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So Powell’s theory is: if we can limit the middle class’s purchasing power by restricting extreme wage growth, the price of consumer goods will eventually plate
by mcast 4y ago
So Powell’s theory is: if we can limit the middle class’s purchasing power by restricting extreme wage growth, the price of consumer goods will eventually plateau or only increase at a fixed 2%.
Otherwise, if wages are allowed to increase at the actual inflation rate or higher (10%+) from a competitive job market, the price of goods will continue to increase without any levers for the Fed to stop it.
- Buttons840 4y agoTwo possibilities exist in an economy, either there are more workers, or there are more jobs. Ideally there would be an equal number of workers and jobs, but things don't work out so exactly in real life, so an equal number isn't really an option. Which is better, to have more workers, or more jobs? If Powell's theory is correct, then having more jobs than there are workers results in high inflation -- not good. Thus, the only stable option for an economy is to have more workers than there are jobs? That sure sucks for the workers.
- gowld 4y agoWhich is why the Federal government should increase tax on (windfall) profits, to disincentivize price increases and allow real wages to increase back to 1970s levels. The problem here is in expecting the Fed to fix the economy when all it has is an interest rate hammer.