Brother, can you spare a Yen?

“For the first time in 14 years, the American workforce has in effect gotten an across-the-board pay cut,” the Los Angeles Times reports, adding that not only are wages rising slower than inflation, but more healthcare costs have been shifted to employees.

Add to this that the tech industry is slashing jobs — you remember, those good paying high tech jobs that we were all told was the future of our economy? Another 60,000 of them went away in the first quarter of 2005 alone. And you can’t blame it all on outsourcing. Part of the problem is “good-enough computing,” a problem (a problem for hardware and software vendors, anyway) where companies simply say “what I have works fine, why do I need more?” Many companies over-bought and over-hired, either in the Y2K buildup or in the Dot-Com boom. They are still working through the hangover capacity. They see no compelling reason to upgrade, no compelling new products that will clearly pay for themselves. They aren’t fixing anything that ain’t broke.

How sad it is that coporate earnings growth is slowing! Why, the S&P 500’s earnings are only expected to rise 9.5% That’s still faster than double the growth of the Gross Domestic Product (GDP) and the Consumer Price Index (CPI, the official inflation rate) combined.

One very big factor contributing to the effective pay cut for the American worker and the “slow” profit growth of American companies and the high price of oil and the record price of gasoline and the record trade deficit is very simply the price of dollars. The United States has allowed the value of dollars to slide sharply over the last 3 years in what I believe to be a giant game of chicken designed to make American goods cheaper overseas, force China to de-link their currency from ours, and (hey as long as we are at it) make a whole lot of money for big oil and oil services companies like Halliburton.

There is the potential for things to get worse. Asian nations have been propping up the dollar, mostly by buying our bonds and financing our debts, because they cannot afford to let their goods get too expensive for Americans to buy. Americans buy a lot of Asian goods, and it would be bad for their economies if we stopped. Imagine if the price of a Honda or Toyota went up 25%. Look around the shelves of any discount store or fashion retailer and imagine if the asian products were 25% more expensive. If Asian products went up 10% in price, you would notice. What happens now — whether the American economy and prospects for the dollar get better or worse — depends on whether or not everybody continues to play the game.

In the end, either they stop the car, we get out of the middle of the road, or everybody gets hurt.