suffice to wish away any
>>> macro-economic problems or finance your spending binge.
>>
>> As if Indian has no serious problems of its own, and India is growing
>> withOUT any economic help from the outside of its borders (i.e. the USA).
>>
> It is growing regardless of whether the US wishes to help and whether
> you elect someone who will decide not to help us.

Its all a free ride for India.

How you pay for
> services is not relevant as much as paying for it in terms which will
> in return allow us to buy something else.

Yeah, your country is buying up property here in the USA for branch
offices of Tata, Wipro, etc., so then it can use L-1 visas on Indians, and
still pay them cheap and then its Indian bosses exploiting (slaving) their
own people. And btw there are no caps on L-1 visas.

>>>> Below is a piece which is undated, but copyrighted (see the end) in 2004
>>>> so it is from that year. Again, the situation is not good. So, we not only
>>>> have corporate CEOs beating on our heads, but Kamal Prasad telling us we
>>>> actually _need_ to become paupers, serfs, and peasants for reasons I can't
>>>> really follow other than a hidden plot to help the rich get richer and at
>>>> the expense of the poorer.
>>>>
>>>
>>> I did recommend in another post that every american (who isn't
>>> extraordinary but does work that can be offshored) should opt for
>>> minimum wage adjusted for inflation.
>>
>> What you have continuously recommended for well over one year now is the
>> voluntary impoverishment of all US people, and I take it that you would
>
> Im recommending that you get over the sense of entitlement.

We worked for what we have. You guys just steal anything you can get your
hands on.

In order
> for americans to be entitled to something by way of citizenship -they
> need something like a fountain of wealth to finance it.

Yes, its called USD.

Saudi Arabia
> has a fountain of oil (trade-able goods) to finance their citizenry
> -and some other countries do too. If you don't have something along the
> same lines, then you need to think in terms of 'why will employers pay
> me so much unless I provide them with something (services) worth a lot
> more?'

Here, read this again:
---------

The Economist (I hope you know that periodical) publishes in the back pages of
every issue lots of financial data. In the April 29, 2006 issue on page 101,
is a bar graph showing (title of bar graph) "Trade in commercial services"
with an asterisk which says "Transport, travel, commmunications, financial
and other services" and under the title it says "Top exporters, 2005, $bn"
and guess who is at the top? The USA, exported $350 billion in services.
The next highest exporter is Britain with $180 bil. There were 13 more
countries listed (Germany, France, Japan, Italy, Spain, China [with $80 bil],
Netherlands, _India_ [with $65 bil in services], and the rest with Canada
ending at $50 bil). The source was given as the WTO.


Just in the Tuesday, May 16, issue of the WSJ, front page, is another bar
graph on world wide farm exports. Guess what, US is at the top with $79.6
bil in exports. The whole EU exports $78.4 bil. Others in order down the
list are Canada (40.1), Brazil (30.9), China (24.1), Oz (22.1), Argentina
(17.1), and down through Russia (13.8), and Malaysia (13.1), and India not
even on the list.

-------


> Assuming you do conclude that your citizenship or worse skin colour
> doesn't entitle americans to any brownie points -you will realize that
> its better to accept competitive wages than to lose one's job.

Its all in the exchange rates and how 3rd world countries are given a free
ride with globalization.

And
> given that many americans piss in their pants at the sight of
> competition -its better that they all gravitate towards minimum wage
> (adjusted for inflation).

And, India and Indians laughing at stealing software, stealing inventions,
and having expiring patents for inventions given to them on a silver
platter for doing nothing.

>> like even our rich people to give up their money, mansions,
>> BMWs/Mercedes/SUVs, yachts, planes, and all other things of value, etc.
>>
>
> depends on how they got it. You may want to go in for a progressive tax
> system wherein taxes increase exponentially with increase in income.

We've already got that, but Bush and Reagan and all have cut the taxes
preferentially for the rich. Big giveaway to them.

>> It could amount to all s/w
>>> engineers in the US working for $20/hr. Thats better than burger
>>> flipping and even better than being unemployed.
>>
>> Our official UE is about 5% just similar to India's official UE, and
>> within 1-2 percentage points of most other country's UE.
>>
> so why should you be crying about it?

Because you are stealing our better jobs.

>> At $20/hr you wouldn't
>>> even have to worry about H1Bs flooding the market.
>>
>> With an official poverty rate in the USA at about 20%, one person in five
>> cannot have an official decent standard of living. Wage rates, as I've
>> said many times, cannot be discussed without discussiong tax rates, rent
>> rates, and price structures.
>>
> if wages fall, rents will also fall and with a progressive tax
> mechanism -it will pay to earn less.

Only over many years, and it will ruin the USA. But, I see that is what
you want. However, all the work going to India will come back. And, then
your growth will go from 8% to maybe 1%.

A lot of what goes into
> rents/mortgages is a result of increased money supply which translates
> to increased wages.

It will all feed back onto itself with no advantage to us.

>> Their purchasing
>>> power in India will be comparable to H1Bs.
>>
>> The rise in India's middle class is being paid for by the US middle class.
>>
>
> it isn't.

Fact: corp lays off 20,000 US guys, hires 20,000 Indians. Yes, US middle
class is paying for your growth.

The export sector is paid for by corporations many of which
> are registered in the US.

And, Wipro, Tata, etc., are taking in $billions from the US. That money is
not going to our (former) middle class.

For the US middle class to pay for India's
> rise, they will need to be holders of significant amounts of
> wealth/assets in which case, they might as well stop working paycheque
> to paycheque or worry about inflatiomn, bankruptcies etc..

You take $50,000/year times 100,000 people and that is $5 bil/year going
into India, and not the paychecks of US guys.

That export
> sector in India doesn't contribute significantly to India's GDP or
> support a large section of Indian society.

Another article said that if one job is created in India, it leads to the
creation of seven more jobs. So, if 1 mil jobs go to india, it creates 7
mil more jobs because they money is passed on by recycling. That is a big
big effect.

You need to get over the
> notion of being owners of a fountain of weslth into which all other
> countries are tapping into.

You need to get over the notion that assets, value, land, and people in
the USA can be treated as dirt or people without their own rights.

If people here didn't slog it out -they
> wouldn't be getting any of the money flowing this way.

India should really try to grow itself by itself, without help from us.

> They get that wealth because they generate services -not because you
> decided to do charity while your own house is in flames.

USD to India is a gift on a silver platter, and you don't even appreciate
it.

>>>> ฉ 2004 The Washington Post Company
>>>>
>>>> --0-2059231908-1156814051=:9913--
>>>
>>>
>> --0-15611913-1157068805=:29835--
>
>

minnesotti

unread,
Sep 4, 2006, 9:39:15 AM9/4/06
to

Straydog wrote:

> It sounds to me, possibly, like there are different forces at higher
> levels and when one force tries to get something, the other force trys to
> cancel it. So, if the second force does cancel the attempt, then the first
> force withdraws. Or, it is nothing but random actions getting random
> reactions and it just wastes resources.

The person who cancelled the position also was the person who created
the position. The senior management has no direct control on who gets
selected at the interview, however they have the right to veto any
decision made by the selection board.

It looks to me that the senior manager did not like the outcome of the
interview (the right person was not selected for whatever reason). And,
you were right -- the nature of the management games is that they are
haphazard and they waste resources. Hopefully, the next one will be
better (for me).

minnesotti

unread,
Sep 8, 2006, 3:46:38 AM9/8/06
to
This week I was interviewed for the second permanent position out of
the two which came up in my department (and one of them was supposed to
be mine). One of the interviewers was the emigrant guy who 'failed' me
to get the position previously which the management wanted me to win
half a year ago. This time, his boss was the selection board chairman.
The emigrant guy asked me the questions which exactly followed the
'party's line' (that is, the boss's line) with zero millimeters
deviation. :-)

I saw the other three interviewees. I knew who the two of them were
(and I saw their CVs on the Internet). The third was an old guy whom I
did not know. All of the interviewees were external to our govt lab.
And I have a conviction that the management wanted an internal guy who
could be plugged into projects, and become productive straight away.
That is me.

And I have learnt a little more on how the management manages their
recruitment. The senior managers have no strict control on who comes on
the top of the merit list as the outcome of the interview. However, if
an "undesirable" come to the top of the list, the senior manager vetoes
the outcome of the interview. The management either cancels the
position (saying that "there is no need in these duties to be
performed"), or elect not to appoint anyone to the position (saying
that "nobody corresponded substantially to the selection criteria").
The latter happened in this interview. They threw a selection criterion
into the set of the selection criteria which _nobody_ could satisfy.
(The first selection criterion was that the "applicant should be an
accomplished experimental scientist in the discipline X"; the second
criterion was that the "applicant should be an accomplished computer
modeller in discipline X". It came out only at the interview that the
third selection criterion was the "knowledge in the discipline Y". It
is a fact of life that the practitioners of the field X generally have
no knowledge of the field Y because it is orthogonal to their
activities. What's more, the selection board chairman told me when the
position was just advertised that the third selection criterion was
about "knowledge in the field X, and nothing else". What an unexpected
turn of affairs. Actually, I am too experienced in interviews, and I
read the textbook on the field Y. So that I was able to talk at the
interview about the phenomenon in the field Y which they asked the
question about. Unfortunately, in the few days between I read the
textbook and the interview, I forgot some of the concepts and the
keywords. I was not completely sure what I was talking about, and
probably I did not score points for that.

Well, anyway, my employment finishes next week. And this is also about
the time when the outcome of the interview will be known. In our recent
conversation, the selection board chairman (who is also my boss) gave
me no indication whether I won the position (or whether they had to
withdraw it). I told him that I would spend the rest of my time
applying for other jobs. He told me that he had no right to give me
even a hint about the outcome of the interview. He also told me that I
should not read into anything what is happening, or what was said,
because this would not bring me to the correct conclusion on the
interview outcome. Anyhow, I have analyzed all the available
information, and cannot come to a conclusion. I hesitantly tend to
believe that the interview went the wrong way (for me), and its outcome
would possibly be cancelled by the management.

At the moment, I am too exhausted and distressed to do anything. I
barely walk. I've got a flu which has not improved over the past two
weeks -- I believe this is because my body is weakened because of the
stress I have been experiencing. Next week, I will start applying for
jobs in the local industry. My fallback plan is the other department in
our govt lab. The head of that department told me that they had too
much funded project work on their hands and not enough of staff, and he
would gladly employ me on casual basis until I get a permanent (or
other) job in this lab (or somewhere else). In fact, a year ago, when
my department collapsed, this departmental head and my current boss
competed between each other to get me into their respective projects;
my current boss won at that time because he had more power. Now the
other boss can finally get me, at least into a casual position.

..

BMJ

unread,
Sep 8, 2006, 10:26:49 AM9/8/06
to
minnesotti wrote:

<snip>

> I saw the other three interviewees. I knew who the two of them were
> (and I saw their CVs on the Internet). The third was an old guy whom I
> did not know. All of the interviewees were external to our govt lab.
> And I have a conviction that the management wanted an internal guy who
> could be plugged into projects, and become productive straight away.
> That is me.

It might be that the outsiders were brought in for the token
demonstration that the lab wasn't showing any favoritism towards
internal applicants.

Been there, suffered for it.

>
> And I have learnt a little more on how the management manages their
> recruitment. The senior managers have no strict control on who comes on
> the top of the merit list as the outcome of the interview.

Thus avoiding any hint of bias.

However, if
> an "undesirable" come to the top of the list, the senior manager vetoes
> the outcome of the interview. The management either cancels the
> position (saying that "there is no need in these duties to be
> performed"), or elect not to appoint anyone to the position (saying
> that "nobody corresponded substantially to the selection criteria").

Thus showing that the process actually is biased.

> The latter happened in this interview. They threw a selection criterion
> into the set of the selection criteria which _nobody_ could satisfy.
> (The first selection criterion was that the "applicant should be an
> accomplished experimental scientist in the discipline X"; the second
> criterion was that the "applicant should be an accomplished computer
> modeller in discipline X". It came out only at the interview that the
> third selection criterion was the "knowledge in the discipline Y". It
> is a fact of life that the practitioners of the field X generally have
> no knowledge of the field Y because it is orthogonal to their
> activities. What's more, the selection board chairman told me when the
> position was just advertised that the third selection criterion was
> about "knowledge in the field X, and nothing else". What an unexpected
> turn of affairs. Actually, I am too experienced in interviews, and I
> read the textbook on the field Y. So that I was able to talk at the
> interview about the phenomenon in the field Y which they asked the
> question about. Unfortunately, in the few days between I read the
> textbook and the interview, I forgot some of the concepts and the
> keywords. I was not completely sure what I was talking about, and
> probably I did not score points for that.

When an employer goofs around like that, it shows that the position in
question really wasn't important to begin with or that it never really
existed in the first place as it was neither approved nor funded.

Been there, suffered for it.

>
> Well, anyway, my employment finishes next week. And this is also about
> the time when the outcome of the interview will be known. In our recent
> conversation, the selection board chairman (who is also my boss) gave
> me no indication whether I won the position (or whether they had to
> withdraw it). I told him that I would spend the rest of my time
> applying for other jobs. He told me that he had no right to give me
> even a hint about the outcome of the interview.

Nor should he. To do so would have been unethical.

He also told me that I
> should not read into anything what is happening, or what was said,
> because this would not bring me to the correct conclusion on the
> interview outcome.

In other words, forget about it.

Anyhow, I have analyzed all the available
> information, and cannot come to a conclusion.

Even if you did, and it was in your favour, it might be wrong.

Been there, suffered for it.

I hesitantly tend to
> believe that the interview went the wrong way (for me), and its outcome
> would possibly be cancelled by the management.

I've learned a long time ago that one should always prepare for the
worst when it comes to interviews. A favourable decision should only be
seen as a bonus.

>
> At the moment, I am too exhausted and distressed to do anything. I
> barely walk. I've got a flu which has not improved over the past two
> weeks -- I believe this is because my body is weakened because of the
> stress I have been experiencing.

That's hardly surprising. When I saw that a job was coming to an end,
with nothing else in sight, I slept and ate poorly. The worst part was
waiting for the misery to be over.

Next week, I will start applying for
> jobs in the local industry. My fallback plan is the other department in
> our govt lab. The head of that department told me that they had too
> much funded project work on their hands and not enough of staff, and he
> would gladly employ me on casual basis until I get a permanent (or
> other) job in this lab (or somewhere else). In fact, a year ago, when
> my department collapsed, this departmental head and my current boss
> competed between each other to get me into their respective projects;
> my current boss won at that time because he had more power. Now the
> other boss can finally get me, at least into a casual position.

Good luck.

>
> ..
>

minnesotti

unread,
Sep 9, 2006, 10:28:36 AM9/9/06
to

BMJ wrote:

> minnesotti wrote:
>
> > He told me that he had no right to give me
> > even a hint about the outcome of the interview.
>
> Nor should he. To do so would have been unethical.

I do not agree with you. The interviewer can tell about his opinion
about the interview at any time during the process and to whomever he
pleases. He does not do it simply because this will make his life
uncomfortable, and ot because it is unethical.


> > At the moment, I am too exhausted and distressed to do anything. I
> > barely walk. I've got a flu which has not improved over the past two
> > weeks -- I believe this is because my body is weakened because of the
> > stress I have been experiencing.
>
> That's hardly surprising. When I saw that a job was coming to an end,
> with nothing else in sight, I slept and ate poorly. The worst part was
> waiting for the misery to be over.

I think that my lab would employ me on a casual basis for a time being
(they have no right to renew my current contract). Thus, I will most
likely be able to afford to pay the bills.

However, the realisation of the following fact made me physically
feeble. I invested one year of my time for this postdoc-like work
completing the research project for my boss and proving that I am a
capable and reliable worker. I published papers. The management praised
me for the quality of work. My contract comes to an end, and I still do
not have a permanent position on my hands which they were talking about
for the past year. They twice interviewed me for the positions which
they said they created for me... but I still have nothing on my hands.
Now I would have to re-align myself, and find another manager who would
be interested in me working for him. I would spend another year or so
working on his project and proving my worth. This would allow them to
create a project and the employment position for me in it. But I am now
in a less stable employment position, and I am already exhausted. I
lost the belief that the hard and competent work will get me a good
position in here or everywhere else for that matter. This reinforces me
even more in thinking that good (i.e. reasonable) jobs are given people
because of the personal connections.

..

BMJ

unread,
Sep 9, 2006, 11:09:54 AM9/9/06
to
minnesotti wrote:
> BMJ wrote:
>
>>minnesotti wrote:
>>
>>
>>>He told me that he had no right to give me
>>>even a hint about the outcome of the interview.
>>
>>Nor should he. To do so would have been unethical.
>
>
> I do not agree with you. The interviewer can tell about his opinion
> about the interview at any time during the process and to whomever he
> pleases. He does not do it simply because this will make his life
> uncomfortable, and ot because it is unethical.

It hints of bias or favoritism, which can be construed as unethical.

>
>
>
>>>At the moment, I am too exhausted and distressed to do anything. I
>>>barely walk. I've got a flu which has not improved over the past two
>>>weeks -- I believe this is because my body is weakened because of the
>>>stress I have been experiencing.
>>
>>That's hardly surprising. When I saw that a job was coming to an end,
>>with nothing else in sight, I slept and ate poorly. The worst part was
>>waiting for the misery to be over.
>
>
> I think that my lab would employ me on a casual basis for a time being
> (they have no right to renew my current contract). Thus, I will most
> likely be able to afford to pay the bills.

Do you have that in writing? If not, all you have is vapourware.

>
> However, the realisation of the following fact made me physically
> feeble. I invested one year of my time for this postdoc-like work
> completing the research project for my boss and proving that I am a
> capable and reliable worker. I published papers. The management praised
> me for the quality of work. My contract comes to an end, and I still do
> not have a permanent position on my hands which they were talking about
> for the past year. They twice interviewed me for the positions which
> they said they created for me... but I still have nothing on my hands.
> Now I would have to re-align myself, and find another manager who would
> be interested in me working for him. I would spend another year or so
> working on his project and proving my worth. This would allow them to
> create a project and the employment position for me in it. But I am now
> in a less stable employment position, and I am already exhausted. I
> lost the belief that the hard and competent work will get me a good
> position in here or everywhere else for that matter. This reinforces me
> even more in thinking that good (i.e. reasonable) jobs are given people
> because of the personal connections.

I thought the same way when I was younger. I did work hard and long in
order to prove myself in hopes of gaining permanent status with a given
employer, only to find myself either remaining on probation or being
tossed out like so much rubbish.

Eventually, I caught on that in order to maintain my sanity while still
showing myself as being a capable and suitable employ, I should simply
work to rule. Do only what's expected of me, but little else. The rate
of return on expending great amounts of energy and time wasn't worth
more than that.

>
> ..
>

minnesotti

unread,
Sep 13, 2006, 6:22:08 AM9/13/06
to

Well, today I got the news that the permanent position which the
management "created" for me, was offered to somebody else (I heard the
guy was much stronger than me). My application was unsuccessful. The
manager offered his condolescences, and said that he could not do
anything for me. I have about one more week left in my contract.

I think this time I will not be left without income. I will move to the
burgeuoning industry nearby.

I feel upset because the management told me one year ago: "Work for us,
and meanwhile we will get you a permanent job". I completed the project
for them... and they kept on postponing advertising the position, than
readvertised the position again... and then I failed to win at the
interview. Now I have several days left in my employment (which is
non-renewable), and after delivering the news the manager did not tell
me something like: "No worries, you did not win this time, but we will
come up with other position soon". I feel I got shafted. If I knew that
they were going to shaft me, I would spend this year working for
another manager and building up the case for permanent position with
him. There had been two bosses who wanted me... I chose this one and
this was a mistake.

Today I had a conversation with the head of another department... he
said he had funds to hire me on a casual basis for at least several
months. I now have doubts whether hanging around this place makes
sense: It is possible that failing me in to get a job was the manager's
way of saying to me that they were not interested to have me around.

..

Straydog

unread,
Sep 13, 2006, 6:46:02 AM9/13/06
to

I seem to recall having suggested many times that you pursue, or attempt
to pursue, other paths that might be more promising. Good luck, but I'm
sorry for your outcome. I would say that you waited too long. Next time
maybe you should ask if you are getting some recognition and appreciation
sooner for having you around instead of waiting years.

minnesotti

unread,
Sep 13, 2006, 8:25:11 AM9/13/06
to

Straydog wrote:

> I seem to recall having suggested many times that you pursue, or attempt
> to pursue, other paths that might be more promising. Good luck, but I'm
> sorry for your outcome. I would say that you waited too long. Next time
> maybe you should ask if you are getting some recognition and appreciation
> sooner for having you around instead of waiting years.

You have been quite right in your suggestion.

But, also: you cannot start the next stage of your life without first
living the previous stage of your life to its end.

Actually, I got quite rusty at my workplace in the past few years: I
largely had nothing to do. Now, this consultancy thing will give me the
intellectual stimulation and the tatse of earning good bucks.

Oh, blast. I have given the thought of being a consultant, and I
realised that nobody is going to offer me a consulting contract (yet
!).

We will see.

But this also mean that I will have trouble sleeping the coming night.

..

Straydog

unread,
Sep 13, 2006, 8:37:13 AM9/13/06
to

On Wed, 13 Sep 2006, minnesotti wrote:

>
> Straydog wrote:
>
>> I seem to recall having suggested many times that you pursue, or attempt
>> to pursue, other paths that might be more promising. Good luck, but I'm
>> sorry for your outcome. I would say that you waited too long. Next time
>> maybe you should ask if you are getting some recognition and appreciation
>> sooner for having you around instead of waiting years.
>
> You have been quite right in your suggestion.
>
> But, also: you cannot start the next stage of your life without first
> living the previous stage of your life to its end.

In case you forgot, I have lived many stages in my life. I have had days
in which I slayed the dragon and I have had days in which, when I met the
dragon I decided the best thing to do is run like hell, and still I can
remember the burns on my ass from the dragon's flame from the mouth.

> Actually, I got quite rusty at my workplace in the past few years: I
> largely had nothing to do. Now, this consultancy thing will give me the
> intellectual stimulation and the tatse of earning good bucks.
>
> Oh, blast. I have given the thought of being a consultant, and I
> realised that nobody is going to offer me a consulting contract (yet
> !).

I hope it is possible, in the various fishing ponds, some of which have
fish, some of which do not have fish, and some of which the fish all swim
to the new fisherman who just came and the old fisherman who has fished
for years with no luck, that one old fisherman, you, will find some
fishing pond where the fish are more friendly.

> We will see.
>
> But this also mean that I will have trouble sleeping the coming night.

I hope you understand that a lot of other people also experience this
phenomenon. Or, would you rather be living in Baghdad or the border
between Israel and Palestine?

> ..
>
>

BMJ

unread,
Sep 13, 2006, 9:00:07 AM9/13/06
to
minnesotti wrote:
> Well, today I got the news that the permanent position which the
> management "created" for me, was offered to somebody else (I heard the
> guy was much stronger than me). My application was unsuccessful. The
> manager offered his condolescences, and said that he could not do
> anything for me. I have about one more week left in my contract.
>
> I think this time I will not be left without income. I will move to the
> burgeuoning industry nearby.
>
> I feel upset because the management told me one year ago: "Work for us,
> and meanwhile we will get you a permanent job".

I've learned that unless it's in writing, I shouldn't take anybody's
word for anything.

I completed the project
> for them... and they kept on postponing advertising the position, than
> readvertised the position again... and then I failed to win at the
> interview.

Twenty years ago, I worked for a contractor. As my term was coming to
an end, and I made inquiries about what was going to happen, the company
became increasing vague and evasive. Nobody wanted to call a spade a
spade and say that my contract wasn't going to be renewed.

Now I have several days left in my employment (which is
> non-renewable), and after delivering the news the manager did not tell
> me something like: "No worries, you did not win this time, but we will
> come up with other position soon". I feel I got shafted.

You were.

If I knew that
> they were going to shaft me, I would spend this year working for
> another manager and building up the case for permanent position with
> him. There had been two bosses who wanted me... I chose this one and
> this was a mistake.

Would the other one have been a better choice? I've often found myself
wondering what I might have done differently in certain situations and,
often, I had to choose between two lousy alternatives, selecting the one
that seemed less damaging.

>
> Today I had a conversation with the head of another department... he
> said he had funds to hire me on a casual basis for at least several
> months. I now have doubts whether hanging around this place makes
> sense: It is possible that failing me in to get a job was the manager's
> way of saying to me that they were not interested to have me around.

Don't bet the farm on this. Start looking for something else ASAP. If
this chap actually does have something worth considering, and you had
found something else in between time, you can always say no to the latter.

>
> ..
>

minnesotti

unread,
Sep 15, 2006, 7:56:56 AM9/15/06
to

Straydog wrote:
> Or, would you rather be living in Baghdad or the border
> between Israel and Palestine?

I used my brain and I managed to come to the quiet Western country far
away from the "border between Israel and Palestine".

Anyway, I recently realised what happened to "my" job. The culprit is
my immediate boss.

A year ago, he asked me if I wanted to do computer modelling in his
project. Subsequently, I was supposed to take the vacant slot of the
numerical modeller in his department. I agreed (I had no other choice).

It looks like later my boss realised that I was no good in computer
modelling. He wanted to get someone who was a good computer modeller.
Thus, he wanted to dump me if nobody better would turn up. Fine. But I
have a problem with understanding why he did not tell me honestly:
"Listen, here is a position coming up. It looks like it is for you, but
you will probably not get it because I want someone better in
modelling. The position will be yours if nobody better turns up. You
may want to start looking for a job".

Instead, my boss did not want to go for a confrontation. He prasied the
results which I got, and never criticized my work. He behaved like a
coward. He just waited until my contract comes to an end. After that I
would automatically fall off the perch. He needed to do nothing to get
rid of me.

My boss went away for the holidays straight after the interview. The
results came up few days after the interview. The position was offered
to somebody else who accepted it (the guy was a much more accomplished
numerical modeller than I was). Now I know that it will be useless for
me to approach my boss upon his return and ask if there would be an
opportunity for another employment. That's bad. However, what's good is
that I now know that the senior managers had nothing against me.
Actually, they quite liked my work and praised the results I got and
papers I wrote. It would be al'right for them if I got the permanent
position in their organisation. However, it was not al'right for my
immediate boss because he was the one charged with the responsibility
to deliver the results. He wanted a numerical modeller better than me.
And his management went with him, because it was him (my boss) who was
responsible to the senior management for the completion of the
projects. That's OK. I now feel free to pitch my services to another
supervisor.

Now, you may point out that I was treated badly at this place, and you
recommended me many times to leave it and find something better. I was
always reluctant to do this. And here is the explanation. My indirect
manager's pointed out to me several times (in the beginning of my work
in here) that I have to spend at least 3 or 4 years working on the same
project. Thus, I will become the expert in the area. My expertise will
be sought by the companies. And this is what I want. This means
security of my employment.

So far, I was never able to work for longer than 1 or 2 years in any
area of science. Thus, I have experience of working in several
unrelated areas, and I am a kind of senior scientist, however I am not
too good in any particular area. This is why my services are not needed
by any other potential employer. This is why I cannot find other
employment... Indeed, why the employer should employ me while he can
hire someone younger and "cheaper" than me with few years of the
relevant experience ? This was why my plan was to stick with this
outfit for at least 3 years to gain experience in one area... but it
turns out that I got shafted after 1 year of working in this area. Who
needs me now ?

..

BMJ

unread,
Sep 15, 2006, 10:37:42 AM9/15/06
to
minnesotti wrote:

<snip>

> It looks like later my boss realised that I was no good in computer
> modelling. He wanted to get someone who was a good computer modeller.
> Thus, he wanted to dump me if nobody better would turn up. Fine. But I
> have a problem with understanding why he did not tell me honestly:
> "Listen, here is a position coming up. It looks like it is for you, but
> you will probably not get it because I want someone better in
> modelling. The position will be yours if nobody better turns up. You
> may want to start looking for a job".

Either he was desperate for someone to fill the position or he was
looking for cheap expendible labour.

>
> Instead, my boss did not want to go for a confrontation. He prasied the
> results which I got, and never criticized my work. He behaved like a
> coward. He just waited until my contract comes to an end. After that I
> would automatically fall off the perch. He needed to do nothing to get
> rid of me.

It's called CYA. By not butting heads with you, he'll be seen as being
cute and lovable should there ever be a complaint or lawsuit filed
against him. Keeping you around until the end of your contract and then
not renewing it lets him off the hook and could disguise the real reason
why he wanted to be rid of you.

Been there, suffered for it.

>

> My boss went away for the holidays straight after the interview. The
> results came up few days after the interview. The position was offered
> to somebody else who accepted it (the guy was a much more accomplished
> numerical modeller than I was). Now I know that it will be useless for
> me to approach my boss upon his return and ask if there would be an
> opportunity for another employment. That's bad.

Bad for you, good for him. By going on vacation, he avoids having to
deal with any issues until it's too late to do anything about it.

He had you over a barrel.

However, what's good is
> that I now know that the senior managers had nothing against me.
> Actually, they quite liked my work and praised the results I got and
> papers I wrote.

Would any of them be willing to act as references?

It would be al'right for them if I got the permanent
> position in their organisation. However, it was not al'right for my
> immediate boss because he was the one charged with the responsibility
> to deliver the results. He wanted a numerical modeller better than me.
> And his management went with him, because it was him (my boss) who was
> responsible to the senior management for the completion of the
> projects. That's OK. I now feel free to pitch my services to another
> supervisor.
>
> Now, you may point out that I was treated badly at this place, and you
> recommended me many times to leave it and find something better. I was
> always reluctant to do this. And here is the explanation. My indirect
> manager's pointed out to me several times (in the beginning of my work
> in here) that I have to spend at least 3 or 4 years working on the same
> project. Thus, I will become the expert in the area. My expertise will
> be sought by the companies. And this is what I want. This means
> security of my employment.

Security of employment is relative, as has been pointed out by various
people on this newsgroup.

>
> So far, I was never able to work for longer than 1 or 2 years in any
> area of science. Thus, I have experience of working in several
> unrelated areas, and I am a kind of senior scientist, however I am not
> too good in any particular area. This is why my services are not needed
> by any other potential employer. This is why I cannot find other
> employment... Indeed, why the employer should employ me while he can
> hire someone younger and "cheaper" than me with few years of the
> relevant experience ? This was why my plan was to stick with this
> outfit for at least 3 years to gain experience in one area... but it
> turns out that I got shafted after 1 year of working in this area. Who
> needs me now ?

Unfortunately, you're finding out how the real world functions. My
engineering career's been the same way. I had a several employers over
the years and left most of them because of layoffs or contracts not
being renewed. Unfortunately, that's been used against me in interviews.

That's one reason I have my Plan B. I don't have to put up with that
nonsense any more.

>
> ..
>

Straydog

unread,
Sep 15, 2006, 1:11:05 PM9/15/06
to

On Fri, 15 Sep 2006, minnesotti wrote:

>
> Straydog wrote:
>> Or, would you rather be living in Baghdad or the border
>> between Israel and Palestine?
>
> I used my brain and I managed to come to the quiet Western country far
> away from the "border between Israel and Palestine".
>
> Anyway, I recently realised what happened to "my" job. The culprit is
> my immediate boss.
>
> A year ago, he asked me if I wanted to do computer modelling in his
> project. Subsequently, I was supposed to take the vacant slot of the
> numerical modeller in his department. I agreed (I had no other choice).
>
> It looks like later my boss realised that I was no good in computer
> modelling. He wanted to get someone who was a good computer modeller.
> Thus, he wanted to dump me if nobody better would turn up. Fine. But I
> have a problem with understanding why he did not tell me honestly:
> "Listen, here is a position coming up. It looks like it is for you, but
> you will probably not get it because I want someone better in
> modelling. The position will be yours if nobody better turns up. You
> may want to start looking for a job".

He can't tell you that much before they make an annoucement and have
interviews. But, it is possible that they would not get someone better,
and then they might keep you (temporary).

> Instead, my boss did not want to go for a confrontation. He prasied the
> results which I got, and never criticized my work. He behaved like a
> coward. He just waited until my contract comes to an end. After that I
> would automatically fall off the perch. He needed to do nothing to get
> rid of me.
>
> My boss went away for the holidays straight after the interview. The
> results came up few days after the interview. The position was offered
> to somebody else who accepted it (the guy was a much more accomplished
> numerical modeller than I was). Now I know that it will be useless for
> me to approach my boss upon his return and ask if there would be an
> opportunity for another employment. That's bad. However, what's good is
> that I now know that the senior managers had nothing against me.
> Actually, they quite liked my work and praised the results I got and
> papers I wrote. It would be al'right for them if I got the permanent
> position in their organisation.

Those are the guys you should be asking for further possibilities if they
exist.

However, it was not al'right for my
> immediate boss because he was the one charged with the responsibility
> to deliver the results. He wanted a numerical modeller better than me.
> And his management went with him, because it was him (my boss) who was
> responsible to the senior management for the completion of the
> projects. That's OK. I now feel free to pitch my services to another
> supervisor.
>
> Now, you may point out that I was treated badly at this place, and you
> recommended me many times to leave it and find something better. I was
> always reluctant to do this. And here is the explanation. My indirect
> manager's pointed out to me several times (in the beginning of my work
> in here) that I have to spend at least 3 or 4 years working on the same
> project. Thus, I will become the expert in the area. My expertise will
> be sought by the companies. And this is what I want. This means
> security of my employment.

The only security of your employment will be if you move from temporary to
"permanent" (which may not be very permanent if they do a rif or
redundancy).

> So far, I was never able to work for longer than 1 or 2 years in any
> area of science.

I spent some 7-8-9 years looking at grant proposals for NIH through their
SBIR program and I can tell you I saw hundreds of proposals from small
businesses and the CVs all showed guys who had mostly 1-2 years at each
prior institution and very rarely 3 or more.

Thus, I have experience of working in several
> unrelated areas, and I am a kind of senior scientist, however I am not
> too good in any particular area. This is why my services are not needed
> by any other potential employer. This is why I cannot find other
> employment... Indeed, why the employer should employ me while he can
> hire someone younger and "cheaper" than me with few years of the
> relevant experience ? This was why my plan was to stick with this
> outfit for at least 3 years to gain experience in one area... but it
> turns out that I got shafted after 1 year of working in this area. Who
> needs me now ?

You will have to ask around there, plus start making applications to other
places (you did say, didn't you, that your term of employment was to come
to an end soon, no?)

> ..
>
>

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