What most don’t look at that this recession/depression will mark the formal beginning of a secular shift of wealth from the West to the East. The simple fact is that the premium for American and G7 labor commands is simply not sustainable over the long term.

What most don’t look at that this recession/depression will mark the formal beginning of a secular shift of wealth from the West to the East. The simple fact is that the premium for American and G7 labor commands is simply not sustainable over the long term. Combined with ever increasing levels of automation, human labor is increasingly commoditized at ever higher levels of skill. The schools in the East may not match schools in the West but they are clearly catching up at very fast pace.

This development has been masked by the credit bubble and resultant financial economy over the past 25 years but especially since the dot com era. Given the fact that competitive infrastructure is now being built much faster in the East and that automation/machine dependent productivity is commoditized through easy and low cost availability of computer systems, the G7 edge in productivity is bound to vanish likely within the next decade. Salaries are not even close to reflecting such a reality.

I therefore don’t expect this to be a short blip but part of a long and highly unpleasant adjustment of the standards of living in the West. Due to an ever growing competitive labor pool combined with ever increasing computing intelligence, real labor costs are bound to adjust downward for the foreseeable future.

The present problems are not of an apocalyptic nature but should mark the peak of Western economies and Western standards of living for a long time to come. I don’t see how such an adjustment can happen without significant social unrest over time. Wars for economic reasons are not out of the question as Iraq amply demonstrates.