Council of Councils
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Introduction
Over the last several decades, governments have collectively pledged to slow global warming. But despite intensified diplomacy, the world is already facing the consequences of climate…
Quick summary of the weekend papers
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Delphi wants to make parts in overseas (in China, I would presume) and big wage cuts from those who still work in the US:
Not only is the company seeking to cut two-thirds of its 34,000 hourly workers in the United States, it wants to cut wages to as little as $10 an hour from as much as $30. ... Delphi is also seeking major cuts in the health care and pension benefits of retirees, though under the terms of the spinoff of Delphi, G.M. would have to assume much of those costs, setting up a further quandary because simply dumping troubles on G.M., its largest customer, is not necessarily palatable to Delphi or the union. ... Delphi plans as well to do more of what it has been doing since its spin-off, by continuing to shift thousands of jobs overseas.
Former autoworkers may find it a bit harder to shift into real-estate related jobs in the future though.
These stories all highlight the forces driving the current international economy, in one way or another. Paul Blustein ends his article on Korea's reserves by nicely summarizing the debate on whether it all can last ...
Blustein's choice of Korea as the illustrative high-saving Asian economy struck me as a bit strange. Korea has let its currency move more than most in Asia, and it has not been adding to its reserves since the first quarter, unlike some. There is a reason why (some) Koreans are starting to complain about Chinese competition ... Maybe Blustein's next article will delve into where Saudi Arabia and Russia are stashing all their cash.
No more from me. I am trying to rediscover the joys of brevity ...
UPDATE: Do read Steve Roach this morning; he has traveled the globe, and discovered it is not so flat. Or rather, he has noticed that the only thing that is really flat is the median real wage in the US ...
"My travels tell me that the theory isn't working as advertised. Globalization may well be win-win in the long run, but in the here and now it is profoundly asymmetrical. It has given rise to a multitude of new entrants on the supply side of the global equation but very few new consumers on the demand side. With the important exception of India, Asia remains very much an external demand story -- aiming its rapidly growing production platform at providing stuff for the overly-indulgent American consumer. .... But the asymmetries of globalization have an equally profound effect on the other side of the ledger -- on workers in the rich, developed world. Over the past five years, industrial world labor markets have suffered from both jobless and now wageless recoveries. The US, with the world's most flexible labor market, has been on the leading edge of these trends. While hiring has picked up over the past 24 months, the private sector job count remains more than 10.5 million workers below the profile that would have been generated by a more typical hiring cycle. Moreover, the inflation-adjusted hourly pay rate is virtually unchanged over the 46 months of this recovery -- underscoring the rare confluence of surging productivity growth and stagnant real wages."
Roach is more pessimistic than most, but some other Wall Street houses are also getting worried about the absence of hourly wage growth in the US, in part because the "don't worry about wages, housing prices are going up" story looks to be on its last legs.
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