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"Unemployment is the goal of this Fed policy - that is the point - cause unemployment so that inflation goes away." Why would this be a goal?
by themitigating 4y ago
"Unemployment is the goal of this Fed policy - that is the point - cause unemployment so that inflation goes away."
Why would this be a goal?
- silisili 4y agoThe end goal is to reduce inflation. The goal of policy is to increase unemployment, which itself is a tool used towards the end goal. This isn't conspiracy speak, JPowell has made this very clear.
- yebyen 4y agoThe idea is I think that inflation is caused by too much money supply in circulation, caused by overemployment, and the only cure for that is less employment. It's a lot like how inflation and deflation are two sides of the same coin, but you wouldn't "root for deflation" because that's just the opposite extreme – Fed doesn't want everyone to lose their jobs, "just a healthy amount"
- Spartan-S63 4y agoThis the reality because there's no political will for Congress to act, so we're left the Fed to implement anti-inflationary measures. A sufficiently empowered legislature might attack this on the supply-side so that nominal increases in wages could become real increases in wages while discouraging the supply-side from increasing prices to rent-seek those nominally increased wages. It sucks, but it is what it is. The rich keep getting richer and the poor keep getting poorer.
- refurb 4y agoPrice controls were tried in the 70’s and it failed spectacularly and often led to shortages. We had almost a decade of stagflation - poor economic performance AND inflation. It wasn’t until the fed took control of the money supply in the late 70’s did inflation get under control.
- grey-area 4y agoIt’s the only lever the Fed has, so that is what they can use. They don’t have control of fiscal policy only monetary.