I think the monetary problems Europe, Japan and the US face are a side show. The real issue is the labor markets. Very simply, until labor of developed nations are once again competitive with that of developing nations, developed nations will continue to suffer economic stagnation.
For the labor of developed nations to become competitive with that of developing nations, you need one of two things to happen. Either the cost (lets keep things simple by not talking about efficiency) of labor in developing nations goes up... or that of developed nations goes down. My guess is that both will happen.
Sidestepping the issue of efficiency and cost of labor in developing nations (they will rise together, making the adjustment period for developed nations longer), I would like to say a few words on how labor is going to become cheaper in the West.
There are really only two options. First you can use deflation to drive down income, or you can use inflation to drive up costs of goods. Of the two choices inflation is by far the easiest and fastest option. If you have any doubts, ask yourself this question:
Is it easier to print money, devalue the dollar and drive up the price of gas or is it easier to convince Americans to take a 50% pay cut?
A sever, negative deflationary cycle is probably the most dangerous economic condition that can occur. It causes many bad things such as fascist governments and wars. By contrast, hyperinflation (typically an effect, not a cause) probably won't even bring about the collapse of a government.
Inflation has one other key advantage. It is useful in melting away the national debt.
For the labor of developed nations to become competitive with that of developing nations, you need one of two things to happen. Either the cost (lets keep things simple by not talking about efficiency) of labor in developing nations goes up... or that of developed nations goes down. My guess is that both will happen.
Sidestepping the issue of efficiency and cost of labor in developing nations (they will rise together, making the adjustment period for developed nations longer), I would like to say a few words on how labor is going to become cheaper in the West.
There are really only two options. First you can use deflation to drive down income, or you can use inflation to drive up costs of goods. Of the two choices inflation is by far the easiest and fastest option. If you have any doubts, ask yourself this question:
Is it easier to print money, devalue the dollar and drive up the price of gas or is it easier to convince Americans to take a 50% pay cut?
A sever, negative deflationary cycle is probably the most dangerous economic condition that can occur. It causes many bad things such as fascist governments and wars. By contrast, hyperinflation (typically an effect, not a cause) probably won't even bring about the collapse of a government.
Inflation has one other key advantage. It is useful in melting away the national debt.