The Great Divergence

[Jester]

Real-estate tends to be prone to malinvestment. According to David Wheelock (St. Louis Fed) the same reckless bubble in real-estate precipitated the crash in 1929.

I'm glad my policy is always to check, because once again, that article doesn't say what you claim it says. The article examines the effects of a housing bailout program. The only thing it says about housing prices and the cause of the Great Depression is:

Some authors contend that the decline in housing investment in 1928-29 contributed to the onset of the Great Depression, though that view is not widely held today.

That would be coming pretty close to the opposite of your point, although strictly the author is only describing the state of the literature.

Prices become ludicrous (just as I explained about Google before they had an income strategy).

As I already pointed out, the price for Google at the top of the bubble was less than half the price it currently trades at ten years later. Buying Google then was a sound investment, whatever you believe or believed.

-Jester

[kandrathe]

Real-estate tends to be prone to malinvestment. According to David Wheelock (St. Louis Fed) the same reckless bubble in real-estate precipitated the crash in 1929.

I'm glad my policy is always to check, because once again, that article doesn't say what you claim it says. The article examines the effects of a housing bailout program. The only thing it says about housing prices and the cause of the Great Depression is:

Some authors contend that the decline in housing investment in 1928-29 contributed to the onset of the Great Depression, though that view is not widely held today.

That would be coming pretty close to the opposite of your point, although strictly the author is only describing the state of the literature.

"Precipitated" may have been too strong a word. Perhaps, "prefaced" would be more accurate. I would agree that it was probably the contracting in the money supply that caused the stock market crash, AND brought an end to the housing boom.

While yes, he does point out some differences, however he also points out quite a few similarities to the situation we find ourselves in now.

"The rapid increases in building activity,
house prices, and mortgage debt during the 1920s
are characteristics shared with the recent U.S.
housing boom. The 1920s witnessed an increase
in loan-to-value ratios and frequent use of high
interest rate secondary loans, which is also reminiscent
of the recent experience (Doan, 1997, p. 35;
Dovenmuehle, 1965, p. 2). Further, according to
some commentators, lending standards in the
1920s were unusually lax (Saulnier, 1956, p. 10).
Thus, on the eve of the Great Depression, many
homeowners were not well positioned to withstand
the substantial decline in income or house
prices that would occur over the next three years." p.138

So, there are four similar factors; a) rapid increases in building, b) increases in loan to value, c) use of higher interest rate 2nd mortgages, d) lax lending practices.

"The recent distress in the U.S. home mortgage
market has parallels in the experience of
the Great Depression. Like the recent episode,
the increase in mortgage defaults during the
Depression coincided with a sharp decline in
house prices after a period of rapid gains. Also
like the recent experience, mortgage defaults
during the Depression were more prevalent on
mortgages with unconventional terms, such as
short-term, non-amortizing loans. Furthermore,
mortgage underwriting standards appear to have
deteriorated before the downturn of the 1930s,
as they did toward the end of the recent housing
boom. However, unlike the recent experience,
the main cause of mortgage loan distress during
the 1930s was the sharply contracting economy
and falling price level." pp 145-146.

What is different now, is that due to massive influx of cash into the money supply, we are not experiencing deflation, and peoples wages and income are not being reduced along with the falling prices of goods and services. So, people who remain employed, can still make their mortgage payments. And... He wrote that in 2008, before the 2nd wave of foreclosures caused by unemployment. Most people were able to make payments for awhile after losing their jobs, and in many places foreclosure takes about a year from the time the homeowner stops making their payments.

Prices become ludicrous (just as I explained about Google before they had an income strategy).

As I already pointed out, the price for Google at the top of the bubble was less than half the price it currently trades at ten years later. Buying Google then was a sound investment, whatever you believe or believed.

Well, we disagree. If "animal spirits" means anything, it referred to the mood at THAT time. This was the time of Greenspan's "Irrational Exuberance" speech. Most dot com investors were clueless about whether, and how the companies they were investing in could ever make a profit, or the size of their potential markets. Making any money by investing then would have required massive doses of prescience, luck, or both. Of the thousands that began in the 1990's, perhaps a few dozen survived.

[Jester]

Most dot com investors were clueless about whether, and how the companies they were investing in could ever make a profit, or the size of their potential markets. Making any money by investing then would have required massive doses of prescience, luck, or both. Of the thousands that began in the 1990's, perhaps a few dozen survived.

Fine. And if you were saying "I thought tech stocks were ludicrous at that time," then you'd be right. If you held a broad basket of speculative startups in the late '90s, you would have gotten killed.

But you don't say that. You keep saying "Google." That's one of the companies that shows the flip side - just because some tech stocks were massively overvalued, doesn't mean they all were. Some were actual winners, and Google is the example par excellence of a good bet that got tarred by being in the same industry as the bad ones.

What is different now, is that due to massive influx of cash into the money supply, we are not experiencing deflation, and peoples wages and income are not being reduced along with the falling prices of goods and services.

Fixed wages accompanied by falling prices practically defines deflation. If that is what we are seeing, how are we not experiencing deflation?

-Jester

[kandrathe]

Fine. And if you were saying "I thought tech stocks were ludicrous at that time," then you'd be right. If you held a broad basket of speculative startups in the late '90s, you would have gotten killed.

But you don't say that. You keep saying "Google." That's one of the companies that shows the flip side - just because some tech stocks were massively overvalued, doesn't mean they all were. Some were actual winners, and Google is the example par excellence of a good bet that got tarred by being in the same industry as the bad ones.

Yes, but...

There was no reason to look at Google and see profits. They hadn't even conceived of their ad strategy. They just had one of the better search engines. They were functionally no different than Yahoo, Excite, Lycos, Alta Vista, etc, etc, etc.

The rational investor is able to derive the potential of success from the available inputs.

[Jester]

There was no reason to look at Google and see profits. They hadn't even conceived of their ad strategy. They just had one of the better search engines. They were functionally no different than Yahoo, Excite, Lycos, Alta Vista, etc, etc, etc.

The rational investor is able to derive the potential of success from the available inputs.

I lack the expertise to judge whether Google's functionality, or anything else about it, could be distinguished from its competitors back in the late '90s, speaking in terms of technology.

But unless you're claiming that Google's success was literally random, it's tough to see how it makes you super-rational that you declared one of the stock market's great all-time winners to be an obvious loser.

-Jester

[kandrathe]

Fixed wages accompanied by falling prices practically defines deflation. If that is what we are seeing, how are we not experiencing deflation?

Probably due to Quantitative Easing Round I, and that the Fed printed 2 to 4 trillion in new cash and gave it to banks to shore up their reserves.

Due to the counteracting inflation caused by the Fed, peoples wages and income are not being reduced. AND, the prices of goods and services are not falling (at least in aggregate).

Were it not for Bernancke's hyper-activity in preventing a deflationary spiral, we'd be smack in the 2nd Great Depression. However, I'm not sure if we can coast out of it merely due to his interventions. I still feel there will be a price to pay eventually for the Fed's recent actions in massively devaluing the US dollar. It may be that China takes over as the worlds most important economy, and reigning military super power.

My bet would be on a high rate of inflation that higher interest rates cannot cure. Couple that with how near the world is in hitting the peak oil ceiling, which suddenly will drive up the cost of energy (needed for all economic activity). Then, there are the secondary unintended effects we saw in 2007, when oil hit ceiling: higher gasoline pushed people to use more ethanol, which caused more grain to be used for fuel, which drove up the price of food worldwide.

[Jester]

Due to the counteracting inflation caused by the Fed, peoples wages and income are not being reduced. AND, the prices of goods and services are not falling (at least in aggregate).

Either prices of goods and services are falling, or they aren't. Understanding the point that there are different commodities behaving in different ways, you still have to pick one story and stick to it.

The bailout is not painless, the stimulus is not painless, quantitative easing is not painless. They are only less painful than the alternatives. Nothing comes without a price.

Were it not for Bernancke's hyper-activity in preventing a deflationary spiral, we'd be smack in the 2nd Great Depression. However, I'm not sure if we can coast out of it merely due to his interventions. I still feel there will be a price to pay eventually for the Fed's recent actions in massively devaluing the US dollar. It may be that China takes over as the worlds most important economy, and reigning military super power.

Correct me if I'm wrong here, but you believe the Yuan is being kept undervalued by China, no? If that is the case, how would a revaluation that promotes US exports help China become powerful? It would make them richer in terms of US products, but then, that's what everyone (except consumers) wants - more US exports to China, and fewer imports. And since they're already holding a hojilion US dollars, anything that makes those less valuable makes them poorer, not richer.

Militarily, we still live in nuclear stalemate. No matter how wealthy China becomes, they cannot escape that fundamental position. Even conventionally, the US still spends nearly seven times what China does on its armed forces. I don't see their relative military positions swapping anytime soon.

My bet would be on a high rate of inflation that higher interest rates cannot cure. Couple that with how near the world is in hitting the peak oil ceiling, which suddenly will drive up the cost of energy (needed for all economic activity). Then, there are the secondary unintended effects we saw in 2007, when oil hit ceiling: higher gasoline pushed people to use more ethanol, which caused more grain to be used for fuel, which drove up the price of food worldwide.

Noted. We shall see.

-Jester

[kandrathe]

Due to the counteracting inflation caused by the Fed, peoples wages and income are not being reduced. AND, the prices of goods and services are not falling (at least in aggregate).

Either prices of goods and services are falling, or they aren't. Understanding the point that there are different commodities behaving in different ways, you still have to pick one story and stick to it.

The bailout is not painless, the stimulus is not painless, quantitative easing is not painless. They are only less painful than the alternatives. Nothing comes without a price.

What does this chart tell you about the overall trend of inflation?



And... That is across a basket of goods less food and energy. If you dig into the BLS numbers by commodity, you will see some are flat, and some are dropping in price.

Correct me if I'm wrong here, but you believe the Yuan is being kept undervalued by China, no? If that is the case, how would a revaluation that promotes US exports help China become powerful? It would make them richer in terms of US products, but then, that's what everyone (except consumers) wants - more US exports to China, and fewer imports. And since they're already holding a hojilion US dollars, anything that makes those less valuable makes them poorer, not richer.

China won't allow the trade imbalance to change, and that means they will keep the yuan weaker than the dollar. If anything, since they unhinged their currency from the US dollar, they've made it worse. Back in 2002, the imbalance was about $70 billion, representing a US job loss of about 900,000 US workers. The latest figures for 2010 show us to be on track to hit $240 billion. A trade balance would put a pretty big dent in our unemployment situation.

At the present time, China doesn't seem to be managing their economy to cater to the needs of their own people (their QOL index 116th in 2006 to 97th in 2010 out of 144 nations). It is an exercise in capturing economic power, for external purposes.

Ok, so back to your question? Which would make us more powerful, debt or production capacity? We are not purchasing China's goods on our dime, with our own productivity. We are borrowing the money (some from China itself) to purchase goods we cannot afford. Does that make us stronger or weaker? Meanwhile, due to the cheapness, and quality of China's labor, all manufacturing in the world is flowing to their shores. They've become the largest manufacturing nation in the world. Think of quintessential American products. Levis and Reeboks? Where are they made now? Essentially, for any nation, your power is based in your people. China's got more, many are very well educated, and they are unified behind their leadership.

Here in the US, we can't even get behind the Democrats when they want to make some tax cuts permanent. How messed up is that? (I'm personally against it, because we are at the point of needing all the revenue we can get. Even then, we need to reformulate our social spending to reduce our expenses as well.)

Militarily, we still live in nuclear stalemate. No matter how wealthy China becomes, they cannot escape that fundamental position. Even conventionally, the US still spends nearly seven times what China does on its armed forces. I don't see their relative military positions swapping anytime soon.

Given the capacity for capital investment (which they now have), and the manufacturing capability (which they now have), it would be a matter of time before they build the capability that we now have. And, given we are facing a decade of malaise and crushing debts, we will probably curtail military programs and put much of our used junk into moth balls. And... Just because we spend the most, doesn't mean we are are investing it. Most of the money is spent housing our armies in other nations.

[Jester]

Think of quintessential American products. Levis and Reeboks? Where are they made now? Essentially, for any nation, your power is based in your people.

I'm always amazed by the way you put contradictory ideas in adjacent sentences.

Is it really your idea that the American people will be great and educated if they spend their lives making Levis and Reeboks? Those are the most boring, worst paid, lowest education manufacturing jobs in the world.

The "quintessential" American products you want to keep in the country are making things like Google and Intel, Boeing and Pfizer. Research and development. High value added. Those things pay good money. Making Reeboks is generally only attractive to people making less than even the poorest decile of American workers.

-Jester

[ShadowHM]

The "quintessential" American products you want to keep in the country are making things like Google and Intel, Boeing and Pfizer. Research and development. High value added. Those things pay good money.

Agreed, however...

Making Reeboks is generally only attractive to people making less than even the poorest decile of American workers.

-Jester

The key word there is 'workers'. There really are many people who are qualified, by ability and/or education (or lack thereof) only to work at such jobs and those jobs are not there anymore. Such people are not 'workers'. I perceive that as a problem.

[Jester]

The key word there is 'workers'. There really are many people who are qualified, by ability and/or education (or lack thereof) only to work at such jobs and those jobs are not there anymore. Such people are not 'workers'. I perceive that as a problem.

Well, there are a few solutions. One is to get rid of the minimum wage, and let North American employers hire those low-skill workers at a pittance. I suspect a combination of social pressure and the popularity of minimum wages makes that unrealistic.

The more usual solution is the services sector. As the labour productivity of manufacturing increases, fewer relatively better off workers can purchase more services, creating low-skill, labour-intensive jobs outside those sectors. The "McJobs" aren't exactly spectacular, but they don't suck any worse than making Levis for a living, or being unemployed.

Bringing Reebok manufacturing back from countries that pay a couple dollars a day to a country that pays a minimum of seven dollars an hour is not a sensible solution for anyone. It would hold back any increase in labour productivity for as long as those jobs stayed in the first world, and it would prevent relatively poor countries from manufacturing at all.

-Jester

[--Pete]

Hi,

Bringing Reebok manufacturing back from countries that pay a couple dollars a day to a country that pays a minimum of seven dollars an hour is not a sensible solution for anyone. It would hold back any increase in labour productivity for as long as those jobs stayed in the first world, and it would prevent relatively poor countries from manufacturing at all.

Actually, some manufacturing is coming back onshore, but it isn't generating much in the way of jobs. As processes become more automated, it makes sense to put them close to the market and to the support personnel. Labor costs don't matter when there is no labor. Reliable, cheap power does.

Just how many butlers, chefs, chauffeurs, maids, landscapers, can the economy support when only the intelligent and creative can find jobs?

--Pete

[Jester]

Actually, some manufacturing is coming back onshore, but it isn't generating much in the way of jobs. As processes become more automated, it makes sense to put them close to the market and to the support personnel. Labor costs don't matter when there is no labor. Reliable, cheap power does.

Sure. Manufacturing in America is unlikely to ever return to its "sewing Reeboks" stage, and nor should it - those jobs are far better suited to other countries. You've hit exactly on why - they are not easy or profitable to automate, and so they don't make up much of the American job market.

For those industries that are automatable, there is still a demand for support personnel, managers, technicians, customer service, and so on. And every job created there is another several supporting them with haircuts and lawnmowing. And so on.

Just how many butlers, chefs, chauffeurs, maids, landscapers, can the economy support when only the intelligent and creative can find jobs?

It depends - largely on how productive the other sectors of the economy are. There are an absurdly large number of potential service tasks to do, some of which we haven't even thought of yet. The question is whether the rest of society is productive enough to justify people doing them. A maid/hairdresser/landscaper/whatever today gets paid a wage that would be laughably high by the standards of a century ago, on the backs of the rest of the economy. The higher that wage goes, the more room there is to create more jobs by using more labour.

But it's hardly that bad, that only the intelligent and creative can find any job at all. Unemployment may be 10%, but it's not 70%. And the employed are consuming more services than ever, in the big picture.

-Jester

[--Pete]

Hi,

. . . they are not easy or profitable to automate . . .

There's a show I catch every now and then on how things are made. It's amazing just how much can be, and is, automated. Sewing Roebucks is probably well within present capabilities. Besides, redesigning products to make them easier to produce in automated factories is common. Things like replacing stitching with pressure welding. So far, it's been the initial investment and the efforts of unions that have held automation at bay. The investment is getting smaller, the unions weaker. In the '70s, I predicted work riots by now -- I was off in the timing, but I'm still pretty convinced of the probability.

For those industries that are automatable, there is still a demand for support personnel, managers, technicians, customer service, and so on.

Yes, but not one of these is a *new* job. The number of people who support the robots will be approximately the same as that which supports the sewing machines the robots replaced. But they will have to have more knowledge and better training. Mid level jobs go away. There is a lesser need for managers at a factory with 20 techs servicing the machinery than at one with 20 techs and 500 workers. Even customer service takes a hit, since goods produced in an automated factory have fewer defects than do those produced by workers.

And every job created there is another several supporting them with haircuts and lawnmowing. And so on.

As per my previous paragraph, I don't think there is a net creation of jobs. The jobs that are created are in the service sector. These jobs do not produce any goods nor added value services. An economy based largely on these jobs is an economy without a foundation. The bastard offspring of a shell game and a pyramid scheme.

It depends - largely on how productive the other sectors of the economy are. There are an absurdly large number of potential service tasks to do, some of which we haven't even thought of yet. The question is whether the rest of society is productive enough to justify people doing them.

As the number of mid level jobs go away, the number of people who can afford the services decreases. When only 10% of the population can afford to go to a restaurant, how many restaurants will be needed?

A maid/hairdresser/landscaper/whatever today gets paid a wage that would be laughably high by the standards of a century ago, on the backs of the rest of the economy. The higher that wage goes, the more room there is to create more jobs by using more labour.

In The Moon is a Harsh Mistress, Heinlein remarks that if two Chinese crash landed in a crater, they'd get rich selling rocks to each other while raising a pack of children. Of course, it's a sardonic remark on a non-productive economy. Stripped down to the basics, it's clear that without production, there is no economy.

But it's hardly that bad, that only the intelligent and creative can find any job at all. Unemployment may be 10%, but it's not 70%. And the employed are consuming more services than ever, in the big picture.

Please, don't throw unemployment numbers around, they're mostly meaningless. How many people, both the young students and the elderly wanting a source of income and society, cannot find a job but don't qualify for unemployment (and are not counted)? How many SO that would like to contribute to the family income have given up looking for a job and never qualified for unemployment or used up their benefits (not counted)? How many people are underemployed? How many people with advanced degrees spend years as post-doc fellows on a tiny stipend because there are no jobs in their field (except, of course, low paying post-doc positions).

This discussion started because of an article on the divergence. The article was largely nonsense, but the divergence is real. And, to a large degree, the divergence is because of the elimination of the middle -- not a completed process, but ongoing nonetheless. We are moving toward a bimodal society. Those capable of contributing more than a machine will continue to be better off -- until what they do can be done by a machine (architectural firms hardly use draftsmen anymore). Those not capable of contributing as much as a machine will be relegated to more and more menial work. And as the machines get better, the need for manual labor gets smaller and its value less.

The problem isn't how to deploy the methods of the past. The problem is that the methods of the past are based on a principle that is no longer true. Humanity no longer needs the output humanity is capable of. "An honest day's work for an honest day's pay" can no longer be applied. What is the solution? I don't know. But I'd suggest looking in science fiction novels rather than in economic texts. The texts are summaries and speculations of what was. The novels at least explore potential for the future (and the future is real close to now).

--Pete

[Jester]

Stripped down to the basics, it's clear that without production, there is no economy.

This is the key. Production is the engine that drives the economy. But when a small few can produce enough for all, then there is ample room to employ everyone else making life more pleasant. We can have yoga instructors and baristas*, scientists and historians, cab drivers and hairdressers. The more each manufacturer/farmer/miner can make, the more support personnel we can have - or, more pointedly, the more those things are *worth*. The value of a good or service is not an objective measure, but a ratio with other goods and services. This ratio is driven by their relative scarcity. A world where we can make a trillion cars with a snap of our fingers is a world where cars are cheap compared with haircuts, or massages. This is why a plumber in the US still makes a damn good living.

Nor are these human-specialist jobs just high-end creative jobs. My hairdresser is a lot brighter than he needs to be to do his job, but all attempts to replace him with a machine have been failures, to say the least.

Are we ever going to reach a point where we run out of such tasks? Not until we have functioning AI, at least. From what I can see, computers are still pretty damn stupid. Heinlein got that much wrong, along with almost every other science fiction author.

Re: Unemployment - I don't mind what statistic you use. We are nowhere near the kind of thing you're talking about, and no plausible rate of technological change is going to get us there in my natural lifetime. Maybe by Star Trek times, but not soon.

-Jester

*and Berkeley Econ profs...

[Zenda]

But this is silly. It's like saying that heart attacks don't kill people, only lack of oxygen to the brain does.

It's more like saying that eating lots of fat food doesn't kill people, but heart attacks do. Knowing there is a relation doesn't mean I should give up all fat food. Some degree of income spread is beneficial to our economies and consumers (someone has to make those cheap reeboks, not?). At what point is the divergence too large? When does it become a problem?

But, no matter. I didn't state the growing divergence is a problem, regardless how obvious it may seem to you, and I don't care to discuss it.

Starting up the process with "no capital" involves shorting, and shorting involves credit - a type of capital.

Credit is not a 'phantom' type, you say?

Arbitrage is not about selling something *later*, nor did I ever say it was.

True, but you made a more general remark that didn't exclude selling at a later time. Just making that clear.

Arbitrage is about taking a gap between a known buying and selling price, and making a profit from closing it.

Yes, the profit is made by making the gap between market prices smaller. The actual buying and selling of the underlying goods (whatever they are) is only a technicality (if it even really happens).

Anyway, this is as much as I will say on the subject, here. Economy is way too boring to spend my free time on

[eppie]

As per my previous paragraph, I don't think there is a net creation of jobs. The jobs that are created are in the service sector. These jobs do not produce any goods nor added value services. An economy based largely on these jobs is an economy without a foundation. The bastard offspring of a shell game and a pyramid scheme.

But on the other hand this is what we see in many 1st world countries.
Most investment banking jobs don't add anything but are highest paid and they need skilled employees.
Same as professional sports, advertisement, etc.
The highest paid jobs often are jobs that don't create anything real.
I'd rather have a few more gardeners if that meant a few less investmentbankers.

[--Pete]

Hi,

I'd rather have a few more gardeners if that meant a few less investmentbankers.

You, me, and TJ agree on that. But gardening doesn't produce anything, either, except for flowers for the florist. And we don't need more farming.

--Pete

[Jester]

You, me, and TJ agree on that. But gardening doesn't produce anything, either, except for flowers for the florist. And we don't need more farming.

If I recall correctly, there is at least one Lurker employed in the florist business.

-Jester

[kandrathe]

The key word there is 'workers'. There really are many people who are qualified, by ability and/or education (or lack thereof) only to work at such jobs and those jobs are not there anymore. Such people are not 'workers'. I perceive that as a problem.

Well, there are a few solutions. One is to get rid of the minimum wage, and let North American employers hire those low-skill workers at a pittance. I suspect a combination of social pressure and the popularity of minimum wages makes that unrealistic.

The more usual solution is the services sector. As the labour productivity of manufacturing increases, fewer relatively better off workers can purchase more services, creating low-skill, labour-intensive jobs outside those sectors. The "McJobs" aren't exactly spectacular, but they don't suck any worse than making Levis for a living, or being unemployed.

Bringing Reebok manufacturing back from countries that pay a couple dollars a day to a country that pays a minimum of seven dollars an hour is not a sensible solution for anyone. It would hold back any increase in labour productivity for as long as those jobs stayed in the first world, and it would prevent relatively poor countries from manufacturing at all.

-Jester

Or, offer the 7$ an hour jobs to already well trained immigrants from China, Eastern Europe, and Africa. Currently, Chinese Americans compose only 1.2% of the US population. Surely, with some encouragement of better pay and more freedom, we might handle a few million more new immigrants. Nothing will help balance the wage inequality more than opening our borders to encourage those who are energetic and seeking a better opportunity to come here and become new Americans. I'd say we should set our sights on ramping up legal immigration of the best skilled and most productive from about 1 million a year, to more like 10 million. That is what I mean by the power of people.

Minimum wage is not a barrier actually. There is a natural minimum wage due to local living conditions. For example, what I saw happening on Long Island, in NY. There is a high cost for living on the island, and a high cost for commuting to the island, so a store can only afford to employ one checkout person who earns a higher wage, and groceries cost more. There aren't enough people who can afford to do the service jobs, so it's not unusual for the ATM machines to be empty, or stores to open late, close early, or be open fewer days. Minimum wage there doesn't matter, since no one could live there and earn it, and no one could commute there for that wage.

So, then extending that elsewhere, people will only work for a wage that ultimately sustains them. The market can adequately determine the appropriate cost of labor. But, let's compromise. Let's raise the minimum wage we have to reflect a living community wage (determined within each county), but allow employers to petition for temporary reduction of the minimum wage under special circumstances such as temporary unskilled labor, or for new workers with less than 6 months experience.

Socially, where the rubber hits the road is that "Americanization" via education and skills improvements need to be readily available and cheap. The good news is that the number of children needing to be educated is dropping, freeing up space in thousands of institutions, and the internet is proving to be an excellent productivity tool in teaching many courses that were previously live lectures. I think now is a great time to buoy up our melting pot nation with an infusion of new immigrant enthusiasm.