no mechanism to reduce wages

we happily live with an inflation rate of between 2 & 3 %

So naturally workers require yearly cost of living wage increases of between 3 & 4%.

When you have an extended boom, wages can and have reached dangerously high levels.

Not just here but all over the world.

Consequently many Govts both State & Country can't live within their means.

The mere mention of spending cuts in Greece has the public sector unions up in arms with planned nationwide strikes and protests.

It will be the same everywhere.

Something has to give.

Either interest rates are going to go sky high or the markets are going to crash or both.

When governments keep trying to artificially prop up markets and economies,they distort conditions to such an extent that the problems just get bigger and the busts end up more damaging.

I suspect the public servants will be the new villains or scapegoats in the not too distant future.

Their wages and conditions will be under enormous scrutiny,especially if they try raising taxes without big spending cuts.

Most States in the USA are broke and can't pay their bills.

They are cutting all kinds of programs and still can't get close to balancing their budgets.

Public sector wages and very generous pension plans are increasingly being blamed.

If there was a mechanism for reducing wages during tough times it might help but I wouldn't hold my breathe waiting for that outcome.

We usually have to take the more brutal option of sacking people.

The new 'us & them' will be the people versus public servants.