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I mean they don’t “have to;” it’s a deliberate policy decision, as it was then, to slow economic growth, increase unemployment, and lower wages, in order to cur
by emodendroket 4y ago
I mean they don’t “have to;” it’s a deliberate policy decision, as it was then, to slow economic growth, increase unemployment, and lower wages, in order to curb inflation and discipline labor. We have a political culture where everyone pretends this is a law of the universe but it isn’t really.
- rayiner 4y agoI think it’s more than “political culture” that drives the Fed to not allow its balance sheet to grow indefinitely.
- emodendroket 4y agoYou could even agree with the decision but it’s not presented as a decision at all.
- themgt 4y agoThe Federal Reserve is given a "dual mandate" written into US law by Congress and signed by the President? So not exactly a "law of the universe" but I wouldn't recommend going around arguing you don't "have to" do things if they don't meet that standard. https://www.chicagofed.org/research/dual-mandate/dual-mandate https://www.chicagofed.org/research/dual-mandate/dual-mandat...
- vlovich123 4y agoI’m eagerly looking forward to the logical pretzeling SCOTUS will engage in to pretend Congress can’t delegate regulating making authority to the EPA but it can do this for the FED.
- jdhn 4y agoI for one hope that there's no pretzeling, and that the standard that's applied to the EPA is equally applied to the Fed.
- colechristensen 4y agoInflation will do it if the fed doesn't. There's no free lunch where you get to shut down big sections of your economy for a year or more and then afterwards it's like nothing happened. Either high inflation causes a recession or the things you do to avoid high inflation causes a recession.
- patrickthebold 4y agoDoes high inflation usually cause recessions? There are some downsides to inflation of course, but it's not obvious to me that that means a recession. I'm not familiar enough with historical examples of inflation to know.
- peytoncasper 4y agoHigh inflation will have knock on effects in which consumers will eventually stop buying items, instead focusing on the bare essentials either out of fear or actual cost cutting needs. This reduction in spending will largely affect non core spending like services and luxury-ish/luxury goods like electronics, cars, houses, etc. This happens to be where the bulk of the US economy is focused which means a slow down in spending there will effect workers in those industries. Couple that with higher core good costs and just natural momentum in regards to spending. You're left with large parts of the economy that experience a flywheel effect that make it harder to purchase things and further reduce the ability to spend on other non-essential goods and even when things start to change, peoples mindset on spending takes years to shift with it. All of this leads to reduced demand and ultimately a recession.
- MisterBastahrd 4y agoIt doesn't help that companies have been gouging customers in order to get ahead of the curve.
- ChrisLomont 4y agoPeople keep claiming this, but SEC filings don't show these inflated profits across any sector I have checked in to. Which sector(s) do you claim is gouging people for higher than normal profits? Have evidence in the form of profit/loss records?