Damning proof there will be no economic crash.

http://www.iht.com/articles/2006/03/26/business/fed.php

(snip)

That caution is now ingrained. Starting with Paul Volcker in the late 1970s, new Fed chairmen have come into office determined to establish their credibility as inflation fighters. But today, there are few signs that Fed officials are acutely worried about an outburst of inflation.

(snip)

But the biggest change since 1987, when Greenspan took over as chairman, is the increasingly global supply of labor and merchandise. This supply helps to alleviate shortages in the United States, and in doing so dampens inflation.

Fed officials recognize the shift. "The growing capacity of foreign countries to supply goods and services to the U.S. market has impacted the structure of wages and the bargaining power of workers," Janet Yellen, president of the Federal Reserve Bank of San Francisco, said in a recent speech.

(snip)

Fischer openly contests the view that a low U.S. jobless rate risks, by itself, pushing up wages and then prices - not when there are so many people in low-wage countries to help supply the United States with inexpensive goods and services. But he acknowledges that his perspective is still controversial.

(snip)

What Greenspan saw primarily as increased productivity was, in Fischer's view, at least in part the rising supply of labor and services from other countries. For now, though, the Fed is likely to continue on its present course, lifting rates once or twice more and then pausing.


Well, More labor around the world. The US doesn't need to help the world with H1Bs and all that anymore. It's time to help our own country; yours and mine. And I'll do what I can. Just, as the old saying says, show us where the money is and we're there.

Edited: Typo

you cannot pay with a debt.

Oh, they'll find ways... and beg forgiveness at one point.

I have heard the analysis that the global supply of labor and products eliminated the threat of inflation, but that analysis was developed during the high employment era of the late Clinton administration. The concern was that with very, very low unemployment and a thriving economy, there would be pressure towards inflation. In other words, inflation occurs when, according to the cliche, there is too much money chasing too few goods. People with money would bid up the price of goods, leading to inflation. Greenspan reasoned, correctly, that with a global economy and global supply of goods, there would never be shortages of goods (the Chinese could supply the goods) and therefore there was no risk of inflation. That's why the Clinton administration was not afraid to pursue a "full employment" policy. Jeez, I remember when times were so good, that corporate employers were recruiting in New York's inner city, and when they still needed more workers, the NY Times reported, they were recruiting workers from prisons and mental institutions!

The inflation risk we face today is altogether different. It is that with our massive federal deficits and trade deficits, we are basically exporting nothing but dollars and treasury bills. If the foreign purchasers of dollars and tbills become worried about our ability to repay those debts, they may sell dollars and invest instead in Euros, Yen and Yuan. The value of the dollar compared to other currencies would decline causing prices of good purchased from overseas sources to rise in comparison. That would set off inflation within the US.

Note well, that globalization was the reason inflation would not occur during the Clinton era, but globalization would the be source that inflation would occur under the debt ridden Bush era.