I find this an incredible statement. You are basically saying that the US would be better off if they reduced their productivity; that the auto industry should shut down its production lines and build each car by hand thus employing many more workers. The problem with that is that those same workers could not then afford to buy a car.

I was a partner in a small company some years ago (early '80s) that built specialty mini-robots for microchip manufacturing. At that time, only very expensive specialty hybrid chips were assembled, wired, and packaged in the US; virtually all the commodity chips (even CPUs) were wire bonded and packaged in East Asia. (Wire bonding is making the connections between the silicon chip and its package terminals with very fine gold or aluminum wires.) The trade off was simple; to make the packaged chips affordable in the final product, the labor of bonding the chip to its frame and the chip pads to the frame terminals had to cost less than $2.50/hour or the chips were packaged at home.

Virtually all hard drives are manufactured in Singapore so they can be sold for $150 in the US. If this weren't so, you wouldn't be able to afford to buy a computer.

No need to go to that extreme. Henry Ford didn't when he doubled worker pay. He ended up creating the Middle Class!
This is exactly what's wrong with the typical business mindset: We can't pay labor a fair wage or we'll go out of business! The problem is that when all the large companies don't pay a fair wage, eventually everyone goes out of business because the companies have all the money and they're not paying anyone! It's anti-free trade (can't have trade without a fair exchange) and it's a recipe for revolution.

The way to fight inflation is to increase interest rates and restrict the money supply. The way to fight a recession is to decrease interest rates and expand the supply of money. By next year we may find ourselves in a position of bouncing back and forth between the two policies. That what's Soros was talking about in the OP when he said:

Today's monetary stimulus (printing money through increased debt and deficit spending) is tomorrow's core inflation, which calls for exactly the opposite action. A yo-yo effect with potentially disastrous consequences for a failure to accurately identify where the yo-yo is in the cycle.

It is exactly to the point. Yes, 18 percent interest rates are not out of the question if we fail to act at the proper instant to reign in spending and debt.

True, but your implication seemed to be that this is a problem created by the current administration. It isn't. Actually, I don't even blame the previous one (much) for it. I think the real culprit is Big Business, which wants to sell high ($150 for a hard drive) and pay low ($2.50 per hour) that likes to cause the government to deficit spend for the same reason it likes to get people hooked on easy financing: easy short term profits at the expense of everyone but Big Business.

The point was kinda like we've been in trouble before where everything seemed lost and out of control. But, here we are. As a couple of the OPs were saying.... the one thing we have learned is the market is not necessarily self correcting. We need to rethink that one for sure.

Obama inherited this mess, and I find some solace in the fact that the gentleman who helped guide Carter out of the mess in the 80s is Obama's primary economic advisor. What we could not survive over the next year or two would be somebody who thinks the spending spree can go on forever and we'll just grow our way out of it. Obama and crew know better.... there's a big price to be paid and it is just around the corner.

Mastering the short-term AND long-term
 

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Interesting observation, AEH. I don’t pretend to understand macroeconomics, let alone the cause of the current crisis or the solutions it requires. However, let me quote one of the most sober voices and accurate economic thinkers of the last few months, Mr George Soros, and what he says in the discussion summarised in the article:

(my emphasis)
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Aw, shucks. You’ve made the exact same quote and point. I should have read each of the last few posts. :o

Economists are like Norwegians .... they all sound alike.:)

I think the real question is, why is this crisis different? I think that the answer is a combination of dwindling resources and a blind faith in Corporate good will that we didn't used to have. Just give them the money, and all will be well! That faith amazes me, because the people who have it are the first to tell you that corporations are only responsible to their stockholders!

It might be wiser to discuss interest rates and such in regards to Federal Chairmen, after all, they are the ones to set the rates as Paul Volcker did during the Carter administration. Carter didn't like this but ooh well...what could he do. Alan Greenspan did the same thing to G.H W Bush again to his dislike. In fact G.H. W Bush blamed Greenspan for his lost of the election to Bill Clinton.

And that they did. 90% of manufacturing a chip is in the fab and probe. 10% is cost in the packaging and that includes all the gold wires.

I haven't learned this lesson. The lesson I learned is that we will not let the market self correct! which is very different.

Volcker was who I was referring to as a key advisor to Obama and the guy I am pinning my hopes on to help the administration do what is necessary to keep the ship upright. Agree the Fed Chairmen plays the key roll in setting interest rates, but the President can do much damage with fiscal policy, such as deficit spending, absent some sound advise not to do so.

Point taken.

I see this as the unofficial death of the Middle Class:
http://money.cnn.com/2009/05/29/auto...ex.htm?cnn=yes
People aren't spending money, so we're trying to solve the problem by taking their money away from them. :eek:

Yeah, that'll work. :rolleyes:

Actually I think $28k a year with full benefits IS very much middle class for entry level workers throughout mid-America. Sure, on the left and right coast that's near poverty. Not so around here. And again, that's entry level in a non-core (whatever that means) position so I am assuming the average worker will be doing much better than that.

That $28k is more than the entry level school teacher with a 4 year degree gets in my state.

Wonder how that compares with Asian auto workers?

It was the auto industry (well, Ford) that started raising people's wages, kick starting the middle class, and now it appears to be the auto industry driving them down. This doesn't end with the UAW. Next will be other average workers, including teachers.

Here in Canada, the government contribution to GM's survival amounts to $1.2M per worker for heavily unionized closed shop jobs. Doesn't sit to well with lobster fishermen who are getting something less than $3 a pound this season or a lot of other folks whose industries could use a boost.

I think it's fascinating how so many people who've made tens of millions of dollars per year and failed miserably at their jobs have managed to pit people making tens of thousands per year against other people who make tens of thousands per year.

It's fascinating but it's probably part of the divide and conquer strategy. While we are bickering at each other, they are raking in the dough.

Who do your suppose was actually paying for the six figure income/benefit packages to hourly workers at GM, Ford & Chrysler?

CEOs.

By reducing wages, they expect to be able to increase their wealth by merely keeping their own incomes from falling. So far, it's working well for them.

Well wait until the Wal Mart of the Auto industry takes holds and then wages want even be enough to cover their health insurance. :D