excerpted:
General Motors (GM) car czar Steven Rattner argues that America's unemployment crisis is a sign of strength:
"US productivity grew right through the recession"
Rattner comes dangerously close to articulating a full-unemployment policy.
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Workers' wages and salaries represent roughly two-thirds of production costs and drive inflation. High inflation is a bondholders' worst enemy because bonds are fixed-income securities. For example, if a bond yields a fixed five percent and inflation is running at four percent, the bond's real return is reduced to one percent. High unemployment constrains labor costs and, thus, also functions as an anchor on inflation and inflation expectations - protecting bondholders' real return and principal.