Author: Darren Gersh, Washington Bureau Chief

Yesterday, I reported on the impact furloughs are having on wages.

So this caught my eye from Goldman Sachs today:

"We expect average hourly earnings growth to turn negative next year, reaching -½% year-on-year by the fourth quarter. . . . Our forecast includes a judgmental adjustment for workers' likely resistance to nominal wage cuts; without this adjustment, the projection would be -2%."

Ouch. Nothing influences voters (and Power Town) more than their pocketbooks. This will be a major issue in next year's election. Count on it.

My kids never tire of hearing how, when I was their age, I could buy an ice-cream cone (three scoops!) for a quarter.

It's $3.50 now! (OK, that's at the fancy ice cream place.)

The important question here is whether the price change matters? Obviously, if the ice cream is identical, then the cost of ice cream has gone up in name. But if everyone in the country is earning 14 times as much, then the real cost of ice cream to me is the same.

At the end of the day or week or year, what we really care about is not how many dollars we have, but how much those dollars can buy. And we also care a lot how much we have to work to get those dollars with which to buy things.

When we confuse the real cost of something with the cost in name, we are falling prey to what economists call "money illusion." As Irving Fisher explained many years ago: "Money illusion . . . is the failure to perceive that the dollar, or any other unit of money, expands or shrinks in value."

What really should matter to workers is how much they can buy when they get their paycheck.

One healthy result of the bursting housing/credit market bubble is a hard-earned sense of humility.

Americans are a little wiser for our recent troubles.

A not so healthy result of the Great Recession is a lack of confidence in our long-run future. A sub-theme of this is that the future belongs to Asia, with the US an also-ran in the current century.

Not quite. China's rise is neither inexorable, nor does it mean the U.S. will be eclipsed completely in the Asian Century.

For useful balance, I recommend this article by Minxin Pei.

Minxin has been a sharp critic of China, but he is also a realist. Anyone interested in the balance of economic and political power in the world for the next few decades should read this article.

The idea of a "public health care plan" makes many people break out in hives. Some consider that a recipe for a government takeover of health care.

Others think a public plan is the only way to battle the insurance giants.

Sen. Kent Conrad of North Dakota has another idea: co-ops. It's a public/private hybrid, if you will. I asked him to explain his idea when we spoke this afternoon. (You'll need Flash installed to watch.)

There are so many crises under way that it is hard to keep track of them all.

But here is one quiet crisis that is gathering force: pensions are under pressure.

A good report on this came out from the OECD and it is worth a read. You can find information on the report here.

The figure that caught my eye is that private pension funds lost almost a quarter of their value last year.

I am usually opposed to nostalgia of all kinds. But I find economic nostalgia particularly misguided. Bad and obsolete businesses are supposed to go away. We shouldn't pine for products the marketplace can no longer support.

Progress means replacing the old stuff with newer and better stuff made by more efficient businesses. That's how we all improve our standard of living. It's creative destruction.

There are, however, exceptions.

Today Kodak announced it will end production of Kodachrome film. Those of a certain age will remember the first time you held up a slide and experienced the magical interplay of light and film.

And the colors. So sharp, so real. Kodachrome captured life as it is. If you doubt that, check out this iconic image.

It's a very different world from today's digital photography where every shot has been hopped up on Photoshop steroids that make the sky an unnatural deep purple and the colors so intense they burn holes in your retinas.

To be sure, film like Kodachrome had its drawbacks. You had to edit shots in your head. You couldn't snap away like you can with a digital camera, figuring you'll get lucky and keep the goods ones. Film is also an old technology that is hardly eco-friendly. Ever smell stop bath?

Film, however, required you to look around. To think a bit harder before you fired off a shot. And there was that moment of delight when appeared upside down and backwards.

One of the boldest reforms in the president's financial regulatory overhaul is the creation of a Consumer Financial Protection Agency.

The CFPA would cover everything from truth-in-lending disclosures to mortgage lending and credit cards. It's a massive portfolio. The goal is to encourage banks to sell "plain vanilla" products as aggressively as they push more exotic -- and profitable -- products.

I asked Austan Goolsbee, one of the president's top economic advisers, about that yesterday.(You'll need Flash installed to watch.)

Today, Power Town sent a clear message to the financial world: Big is not better.

For many years now banks and brokerages have been beefing up, expanding globally, trying to reach a scale where they can compete with other huge financial players.

The most extreme example of this "big is better" philosophy has been the financial supermarket approach. That was Citi's plan -- offer everything from insurance to investment banking to mortgages. The idea was to become the world's biggest bank. And it seemed to work for a while.

But after the credit crisis, the Obama administration has concluded that big often means "too risky." And the current regulatory proposal aims at addressing this problem.

Here is a quote from a draft we got last night.

The Administration just finished briefing reporters on the Obama Regulatory Reform plan.

Here are a few highlights of the plan:

- Create a financial services oversight council. Sounds like the current President's Working Group on Financial Markets, but the Federal Reserve is the "consolidated supervisor" of really big firms.

- Higher capital requirements are on the way. Banks and other institutions will need to have more money against the risks they take on.

- Executive compensation standards and the incentives to threaten safety and standards will get a high profile.

David Brooks has jumped on the Great Unwind downward slide. In January 2008, I suggested the gathering credit crisis should be called The Great Unwind. Since then, more and more people have caught on, including William Safire in this column on naming the plunge.

More evidence of the extent of the unwinding came today from Goldman Sachs. They report household net worth as a percentage of disposable income is now back where it was in 1992, unwinding all the gains made during the housing and tech bubbles. Illusory gains, I should say.

For perspective, the Federal Reserve reports household net worth fell $1.3 trillion dollars since the beginning of 2008 and now stands at $50.4 trillion. We are still very rich, but not as rich as we used to be.

The challenge for Power Town, as Brooks notes, is crafting policy in an environment where people are less rich. And I think it is fair to say we can't count on another consumer bubble, tech bubble, or any other bubble to magically restore the revenues destroyed in the last decade.