Sooner or later the resistance to nominal wage cuts will fade (when the pain gets intense enough), salaries will fall, and you'll see an export-led resurgence.

No, you will see another wave of plant closures as the deflationary impact of protectionist wage dumping hits the balance sheets of firms that in any properly managed macroeconomy would be fundamentally sound.

And then you will see a trade war, not totally unlike the good, old-fashioned sort with import duties and customs barriers. Except instead of competing to see who can raise import duties higher before their domestic economy starts breaking for lack of raw materials, we'll be seeing who can raise unemployment higher before their democracy breaks from paramilitary organisations being the only viable career prospect for anybody born after 1990.

And unlike the counterfactual presented of the in the diary body, this is a repeatedly observed and well described phenomenon.

- Jake

Friends come and go. Enemies accumulate.