Altogether, color me skeptical that anything good is going to happen to the middle classes in the near future.

See? That's where you and Roach differ: you're thinking about the middle classes, an he, well...

This is a delicate operation, to say the least. We are in the midst of what could well be the mother of all liquidity cycles. Courtesy of an extraordinary monetary accommodation, financial markets have enjoyed open-ended support from central banks. This has been a key role reversal for the tough guys who are supposed to take away the "punch bowl" just when the party gets good. Given the power of this liquidity cycle -- evidenced not just by asset bubbles in major markets but also by an extraordinary compression of spreads on risky assets such as emerging-market debt and more traditional credit instruments -- a serious monetary tightening could prove devastating for financial markets and increasingly wealth-dependent economies. As long as inflation remains low, however, the authorities can set their sights on the more benign target of neutrality. The latest downside surprise on the US inflation front -- another weaker-than-expected increase in the all-important Employment Cost Index -- provides support for that strategy. Despite a tightening labor market, compensation growth for civilian workers slowed to just 2.8% in the 12 months ending March 2006 -- down one full percentage point from the pace two years ago. This is yet another example of the power of the global labor arbitrage and good reason to believe that central banks can stay focused on the goal of normalization rather than tightening.

Ok, let's see... Central banks have given the financial markets all the liquidiy they could dream about, and now that the bubble is about to pop, it's great news that inflation... of salaries is going down! Gee whiz, "compensation growth for civilian workers* has grown by 1% less this year than two years ago! Bring out the bubbly! This is all thanks too... labour arbitrage, the ability of capitals to move unhindered in pursuit of the lowest labour costs. You know, when I was a kid the government was very concerned about capital flights, you know, they had an interest in keeping capital tied to the home country so that, you know, there would be capital to fuel demand for workers and pay their wages. Instead we are decapitalizing our economies to such an extent that, despite a tightening labour market which would ordinarily push wages up, well, the available capital is going down so fast that there just isn't any money to pay wages anyway.

Gaaa...

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper