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Reply #20: Or increase profit margins (or wages). [View All]

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Home » Discuss » Archives » General Discussion (1/22-2007 thru 12/14/2010) Donate to DU
Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Aug-19-10 10:45 AM
Response to Reply #14
20. Or increase profit margins (or wages).
Americans had access to an unbelievable (and utterly unsustainable) amount of consumer credit.

This means that employers were able to keep wages stagnant and demand still rose. Consumer just tapped more and more and more and more credit. Thus there was no need to either lower prices (to stimulate demand), or raise wages (due to competition in scarce labor market).

Nope the profits just flowed to shareholders & owners.

Sadly "easy credit" helped to continue the cycle of stagnant wages. Now that credit bubble has burst and consumers are deleveraging it is entirely possible productivity gains will result in supply exceeding demand and has the potential for crippling deflation.

Consumers should NEVER have had access to the level of credit they did. It utterly unbalanced the global economic system. Sadly we will be paying the price for that for years (if not decades).
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