The seized at the time when profits are high

In a recent "Flash" published by Natixis (1) under the title "nothing happens more like before half of a cycle of expansion", Patrick Artus, head of the Department of research of the said group, puts the finger on an entirely new phenomenon. The economic cycle has completely changed profile.

To establish his finding, Artus compares "the expansion cycle 1994-2000 and 2003-2006 (2007) cycle." The parenthesis is not indifferent. The author of the next year an idea said. It deserves, too, that it is attention.

In the two periods, he wrote, although there was a recovery in employment. According to him, the unemployment rate is down mid-term in the vicinity or below its "structural". In the United States, this happened as early as 2004 (in 1997, during the previous cycle). In the euro area, the passage took place respectively in 2005 and 1998.

The Chief Economist of Natixis Note: "tension, largest on the labour market and on the market of goods and services, would normally lead to it is him who says acceleration of wage and salary costs, inflationary pressures.". This about the word "inflation" is inappropriate here (it will return to this crucial point), no one can contest this observation. Novelty, and it is of size, is that it does not apply in the current cycle: "in 2006, the real wage, written Artus, languished in the United States and the euro area". The contrast is striking with real wage growth in the last years of the previous expansionary cycle: 3 in the United States, 1.5 in the euro area. The result was an increase in unit wage costs.

The famous analyst is still other outstanding differences. They have ceased to take short experts. Alan Greenspan himself had described in February 2005 of "Enigma" (conundrum) declining long-term interest rates. Since then, the mystery, if mystery, it is still thickened. In the United States, the yield curve is inverted (long rates are now lower than the short rate). Artus is still the stability of the credit spreads (difference of rates according to the quality of the borrower). He attributed "to the pursuit of increased profitability with the compression of the salary costs".

He does not believe that companies will stop in so good way (hateful way, should specify, for the general economy!): "early inflation still reflects the extent of disinflation should take place in 2007." It does not forget that the apparatus of the credit of the globalized economy is supported by this epitome of public intervention purchases massive by the central banks in Asia bonds and obligations of the public Treasury, that means speedy rescue to the dollar. Not to mention portfolios of debt 'corporate' (issued by listed companies) acquired by the banking system. Hence the low interest rates in the long term, the good credit. Jean-Claude Trichet attributed these results to the "credibility" of the monetary authorities.

This breakdown is happening before our eyes with the traditional cycle, Artus explained by the acceleration of imports from emerging countries, and the loss of purchasing power of employees because of the relocation, of continuous immigration of poorly paid by small business service jobs. Would it not also (especially) an internal cause

The most serious breach of liberal capitalism is indeed deliberate his respiratory paralysis. When the economy starts to lose his breath (recession), it picks up its forces. Best-performing companies, keeping the more effective labor, to remake a health. The profits go back. High profits are revived appetite of investments and hiring. On more active markets where real wages tend to move forward, many selling price yesterday fell in the vicinity of the price of production are. This is one of the conditions for the return to prosperity. It is not inflation. For example, social security contributions are no longer figure of "charges". They are swallowed by the play of the market, in the same way as other expenses contribute to the maintenance in good condition of the productive forces! As to possibly excessive increases in the consumer price, they are quickly offset by the full impact on the final price, as it does not fail to occur on competitive markets, advances in productivity.

With the supremacy of the financial markets, it is as if they immobilized the process. The seized at the time when profits are high. To maintain this level, organized in successive restructuring blow (to eliminate the competitor) artificial compression of payroll. Salaries are frozen, precarious employment and part-time work are the rest. Capitalism is torn between the generating dynamism of employment in its nature and the new Western Malthusianism, in the absence of which the alleged principle of maximizing the benefit could not prevail.

The manoeuvre of uptake would be hard-pressed to continue if it was not locked to the flight deck by the modern confusion between economic price fluctuations and the threat of inflation. Inflation is linked to a creation ex nihilo to purchase through a broadcast, disconnected from the needs of production, currency and credit. The more virulent source since... is more than forty years the operations of the dollar by central banks. The ECB, it should be noted, is not directly involved in the infection (despite the admonitions of our politicians to make it).

Public notoriety, inflation is now channelled towards some compartments of the market (market bond, real estate, eventually market share). The pilotage station (Central Bank) believes that this is not its direct responsibility. However the Fed, under 14 times its interest rates since June 2002 appears to be managed to achieve the indefinite inflation of the prices of homes. The ECB follows far behind. In the first place concern these two institutions is stability, confused with stagnation, prices and wages. Financial markets to ensure jealously!