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Any article that claims the Fed has the tools to address supply troubles is too shallow to believe. Any article that talks about the Fed's response without tal
by readthenotes1 4y ago
Any article that claims the Fed has the tools to address supply troubles is too shallow to believe.
Any article that talks about the Fed's response without talking about Powell's reconfirmation is really not worth reading.
Once his job was secure, inflation was priority and he set out to destroy demand to reduce wages and the ease the burden on the broken supply chain that he no tools to fix.
- hammock 4y agoYour comment will go unappreciated because it’s not that accessible to a broad audience, but you are right the goal right now is demand destruction.
- matwood 4y agoPretty much. He's going to have to force demand to recession levels to deal with the supply issues still going on from covid and now the war. It's like people forget that inflation is not only too much money, but too much money chasing too few goods.
- wafriedemann 4y agoI dont't think so, because supply can't keep up with demand. So lowering demand even significantly would have no impact on supply, i.e. the economic output.
- legutierr 4y agoSurely the problem is that the supply of various goods is hitting physical limits. A reduction in demand wouldn't reduce supply; instead it would cause demand to be more in line with a fixed supply level.
- aeternum 4y agoWhich goods are hitting physical limits? This generally doesn't happen with capitalism.
- wafriedemann 4y agoThere definitely is a limit, but most certainly there are a ton of temporary limits. You need more workers, which are limited (the US is basically at full employment), you need new factories (which take time to build), you need to factor in if the increased demand is sustainable (otherwise you wouldn't build it).
- adam_arthur 4y agoSupply of pretty much everything is above pre-pandemic levels. Just that demand is even higher. A balanced outcome is always a function of both supply and demand
- wafriedemann 4y agoThat is what I am saying.
- adam_arthur 4y agoMy bad then, I read your comment differently. I see a lot of people saying Fed shouldn't raise because it's a supply side issue, but blunting demand in these situations is exactly what the Fed is meant to do, since supply is fixed in the short/medium term
- mint2 4y agoFor example how’s he going to fix housing inflation that’s due to the horribly broken housing supply that was basically a time bomb left by single family zoning.
- vinyl7 4y agoKill demand by raising mortgage interest rates. Houses will stay on the market longer and cause prices to fall. The run up over the last two years was because of FOMO and speculation more so than shortages.
- basch 4y agoPrice of consumer goods is up, and one quarter ago every company was making record profits, but obviously its the FEDs fault corporate America started price gouging.
- readthenotes1 4y agoThat is the third leg of inflation. It is fairly well known that one of the predictors of future inflation is the belief in it - - a self-fulfilling prophecy. The Fed does not have any tools to address businesses who take advantage of people believing that the prices should be higher to raise their price and in the short term their profit. The fed has one Cannon to use, reduce or expand the money supply, and it only hits one of the three sources for inflation
- ayngg 4y agoIt looks like they have the choice of saving the dollar or saving the economy, and it seems like in their attempt for both fixing inflation while having a "soft landing," they may get neither.