9 votes

To fight inflation, the Fed is declaring a war on workers

15 comments

  1. [15]
    MimicSquid
    Link
    The thing I hate about articles like this is that there's no call to action or other suggested path towards change. It's just saying "large forces are moving against the worker" and stopping...

    The thing I hate about articles like this is that there's no call to action or other suggested path towards change. It's just saying "large forces are moving against the worker" and stopping there. What's the point of that? To make people afraid? Outraged? Helpless? Ok, but then what? If I end an article feeling negative emotions without some concrete direction to focus them, was reading it actually good for me? No.

    8 votes
    1. [14]
      vord
      (edited )
      Link Parent
      There are numerous other ideas out there to extract this money out of the economy in a way that is less harmful to workers. In short, they all boil down to "tax the rich heavily." Heavily...

      There are numerous other ideas out there to extract this money out of the economy in a way that is less harmful to workers. In short, they all boil down to "tax the rich heavily." Heavily increasing top tax brackets to 1960's levels, into the 90%+ range, and adding wealth/estate taxes. For Jacobin to write about it, that's preaching to the choir. Here's some discussion about how Manchin killed some plans surrounding this.

      You can also mitigate the effects of inflation by expanding social safety nets to support those who are hit hardest by inflation before they become destitute. So long as you're taxing more than you're spending it's still a net win. Would have been more of a net win if it started happening after 2008, but that ship sailed.

      Edit: Also see the "Forging an Alternative Path" section of the article.

      9 votes
      1. [13]
        papasquat
        Link Parent
        The Fed doesn't have the capability to do any of that though. They don't control the tax rate and they don't control spending. The sole lever they have to influence the economy in any way is the...

        The Fed doesn't have the capability to do any of that though. They don't control the tax rate and they don't control spending. The sole lever they have to influence the economy in any way is the fed fund interest rate, which has been at absolute rock bottom almost unbroken since 2008 in an effort to continue pushing breakneck growth. Making money that cheap is fine when things are good, but when you get into a perfect storm of supply side issues like the pandemic and the war in Ukraine, it leaves you with very little wiggle room to control breakneck inflation.

        Raising the fed fund rate is literally the only thing they can do to control it. It's not a good decision, but neither is doing nothing. It's just the least bad decision they can make. A recession is inevitable at this point, but the hope is that by controlling spending we can avoid a hyper inflationary period beforehand which would make the whole situation far, far worse.

        7 votes
        1. [9]
          vord
          (edited )
          Link Parent
          True, but congress could certainly do something. They probably won't, but they could. The real problem is we never really recovered from 2008. Yea, we stopped the immediate crisis. But we didn't...

          True, but congress could certainly do something. They probably won't, but they could.

          The real problem is we never really recovered from 2008. Yea, we stopped the immediate crisis. But we didn't build that buffer to mitigate the next one.

          The real reason they're slamming on the brakes is because of increased worker empowerment. You can hear them bemoaning "labor shortage", despite full employment being good thing. People are voluntarily quitting bad jobs for good ones (with no unemployment mind). Inflation somehow wasn't quite so important when there also wasn't high employment for some reason.

          Let's do some hyperinflation and see what happens. We could use a good crisis that affects everyone....not just the lower classes.

          2 votes
          1. [5]
            skybrian
            Link Parent
            In the US we have no experience with hyperinflation, but from what I've read about other countries, I'm pretty sure it's a bad thing. We are not experiencing hyperinflation and inflation is not...

            In the US we have no experience with hyperinflation, but from what I've read about other countries, I'm pretty sure it's a bad thing.

            We are not experiencing hyperinflation and inflation is not built into expectations like the 70's yet. This is not like 1982 when Volcker killed the economy with double-digit interest rates. It's not even clear that a modest increase in interest rates is going to cause much unemployment.

            6 votes
            1. [4]
              vord
              Link Parent
              I think it's not gonna do much at all short of mass layoffs at companies flush with cash using it as an excuse to clean house. Some companies are afraid of losing existing high-skill workers. The...

              I think it's not gonna do much at all short of mass layoffs at companies flush with cash using it as an excuse to clean house.

              Some companies are afraid of losing existing high-skill workers. The 'low skill' jobs are already seeing massive churn.

              The "ideal" solution (from the souless economist) would be to fire all the high-wage earners, let their unemployment run out, and then hire them in low-wage retail jobs because nobody is hiring for high wages anymore.

              1. [3]
                skybrian
                Link Parent
                I very much doubt that any economists believe that retail jobs are the best way to employ people who were previously doing higher-skilled work.

                I very much doubt that any economists believe that retail jobs are the best way to employ people who were previously doing higher-skilled work.

                6 votes
                1. [2]
                  vord
                  (edited )
                  Link Parent
                  Maybe at a personal level, but the way policies are designed, implemented, and reported certainly reflect that kinda sentiment more often than not. Yes, there is the "Underemployed" metric, but...

                  Maybe at a personal level, but the way policies are designed, implemented, and reported certainly reflect that kinda sentiment more often than not. Yes, there is the "Underemployed" metric, but Unemployed metrics don't care if a brain surgeon is flipping burgers.

                  And wages will go down, which if the news is to be believed, is a "good thing".

                  Pair that with this obsession for having a large pool of unemployed to fill job openings immediately, and you build a picture of a hypothetical economist with all the empathy of a rock.

                  Edit: Check this article out. It's about as callous as it can get. Bad paraphrase: "It'll lower employment AND increase cost of essential goods, but at least inflation will be down!"

                  1. skybrian
                    Link Parent
                    I don't know of any economists who think that lower wages are generally better either. That's deflation, which is generally a bad thing. There are also many, many papers studying inequality that...

                    I don't know of any economists who think that lower wages are generally better either. That's deflation, which is generally a bad thing. There are also many, many papers studying inequality that were written by economists. Nor is a "large pool of unemployed" considered a good thing - who thinks high unemployment is bad?

                    Enough with the strawmen already.

                    5 votes
          2. [2]
            stu2b50
            Link Parent
            a) Uh, I'm good, thanks b) Hyperinflation absolutely disproportionally affects lower classes for a multitude of reasons. For one, inflation as measured by the CPI is disproportionately on staples...

            Let's do some hyperinflation and see what happens. We could use a good crisis that affects everyone....not just the lower classes.

            a) Uh, I'm good, thanks

            b) Hyperinflation absolutely disproportionally affects lower classes for a multitude of reasons. For one, inflation as measured by the CPI is disproportionately on staples and basic living needs. The poor spend disproportionate amounts of their income on basic living needs.

            The price of bread and related goods going up 30% might cause someone poor to go from spending 70% of their take home on basic needs, to spending 90% of their take home on basic needs. But it'll make a rich person go from spending 10% of their take home home on basic needs to 12% of their take home on basic needs.

            Secondly, the rich disproportionately have their wealth in non-cash assets. Land, stocks, bonds, other forms of capital. Not only that, but they have more opportunity to turn cash assets into other assets, including international assets if the inflation is localized to a specific market.

            6 votes
            1. vord
              Link Parent
              The solution thus presents itself. Tax the rich till that 10% is at least 50%. If the people are starving (hyperinflation or no, they're going to the food banks), the rich can forfiet some luxury...

              The price of bread and related goods going up 30% might cause someone poor to go from spending 70% of their take home on basic needs, to spending 90% of their take home on basic needs. But it'll make a rich person go from spending 10% of their take home home on basic needs to 12% of their take home on basic needs.

              The solution thus presents itself. Tax the rich till that 10% is at least 50%. If the people are starving (hyperinflation or no, they're going to the food banks), the rich can forfiet some luxury spending/asset accumulation.

              3 votes
          3. [2]
            Comment deleted by author
            Link Parent
            1. vord
              Link Parent
              Last I checked, I think we already had our fascist take over. Jan 6th showed that much. Now it's a question of if we can recover from it. I suppose I should have mentioned that last bit was mostly...

              Last I checked, I think we already had our fascist take over. Jan 6th showed that much. Now it's a question of if we can recover from it.

              I suppose I should have mentioned that last bit was mostly tongue in cheek. Text is a hard medium.

              2 votes
        2. [2]
          stu2b50
          Link Parent
          Doesn’t that make it a good decision?

          It's not a good decision, but neither is doing nothing. It's just the least bad decision they can make.

          Doesn’t that make it a good decision?

          1 vote
          1. papasquat
            Link Parent
            It makes it the best decision among two almost, but not equally bad decisions. I wouldn't say its necessarily a good one though.

            It makes it the best decision among two almost, but not equally bad decisions. I wouldn't say its necessarily a good one though.

            3 votes
        3. skybrian
          Link Parent
          Some parts of the economy are down (including the stock market) and a recession is more likely than it was, but I don't think it's inevitable. US unemployment is still very low.

          Some parts of the economy are down (including the stock market) and a recession is more likely than it was, but I don't think it's inevitable. US unemployment is still very low.

          1 vote