Listen now (14 mins) | Or does the "intensity" of labour competition from globalisation determine interest rates?
If the RMB is strong and China is Pro labor, and real chinese wages go up. Then wouldn't it trigger a commodity supercycle? It would also trigger a massive consumption boom because half the country still has low incomes. Would not it also force chinese corporates upgrade themselves in the value chain? because if they cannot compete internationally in a strong RMB environment they would have huge layoffs and massive unemployment.
Would you assume from this, that wages and labour supply conditions could be manipulated to effect interest rates / currency?
As with quantitative peopling in Australia.
I'd like to pushback a little on your article. I agree that the worst of the deflationary spiral due to global wage competition is behind us BUT doesn't necessarily mean a reversion is on the cards. I really can't see anywhere signs of political movements focused on a labour revolution. It's true that more inflationary policies have been proposed recently (direct cheques in lockdown) but politicians have already started to move in the opposite direction especially in the US. Also GDP per capita probably not the best metric to measure impact of labour dynamics given it's an average rather than a true measure of the income generated by those affected by globalisation. Labour is an important part in the inflation/deflation debate but not the only one. Negative impact of demographics and technology is still there. Long story short, labour no longer source of deflation but don't think turning point is round the corner.
Y3000 an hour was pretty much the going rate in Tokyo in 1982.
Very insightful. Tks Russell.