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Its not an inaccurate summary of the fed's actions. Bringing down employment whenever wages rise certainly stops inflation, but it does so while preserving cap
by lumost 4y ago
Its not an inaccurate summary of the fed's actions. Bringing down employment whenever wages rise certainly stops inflation, but it does so while preserving capitol holders margins. Individuals only have bargaining power when the labor market is tight.
The fed is effectively cutting off the labor side of the business cycle.
- mistrial9 4y ago> is effectively cutting off the labor side of the business cycle yeah - overly simplistic conclusion.. for example, you do not recognize classes of business activity at all, yet some classes of employer are affected differently or even in the opposite direction; misleading.
- lumost 4y ago> overly simplistic conclusion Dominant first order and second order effects often have simple sounding narratives. Inflation, interest rates, and growth are complex relationships. The Fed's actions on the market are however simple instruments. The above comment points out that since the Fed started using modern monetary theory to regulate the economy. Wages and Productivity have decoupled, while one may not cause the other - it's reasonable to hypothesize a relationship based on bargaining power.