Thanks for all the comments about my recent post, "If Jobs Are Being Cut, Why Aren't Paychecks, Too?," including this one, from Mac101:

"The average American worker has been losing money in their paychecks for quite a while. My parent's generation managed well on one paycheck, but now even in families where both work, people can't make ends meet...wage growth, for most people, has been a myth even before the current recession."

Our reader has a point. While its true that hourly earnings are up year on year, workers have been pocketing a smaller share of the nation's wealth for some time. As my colleague Tony Emerson and I wrote in a cover story for Newsweek International entitled "A Heavier Burden," back in 2004, "wage share," or the percentage of national income that gets paid out to workers, has been flat or decreasing not only in the U.S., but in most developed countries, for the last two decades.

The forces behind this trend -- mainly globalization and technological advancement -- are still with us, and given that wages were shrinking even when corporate profits were going up, there's no reason to think that the situation will get better now, as they are falling. In fact, I have spoken to analysts who expect the outsourcing trend, which had actually fallen off a bit as developing country wages caught up with those of the U.S. and Europe, to surge back, as companies look for any possible way to cut costs.

Clearly, some of our readers are already feeling the pinch, like the "PrairePrankster," who writes:

"I am not sure where the author lives, but I can say that where I work, wages are frozen and the organization's contribution to our 401k accounts have been suspended until further notice. In effect, our wages are being cut since these actions were announced about 4 months ago. With a nasty inflationary spiral awaiting as the stimulus causes our government to print more dollars, our frozen wages will be worth less in the coming years. Maybe that 3.4% wage increase referenced counts all the bonus money paid to the brain dead, greedy MBAs who mismanaged the banks and financial services industry in their zeal to destroy what's left of America's industrial heartland."

Actually, the 3.4 percent increase in national hourly earnings from last year to this year doesn't include any bonus money -- it's just good old fashioned wages, a large chunk of which would have been paid out to workers in the Heartland. Still, I agree that as nearly every central bank in the world goes into over-drive printing money, we are certainly in for a period of much higher inflation. And I have to admit that, as a New York City homeowner, I'm desperately hoping that Wall Street doesn't totally collapse. After all, many years from now, I'm counting on some MBA to buy my house and fund my future retirement if my 401K doesn't cut it.

Many think so. Former IMF chief economist Simon Johnson wrote in the Atlantic recently that "from 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits...this decade, it reached 41 percent." He calls it a "quiet coup." Felix Salmon at Reuters complains that "financial services companies are meant to be intermediaries, middlemen. And any time that the middleman is taking 41 percent of the total profits in what’s meant to be a highly competitive industry, there’s something very wrong." And the New York Times this weekend wrote almost gleefully of an impending shift in job demand among students at the nation's top universities. "Early indications suggest new career directions that are tethered less to the dream of an immediate six-figure paycheck on Wall Street than to the demands of a new public agenda to solve the nation’s problems," the paper declared.

Color me skeptical. For all the TARPs and PPIPs, Congress and the Administration have so far done nothing in the way of long-term, structural reform of the financial sector. There are some proposals on the table, but unless the new regulation is dramatic, I don't think the lure of billions will soon give way to the lure of science labs and Teach For America. There will be a hiccup, to be sure, since there are fewer jobs on the Street this year, but what's to prevent the rubber band from snapping back to its original shape after the economy stabilizes?

I don't think pay caps are the answer. They're too easily thwarted, and there's a first-mover disadvantage -- if the U.S. limits executive pay, European banks (or Chinese ones?) will quickly snag all the top talent.

Dean Baker suggests a financial transactions tax. "A tax of 0.25 percent on a stock trade, or a 0.02 percent tax on the purchase of an option or future, will have almost no impact on those looking to invest in the stock market or hedge their wheat crop. However, it will impose a heavy cost on short-term traders, and therefore will substantially reduce the volume of trading."

The result, he hopes, will be "a financial sector small enough to drown in a bathtub."

Watching the protests in Thailand over the weekend brought back some distant memories for me—of covering the pro-democracy protests in that country nearly 17 years ago, in May of 1992. Then, as now, the country was paralyzed, but the story line was a lot simpler in those days. Then it was a nascent middle class clamoring for Thailand’s emergence from military autocracy, making use of technologies like fax machines and cell phones to spread the word and undermining official state TV. It was all part of that simplistic “end-of-history” model we were enthralled with back then. Once people got a taste of prosperity, they wanted open political expression. And boy, were they becoming prosperous in the ‘90s, or so we thought. Western-style open-market economies had dominated in the great cold war contest of alternative ideologies. Even Vietnam found itself surrounded by Asian Tigers -- the cold war dominoes had fallen the other way. The end of the cold war was nigh, as was the collapse of the Soviet Union (that would take place six months later). The ultimate victor, we all knew, would be freedom. And not some abstract concept of freedom -- instead, we all were coming to the belief that the freedom to think and vote and act freely was intrinsically linked to the freedom to invent some hot new technology or to start up your own business. It was a moment of history when the truth really did seem simple.

Now we know better. And nothing demonstrates how complex things have become than the travails of Thailand. The latest protests, after all, are not just a story of brave freedom-seeking demonstrators versus evil authoritarians. Yes, the target of their immediate ire is the latest military coup, the one that toppled Prime Minister Thaksin Shinawatra in 2006. But Thaksin was also corrupt, and the economic inequalities he did little to ameliorate during his increasingly authoritarian tenure have become acute with the latest economic crisis. And as Thaksin faces charges at home, the former telecom magnate has been funneling money to the protesters, known as Red Shirts, who have their own satellite TV channel. Many Thais genuinely want a return to democracy, but Thaksin is hardly the hero of the future.

The deeper problem is the flaws in that rapidly obsolescing old globalization model—free-markets produce democracy which in turn produces general happiness—still need to be addressed. The model is long overdue for rethinking and rejiggering. In the wake of the subprime mortgage fallout, we have realized that simply letting capital flow freely—the global financial system we have depended on—isn’t working. We’ve also known for years that while free trade is generally good, the world is not flat, that globalization has deepened income inequalities rather than narrowed them. Overall globalization is still the way to go: No country, not even would-be rogues like Iran and Russia, has found a way around the iron law of the post-cold war global order: in order to be influential or powerful, a nation must be prosperous; and in order to be prosperous, its economy must take part in the international system. But simply coasting on those verities won’t cut it any more. I’m not sure what the answer is exactly, but to try to find out I’ve begun reading a book by Joseph Stiglitz that for too long I’ve ignored: “Making Globalization Work.”

Scrub Up: The Treasury Department is preparing General Motors for a fast, "surgical," bankruptcy.

Earnings Season: Some big names announce earnings this week, including Goldman Sachs and Citigroup. Markets are expected to sink today on worries over the financial health of major companies.

Wrong, Wrong, Wrong: More than a year into the financial crisis, Der Spiegel looks at which world leaders, business minds and pundits were right in their economic predictions -- and which were blindingly wrong. Bush, Bernanke, Trichet, and Merkel fall into the latter category; Buffett, Soros, Greenspan, and Roubini get bragging rights.

Money Managers Are at Fault, Too: It's not just the banks, mortgage brokers, and borrowers that sank the economy. Blame your pension fund and university endowment, too. Big funds own 70 percent of large public companies, and they failed to police them. "These managers arguably played a major role in allowing the managers of our public corporations to exploit the advantages of their own agency," says the legendary founder of Vanguard.