Krugman Column: Europe's Austerity Madness

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Friday September 28, 2012 · 10:41 AM PDT

2012/09/28 · 10:41

This will be a brief diary, because I've only got half an hour before my lunch break ends. However, I had to share this neat Krugman column on the European austerity frenzy.

Consider Spain’s woes. What is the real economic problem? Basically, Spain is suffering the hangover from a huge housing bubble, which caused both an economic boom and a period of inflation that left Spanish industry uncompetitive with the rest of Europe. When the bubble burst, Spain was left with the difficult problem of regaining competitiveness, a painful process that will take years. Unless Spain leaves the euro — a step nobody wants to take — it is condemned to years of high unemployment.

Short version: they suffered from a housing bubble, much like those fostered by one percenters here and in Canada (Real estate is an investment! Take out home equity loans! The good times will always be here! Credit is your friend!). The bubble burst. The credit left. However, unlike states throughout the country that could rely on federal dollars due to being part of the US, Spain didn't have that option. They had the shared currency, but not the shared safety net (ironically) of a shared central government. The inevitable result? An economic contraction, which was also experienced by other smaller countries (e.g., Greece and Portugal).
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The Two-Tiered Model comes to Canada: Lower Wages for Autoworkers!

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Tuesday September 25, 2012 · 5:37 AM PDT

2012/09/25 · 05:37

This started out as a rant to my wife last night and turned into a Facebook post this morning, so I figured it would be better to preserve it for later review as a diary.

From The Globe and Mail.

"Two-tier wage deals like those inked recently by Ford Motor Co. and General Motors Co. are spreading across the U.S. border into Canada’s labour landscape – again – as companies struggle to compete with lower-cost global rivals.
The Canadian Auto Workers union agreed to deals last week with Ford and GM that will see new hires start at a lower rate – $20 an hour rather than $24 currently – and reach the top salary scale of $34 an hour after 10 years, rather than six years for existing workers.

The CAW fought off an unpopular provision in place at Ford and GM’s U.S. plants that keeps new hires permanently at a lower wage level with a pay scale that never achieves parity with existing workers. But the union did agree to a wage freeze and bonuses instead of a cost of living allowance, reflecting in part how unions are on the defensive amid a sluggish economy, and the battering Canada’s manufacturing sector has taken because of globalization and the rise in the value of the Canadian dollar."

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Where is the bottom, or at what point do we become "competitive"?

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It's still far away

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There is no bottom

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My conversation with a 19-year old conservative

progressivist

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Sunday September 23, 2012 · 10:47 AM PDT

2012/09/23 · 10:47

I had the chance to do a bit of talking with a coworker of mine this morning, and felt like sharing, as I've always been inspired by the various diaries on this topic over the last eight years or so of reading DK.

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