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This has almost nothing to do with Powell. The demand spike began easing months ago as gasoline inventories began to go up. The thing about the Fed and both pa

by jmyeet 4y ago

This has almost nothing to do with Powell. The demand spike began easing months ago as gasoline inventories began to go up. The thing about the Fed and both parties is their only tool for tackling inflation is to suppress worker wages by spiking unemployment. That's what monetary policy is designed to do. But it's not the only way to tackle demand. But you can do the same thing with taxation (eg Spain's windfall tax [1]). Why is it no one in US politics talking about that? The answer should be obvious: both parties exist to protect the capital-owning class and won't do anything that migh thurt profits. [1]: https://www.euractiv.com/section/energy-environment/news/spain-announces-windfall-tax-on-energy-finance-firms-to-ease-inflation-pinch/ https://www.euractiv.com/section/energy-environment/news/spa...

JumpCrisscross 4y ago
> their only tool for tackling inflation is to suppress worker wages by spiking unemployment This is nonsense. Unemployment is down. Raising rates reduces aggregate demand in fairly direct ways, e.g. through home construction and renovation. To the degree workers are getting screwed it’s by real incomes being squeezed by inflation.
- rufusroflpunch 4y ago
  It's not nonsense. In the US, full-time jobs are down, people with multiple jobs are up. It's not reflected correctly in the Establishment jobs survey, which is the survey the media outlets all use when reporting jobs numbers. Anyway, full time jobs are dropping out of the economy, but it's being offset by people taking more than one job to make ends meet. I don't know about you, but this hardly seems like a healthy situation.
  - Bud 4y ago
    It's nonsense. Unemployment is at a 50-year low.
    - simoncion 4y ago
      I don't see why "Many-to-most people have to have two part-time jobs to make ends meet" precludes unemployment being at a 50-year low. What am I missing?
      - JumpCrisscross 4y ago
        > don't see why "Many-to-most people have to have two part-time jobs to make ends meet" precludes unemployment being at a 50-year low Full-time employment is at a record high [1]. Multiple job holders are about 1mm over the pre-pandemic peak, but below trend and not cannibalising FTE [2]. [1] https://fred.stlouisfed.org/series/LNS12500000 https://fred.stlouisfed.org/series/LNS12500000 [2] https://fred.stlouisfed.org/series/LNS12500000 https://fred.stlouisfed.org/series/LNS12500000
        simoncion 4y ago
        Ah. I was missing the part that OP didn't mention at all. Thanks much for filling in the gaps in the explanation.
- imtringued 4y ago
  >This is nonsense. Higher capital yields mean a higher income share for capital. That means companies have less money to spend on wages and as far as I know, employers prefer firing entire humans over reducing pay or working hours over the entire staff, hence the unemployment problem and the need for inflation to quietly negotiate wages downward to avoid excessive unemployment that deflation would cause.
- tablespoon 4y ago
  > This is nonsense. Unemployment is down. IIRC, so are real wages: America's inflation problem gets worse (https://www.axios.com/2022/07/13/inflation-cpi-biden-prices https://www.axios.com/2022/07/13/inflation-cpi-biden-prices): > High inflation is causing the sharpest decline in real wages in decades. Even in a robust jobs market, the typical worker ends up financially worse off with every month that passes. With Surge in July, U.S. Recovers the Jobs Lost in the Pandemic (https://www.nytimes.com/2022/08/05/business/economy/july-jobs-report-gains.html https://www.nytimes.com/2022/08/05/business/economy/july-job...): > The Fed has raised interest rates four times in its battle to curb the steepest inflation in four decades, and policymakers have signaled that more increases are in store. That strategy is likely to lead to a slowdown in hiring later in the year as companies cut payrolls to match expected lower demand. > Already, surveys of restaurateurs, home builders and manufacturers have reflected concern that current spending will not continue. Initial claims for unemployment insurance have been creeping up, and job openings have fallen for three consecutive months. In an Unequal Economy, the Poor Face Inflation Now and Job Loss Later (https://www.nytimes.com/2022/08/08/business/economy/inflation-jobs-economy.html https://www.nytimes.com/2022/08/08/business/economy/inflatio...) > In that case, poorer families will almost certainly bear the brunt again, because low-wage workers are often the first to lose hours and jobs. The bifurcated economy, and the policy decisions that stem from it, could become a double whammy for them, inflicting higher costs today and unemployment tomorrow.... > America’s poor have spent part of the savings they amassed during coronavirus lockdowns, and their wages are increasingly struggling to keep up with — or falling behind — price increases. Because such a big chunk of their budgets is devoted to food and housing, lower-income families have less room to cut back before they have to stop buying necessities. Some are taking on credit card debt, cutting back on shopping and restaurant meals, putting off replacing their cars or even buying fewer groceries.
- jmyeet 4y ago
  : This is nonsense. Listen to Powell [1] himself (emphasis added): > So in principle, it seems as though, by moderating demand, we could see vacancies come down, and as a result—and they could come down fairly significantly and I think put supply and demand at least closer together than they are, and that that would give us a chance to have lower—to get inflation—to get wages down and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that. Back to you: > Raising rates reduces aggregate demand in fairly direct ways, e.g. through home construction and renovation Because if there's one thing we need it's less home construction. [1]: https://www.wsj.com/articles/transcript-fed-chief-powells-postmeeting-press-conference-11651696613 https://www.wsj.com/articles/transcript-fed-chief-powells-po...

by jmyeet 4y ago

JumpCrisscross 4y ago

> their only tool for tackling inflation is to suppress worker wages by spiking unemployment This is nonsense. Unemployment is down. Raising rates reduces aggregate demand in fairly direct ways, e.g. through home construction and renovation. To the degree workers are getting screwed it’s by real incomes being squeezed by inflation.

rufusroflpunch 4y ago
It's not nonsense. In the US, full-time jobs are down, people with multiple jobs are up. It's not reflected correctly in the Establishment jobs survey, which is the survey the media outlets all use when reporting jobs numbers. Anyway, full time jobs are dropping out of the economy, but it's being offset by people taking more than one job to make ends meet. I don't know about you, but this hardly seems like a healthy situation.
- Bud 4y ago
  It's nonsense. Unemployment is at a 50-year low.
  - simoncion 4y ago
    I don't see why "Many-to-most people have to have two part-time jobs to make ends meet" precludes unemployment being at a 50-year low. What am I missing?
    - JumpCrisscross 4y ago
      > don't see why "Many-to-most people have to have two part-time jobs to make ends meet" precludes unemployment being at a 50-year low Full-time employment is at a record high [1]. Multiple job holders are about 1mm over the pre-pandemic peak, but below trend and not cannibalising FTE [2]. [1] https://fred.stlouisfed.org/series/LNS12500000 https://fred.stlouisfed.org/series/LNS12500000 [2] https://fred.stlouisfed.org/series/LNS12500000 https://fred.stlouisfed.org/series/LNS12500000
      - simoncion 4y ago
        Ah. I was missing the part that OP didn't mention at all. Thanks much for filling in the gaps in the explanation.
imtringued 4y ago
>This is nonsense. Higher capital yields mean a higher income share for capital. That means companies have less money to spend on wages and as far as I know, employers prefer firing entire humans over reducing pay or working hours over the entire staff, hence the unemployment problem and the need for inflation to quietly negotiate wages downward to avoid excessive unemployment that deflation would cause.
tablespoon 4y ago
> This is nonsense. Unemployment is down. IIRC, so are real wages: America's inflation problem gets worse (https://www.axios.com/2022/07/13/inflation-cpi-biden-prices https://www.axios.com/2022/07/13/inflation-cpi-biden-prices): > High inflation is causing the sharpest decline in real wages in decades. Even in a robust jobs market, the typical worker ends up financially worse off with every month that passes. With Surge in July, U.S. Recovers the Jobs Lost in the Pandemic (https://www.nytimes.com/2022/08/05/business/economy/july-jobs-report-gains.html https://www.nytimes.com/2022/08/05/business/economy/july-job...): > The Fed has raised interest rates four times in its battle to curb the steepest inflation in four decades, and policymakers have signaled that more increases are in store. That strategy is likely to lead to a slowdown in hiring later in the year as companies cut payrolls to match expected lower demand. > Already, surveys of restaurateurs, home builders and manufacturers have reflected concern that current spending will not continue. Initial claims for unemployment insurance have been creeping up, and job openings have fallen for three consecutive months. In an Unequal Economy, the Poor Face Inflation Now and Job Loss Later (https://www.nytimes.com/2022/08/08/business/economy/inflation-jobs-economy.html https://www.nytimes.com/2022/08/08/business/economy/inflatio...) > In that case, poorer families will almost certainly bear the brunt again, because low-wage workers are often the first to lose hours and jobs. The bifurcated economy, and the policy decisions that stem from it, could become a double whammy for them, inflicting higher costs today and unemployment tomorrow.... > America’s poor have spent part of the savings they amassed during coronavirus lockdowns, and their wages are increasingly struggling to keep up with — or falling behind — price increases. Because such a big chunk of their budgets is devoted to food and housing, lower-income families have less room to cut back before they have to stop buying necessities. Some are taking on credit card debt, cutting back on shopping and restaurant meals, putting off replacing their cars or even buying fewer groceries.
jmyeet 4y ago
: This is nonsense. Listen to Powell [1] himself (emphasis added): > So in principle, it seems as though, by moderating demand, we could see vacancies come down, and as a result—and they could come down fairly significantly and I think put supply and demand at least closer together than they are, and that that would give us a chance to have lower—to get inflation—to get wages down and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that. Back to you: > Raising rates reduces aggregate demand in fairly direct ways, e.g. through home construction and renovation Because if there's one thing we need it's less home construction. [1]: https://www.wsj.com/articles/transcript-fed-chief-powells-postmeeting-press-conference-11651696613 https://www.wsj.com/articles/transcript-fed-chief-powells-po...