3 ms·

Perhaps I'm just a moron - why can't we have low unemployment and low inflation at the same time? Wouldn't that situation be the best for wage increases?

• bryanlarsen 4y ago
  We have had times with low unemployment and low inflation, but that's outside the Fed's control. The Fed has 2 levers it can pull -- interest rates and QE. Increasing rates / decreasing QE makes inflation better and unemployment worse. Decreasing rates or increasing QE makes inflation worse and unemployment better. This is about as well studied as anything in economics can be. And while low unemployment is not unique to 2022, the decreasing inequality and the imbalance between the number of job openings vs job seekers are both at levels not seen in modern times. It seems reasonable to say that the inequality reduction and the high number of job openings are correlated. Raising interest rates will impact the latter so it's quite probable that it will reverse the decreasing inequality trend.
  • tb_technical 4y ago
    Thank you for explaining that. Doesn't Quantitative Easing just destroy the savings of the middle class over time? I don't understand how this helps equality in the long run, because it seems that inflation and Quantitative Easing are tools used to destroy generational wealth. Do you have a resource you can recommend for self study?
    • bryanlarsen 4y ago
      Neither the poor nor the middle class have significant generational wealth to destroy. Wealth inequality is much worse in the US than income inequality. Inflation decreases wealth and increases income which is why it is a powerful tool to combat inequality.