7 ms·

People employed can afford to buy stuff though, which also increases profit. The simpler reason is that it means that people believe Fed will read this as a lic

People employed can afford to buy stuff though, which also increases profit. The simpler reason is that it means that people believe Fed will read this as a license to not have to slow down rate increases, which will hurt stocks.

lapcat 4y ago
> The simpler reason is that it means that people believe Fed will read this as a license to not have to slow down rate increases But there's a direct relation, because the Fed has been very explicit that they're worried about employment and wage growth, and they're raising interest rates in order to depress those. The Fed operates according to the interests of the wealthy.
- toomuchtodo 4y ago
  Good luck to them. 10K boomers retire a day, there are less workers than jobs, and no benchmark rate will change that. https://news.ycombinator.com/item?id=34601350 https://news.ycombinator.com/item?id=34601350
  - Loughla 4y ago
    Not interest rates, but tanking stocks and investments absolutely will change that. If my retirement investments lose 50% of their value, I'll have to go back to work.
    - netfortius 4y ago
      I can't believe how fewer people see that side! It's good for the working folks to get competitive wages, but what are you doing with the troves of people who had to embark in the 401k/IRA/etc. "trains"? Are they expected to get back to work in their 60s/70s/80s, to make up for inflation and purchasing power
      - lapcat 4y ago
        That's supposed to be what Social Security is for. Though arguably the retirement age is too low now for increasing human lifespans. (OTOH the pandemic cut into that somewhat.)
        netfortius 4y ago
        Living out of [only] social security is a bad joke, for a standard of living barely above just eating, sleeping and not getting sick. I contributed the max throughout my 30 years professional career, I'm fully vested, and it can barely cover anything of usable value, in these times. If one thinks that culturally / spiritually (but not religiously) could be supported by socsec, is delusional. Leaving the States is the only reasonable move, considering the present situation.
        lapcat 4y ago
        Note that I said "That's supposed [emphasis added] to be what Social Security is for." The question is not what the federal government is actually doing right now (if anything) to help people affected by inflation but rather what the federal government could do to help people affected by inflation. Some people in the comments seem to be claiming that driving up interest rates is literally the only logical possibility, and nothing different could be done. The equation of retirement and stock market investment is a deliberate policy choice designed to push large amounts of working class money into the stock market, thereby benefitting the speculators and financiers.
        Loughla 4y ago
        I've been thinking about your comment for a few days now. >The equation of retirement and stock market investment is a deliberate policy [. . .] Reads to me as if investing in stocks is a negative, that has been deliberately pushed on society as a whole. I am interested to hear what an alternative would be for you. What else can I park my money in for a good enough return to ensure that I don't have to rely on the weak (and ever weakening) SS? I legitimately cannot come up with anything worthwhile.
  - ianai 4y ago
    My hypothesis is the offered wages are below the market clearing rates. People have a willingness to work for every price offered for their labor. If they aren’t filling positions then the wage is too low. Granted, if they raise rates to 10%+ they’ll drive the entire economy into the ditch. Then these jobs will disappear and prices will deflate-along with lots of horrific side effects. Edit-The US minimum wage is 7.25/hr or 15,080 per year at full time. The US poverty level for a single person without children is 15,225. They have to specify it in a spreadsheet. Because of all the qualifications on that information. https://www2.census.gov/programs-surveys/cps/tables/time-series/historical-poverty-thresholds/thresh22.xlsx https://www2.census.gov/programs-surveys/cps/tables/time-ser...
    - bombcar 4y ago
      Anecdotally but I think there's a large portion of the workforce that left during covid and has determined that returning isn't valuable. Mostly the second income in a household, and often the woman (who was lower paid in general anyway). Why return for $20 an hour when you cut all your daycare expenses, maybe even downsized? You'll have to offer a wage high enough to make it worthwhile.
      - toomuchtodo 4y ago
        I have seen similar across various age cohorts. Older folks 65+ who opted for Social Security + Medicare versus going back to an office, as well as couples who found better value from single income and making adjustments versus two incomes and intermittent child care arrangements (child care is not only expensive, but difficult to find, due to wait lists, staff shortages, etc).
        bombcar 4y ago
        Yeah, and I feel many people just needed to "try" it to realize "this ain't so bad, sheep" and then they stick with it. When a second wage earner loses a job you get into a panic because the bills are still coming and you're used to running at a certain spend rate - but when you've been not working for 2+ years now you're going to have acclimatized to one income, and the desire to return may be there, but the fear driven need won't be. And that means you can wait and choose a good offer for you.
  - runnerup 4y ago
    That wouldn’t inherently lead to CPI inflation though except that the supply of many, many things is so damned constrained. Even the feds own reports acknowledge that slightly over half of inflation is from lack of supply, not high wages. e.g. wages aren’t doubling the price of eggs.
    - pessimizer 4y ago
      > wages aren’t doubling the price of eggs. No, that seems to be a crime of opportunity.
      - deleted 4y ago
        [deleted]
  - lapcat 4y ago
    > no benchmark rate will change that It's definitely a crude measure. I think it acts as more of a signal to corporations that they should instigate mass layoffs. You don't want to be the only company doing layoffs and then just have your competitors gobble up your talent and eat your lunch. So the Fed signals the safe time for everyone to do layoffs simultaneously. It's implicit coordination.
- baryphonic 4y ago
  > The Fed operates according to the interests of the wealthy. That may me true (FWIW I think the Fed acts in the Fed's own and the US Government's interests). However, mainstream macroeconomics posits something called "demand-pull" inflation.[0] The symptoms of demand-pull inflation apply to the labor market, and look kind of like what we see today. I don't really believe in that myself, but the vast majority of professional economists do. [0] https://seekingalpha.com/article/4488432-demand-pull-inflation https://seekingalpha.com/article/4488432-demand-pull-inflati...
- mastax 4y ago
  Do you think that inflation doesn't affect the poor? Or do you think the Fed has some tool which can reduce inflation without reducing wages, which they are choosing not to use? Or some third option?
  - lapcat 4y ago
    > Do you think that inflation doesn't affect the poor? Yes, it affects the poor, but the only way out of poverty is employment and wage growth. > Or do you think the Fed has some tool which can reduce inflation without reducing wages No. > Or some third option? Wage inflation is not necessarily a bad thing, as long it outpaces the inflation of other products. Of course it all depends on whose wages are rising the fastest, the wages of the poor or the wages of the wealthy. What corporations don't like is when wage inflation cuts corporate profits.
- cscurmudgeon 4y ago
  If you have a way of reducing inflation without hitting wages or jobs, please share that with world.
  - lapcat 4y ago
    I don't want to reduce wage inflation, at least not for the majority of the population.
    - cscurmudgeon 4y ago
      I wasn’t talking about wage inflation. I don’t want to age either. Nobody does.
      - lapcat 4y ago
        > I wasn’t talking about wage inflation. But you were, because inflation includes wage inflation. > I don’t want to age either. This is a non sequitur.
        cscurmudgeon 4y ago
        Is wage inflation the only part of inflation? You are not answering the question. Let me reformulate: How do you reduce general inflation without hitting jobs? It is okay to admit this is logically not possible. > This is a non sequitur It isn’t :)
        lapcat 4y ago
        > Is wage inflation the only part of inflation? No, there are many factors. The supply chain plays a big part, as we've seen during the pandemic. Corporate profiteering also plays a big part. > How do you reduce general inflation without hitting jobs? I'm not answering the question because I'm not committed to reducing "general" inflation. I'm happy to increase wage inflation, especially at the lower end. I would like to reduce specific forms of inflation, for example, health care cost inflation and school tuition inflation. Whether costs should go up, down, or stay the same all depends on the specific product.
- kolbe 4y ago
  The only thing that really causes inflation is wage growth, and an observed phenomenon is that overall wage growth does not increase the living standards of workers anyway, because scarce necessities like housing will just increase at a high enough rate to capture all excess wages. On the other hand, the real consequence of wage growth is supply chain and staffing disruptions. If we could get wage growth without offsetting inflation, that would be great. But the "wealthy" boogeyman that you reference would never allow that to happen!
  - lapcat 4y ago
    > The only thing that really causes inflation is wage growth I'm truly stunned that you can say this after the pandemic.
    - kolbe 4y ago
      A period of time with a lot of inflation and wage growth? How dare I say the two are related. It's not a blanket statement. Real war causes inflation, monopoly power causes inflation. But in the context of modern US, the biggest thing is wage growth.
- pjc50 4y ago
  > The Fed operates according to the interests of the wealthy. Eh, the Fed is playing business cycle PID controller with the standard economic model that's worked to keep inflation low since the 1970s; having employment above a certain level ("NAIRU") causes a "wage-price spiral", and the side effects of the resulting inflation are deemed worse than those of artificially keeping employment higher than it otherwise might be. It certainly works for stability and against a high-inflation environment where people are constantly on strike. The side effect is indeed that this pressures wage earners.
  - lapcat 4y ago
    > the side effects of the resulting inflation are deemed worse Deemed worse by whom? People complain about inflation in the 1970s, but just like now a significant part of that was caused the supply chain (OPEC then, Covid now), and in any case US income and wealth inequality are actually much worse now than in the 1970s.
    - refurb 4y ago
      Worse for the average worker who saw their 10% pay raise disappear with 13% inflation. The 70’s were an absolute dump in terms of the economy. 8% unemployment in ‘75. Nobody wants to go back to that.
- boringg 4y ago
  [flagged]
  - lapcat 4y ago
    Your reply grossly violates the HN guidelines. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html Mostly for your own benefit but also to drive better conversation here, please review them.
- Aunche 4y ago
  This is the nonsense narrative the mainstream media is trying to pedal to drive populist engagement, but it doesn't make any sense. The interest rate hikes have dramatically decreased wealth inequality and tempered inflation without affecting unemployment. The Federal Reserve has shown that they don't care that their high interest rates are driving down stocks, so they'll continue to allow them to tumble. By contrast, they have said that they would lower interest rates again if unemployment increases to much, but by some twisted logic, people think that it means that it's their goal to decrease employment rather than unemployment being something that they actually care about.
  - lapcat 4y ago
    > The interest rate hikes have dramatically decreased wealth inequality Citation please. > tempered inflation without affecting unemployment If they've tempered inflation, then why did the Fed just raise them again, and suggest they might be raised even more? > people think that it means that it's their goal to decrease employment No, the Fed has explicitly said that their goal is to reduce wage growth. They're happy to have people employed, as long as the workers don't ask for higher wages. You're painting a false dichotomy: employed or unemployed. But how much you make while employed is crucial.
    - Aunche 4y ago
      > Citation please. Look at stock prices, which are primarily owned by the wealthy. The richest 500 people collectively lost $1.4 trillion last year. https://www.bloomberg.com/news/features/2022-12-29/billionaire-wealth-losses-in-2022-hit-1-4-trillion-led-by-elon-musk-jeff-bezos https://www.bloomberg.com/news/features/2022-12-29/billionai... > If they've tempered inflation, then why did the Fed just raise them again, and suggest they might be raised even more? Inflation is still at 6.5%, which is greater than the interest rate. > No, the Fed has explicitly said that their goal is to reduce wage growth. No, they explicitly did not say this. This is the nonsense framing that I'm talking about. The Federal Reserve does fear a wage price spiral, but that's because that's a feedback loop that undermines economic stability. Inflation affects everyone. Meanwhile, wage increases benefit some people more than others, for example younger workers who are happy to job hop. Meanwhile, others are stuck paying higher prices on the same income.
unity1001 4y ago
> People employed can afford to buy stuff though, which also increases profit. Such long-term thinking does not exist in the free market religion. They want maximum profits now, and everything else is "someone else's problem".
lamontcg 4y ago
That's more or less exactly what the comment you're responding to is saying. The way that higher unemployment and lower wages and income inequality is maintained is by the fed hiking rates until it engineers a recession (which hurts stocks).

lapcat 4y ago

> The simpler reason is that it means that people believe Fed will read this as a license to not have to slow down rate increases But there's a direct relation, because the Fed has been very explicit that they're worried about employment and wage growth, and they're raising interest rates in order to depress those. The Fed operates according to the interests of the wealthy.

toomuchtodo 4y ago
Good luck to them. 10K boomers retire a day, there are less workers than jobs, and no benchmark rate will change that. https://news.ycombinator.com/item?id=34601350 https://news.ycombinator.com/item?id=34601350
- Loughla 4y ago
  Not interest rates, but tanking stocks and investments absolutely will change that. If my retirement investments lose 50% of their value, I'll have to go back to work.
  - netfortius 4y ago
    I can't believe how fewer people see that side! It's good for the working folks to get competitive wages, but what are you doing with the troves of people who had to embark in the 401k/IRA/etc. "trains"? Are they expected to get back to work in their 60s/70s/80s, to make up for inflation and purchasing power
    - lapcat 4y ago
      That's supposed to be what Social Security is for. Though arguably the retirement age is too low now for increasing human lifespans. (OTOH the pandemic cut into that somewhat.)
      - netfortius 4y ago
        Living out of [only] social security is a bad joke, for a standard of living barely above just eating, sleeping and not getting sick. I contributed the max throughout my 30 years professional career, I'm fully vested, and it can barely cover anything of usable value, in these times. If one thinks that culturally / spiritually (but not religiously) could be supported by socsec, is delusional. Leaving the States is the only reasonable move, considering the present situation.
        lapcat 4y ago
        Note that I said "That's supposed [emphasis added] to be what Social Security is for." The question is not what the federal government is actually doing right now (if anything) to help people affected by inflation but rather what the federal government could do to help people affected by inflation. Some people in the comments seem to be claiming that driving up interest rates is literally the only logical possibility, and nothing different could be done. The equation of retirement and stock market investment is a deliberate policy choice designed to push large amounts of working class money into the stock market, thereby benefitting the speculators and financiers.
        Loughla 4y ago
        I've been thinking about your comment for a few days now. >The equation of retirement and stock market investment is a deliberate policy [. . .] Reads to me as if investing in stocks is a negative, that has been deliberately pushed on society as a whole. I am interested to hear what an alternative would be for you. What else can I park my money in for a good enough return to ensure that I don't have to rely on the weak (and ever weakening) SS? I legitimately cannot come up with anything worthwhile.
- ianai 4y ago
  My hypothesis is the offered wages are below the market clearing rates. People have a willingness to work for every price offered for their labor. If they aren’t filling positions then the wage is too low. Granted, if they raise rates to 10%+ they’ll drive the entire economy into the ditch. Then these jobs will disappear and prices will deflate-along with lots of horrific side effects. Edit-The US minimum wage is 7.25/hr or 15,080 per year at full time. The US poverty level for a single person without children is 15,225. They have to specify it in a spreadsheet. Because of all the qualifications on that information. https://www2.census.gov/programs-surveys/cps/tables/time-series/historical-poverty-thresholds/thresh22.xlsx https://www2.census.gov/programs-surveys/cps/tables/time-ser...
  - bombcar 4y ago
    Anecdotally but I think there's a large portion of the workforce that left during covid and has determined that returning isn't valuable. Mostly the second income in a household, and often the woman (who was lower paid in general anyway). Why return for $20 an hour when you cut all your daycare expenses, maybe even downsized? You'll have to offer a wage high enough to make it worthwhile.
    - toomuchtodo 4y ago
      I have seen similar across various age cohorts. Older folks 65+ who opted for Social Security + Medicare versus going back to an office, as well as couples who found better value from single income and making adjustments versus two incomes and intermittent child care arrangements (child care is not only expensive, but difficult to find, due to wait lists, staff shortages, etc).
      - bombcar 4y ago
        Yeah, and I feel many people just needed to "try" it to realize "this ain't so bad, sheep" and then they stick with it. When a second wage earner loses a job you get into a panic because the bills are still coming and you're used to running at a certain spend rate - but when you've been not working for 2+ years now you're going to have acclimatized to one income, and the desire to return may be there, but the fear driven need won't be. And that means you can wait and choose a good offer for you.
- runnerup 4y ago
  That wouldn’t inherently lead to CPI inflation though except that the supply of many, many things is so damned constrained. Even the feds own reports acknowledge that slightly over half of inflation is from lack of supply, not high wages. e.g. wages aren’t doubling the price of eggs.
  - pessimizer 4y ago
    > wages aren’t doubling the price of eggs. No, that seems to be a crime of opportunity.
    - deleted 4y ago
      [deleted]
- lapcat 4y ago
  > no benchmark rate will change that It's definitely a crude measure. I think it acts as more of a signal to corporations that they should instigate mass layoffs. You don't want to be the only company doing layoffs and then just have your competitors gobble up your talent and eat your lunch. So the Fed signals the safe time for everyone to do layoffs simultaneously. It's implicit coordination.
baryphonic 4y ago
> The Fed operates according to the interests of the wealthy. That may me true (FWIW I think the Fed acts in the Fed's own and the US Government's interests). However, mainstream macroeconomics posits something called "demand-pull" inflation.[0] The symptoms of demand-pull inflation apply to the labor market, and look kind of like what we see today. I don't really believe in that myself, but the vast majority of professional economists do. [0] https://seekingalpha.com/article/4488432-demand-pull-inflation https://seekingalpha.com/article/4488432-demand-pull-inflati...
mastax 4y ago
Do you think that inflation doesn't affect the poor? Or do you think the Fed has some tool which can reduce inflation without reducing wages, which they are choosing not to use? Or some third option?
- lapcat 4y ago
  > Do you think that inflation doesn't affect the poor? Yes, it affects the poor, but the only way out of poverty is employment and wage growth. > Or do you think the Fed has some tool which can reduce inflation without reducing wages No. > Or some third option? Wage inflation is not necessarily a bad thing, as long it outpaces the inflation of other products. Of course it all depends on whose wages are rising the fastest, the wages of the poor or the wages of the wealthy. What corporations don't like is when wage inflation cuts corporate profits.
cscurmudgeon 4y ago
If you have a way of reducing inflation without hitting wages or jobs, please share that with world.
- lapcat 4y ago
  I don't want to reduce wage inflation, at least not for the majority of the population.
  - cscurmudgeon 4y ago
    I wasn’t talking about wage inflation. I don’t want to age either. Nobody does.
    - lapcat 4y ago
      > I wasn’t talking about wage inflation. But you were, because inflation includes wage inflation. > I don’t want to age either. This is a non sequitur.
      - cscurmudgeon 4y ago
        Is wage inflation the only part of inflation? You are not answering the question. Let me reformulate: How do you reduce general inflation without hitting jobs? It is okay to admit this is logically not possible. > This is a non sequitur It isn’t :)
        lapcat 4y ago
        > Is wage inflation the only part of inflation? No, there are many factors. The supply chain plays a big part, as we've seen during the pandemic. Corporate profiteering also plays a big part. > How do you reduce general inflation without hitting jobs? I'm not answering the question because I'm not committed to reducing "general" inflation. I'm happy to increase wage inflation, especially at the lower end. I would like to reduce specific forms of inflation, for example, health care cost inflation and school tuition inflation. Whether costs should go up, down, or stay the same all depends on the specific product.
kolbe 4y ago
The only thing that really causes inflation is wage growth, and an observed phenomenon is that overall wage growth does not increase the living standards of workers anyway, because scarce necessities like housing will just increase at a high enough rate to capture all excess wages. On the other hand, the real consequence of wage growth is supply chain and staffing disruptions. If we could get wage growth without offsetting inflation, that would be great. But the "wealthy" boogeyman that you reference would never allow that to happen!
- lapcat 4y ago
  > The only thing that really causes inflation is wage growth I'm truly stunned that you can say this after the pandemic.
  - kolbe 4y ago
    A period of time with a lot of inflation and wage growth? How dare I say the two are related. It's not a blanket statement. Real war causes inflation, monopoly power causes inflation. But in the context of modern US, the biggest thing is wage growth.
pjc50 4y ago
> The Fed operates according to the interests of the wealthy. Eh, the Fed is playing business cycle PID controller with the standard economic model that's worked to keep inflation low since the 1970s; having employment above a certain level ("NAIRU") causes a "wage-price spiral", and the side effects of the resulting inflation are deemed worse than those of artificially keeping employment higher than it otherwise might be. It certainly works for stability and against a high-inflation environment where people are constantly on strike. The side effect is indeed that this pressures wage earners.
- lapcat 4y ago
  > the side effects of the resulting inflation are deemed worse Deemed worse by whom? People complain about inflation in the 1970s, but just like now a significant part of that was caused the supply chain (OPEC then, Covid now), and in any case US income and wealth inequality are actually much worse now than in the 1970s.
  - refurb 4y ago
    Worse for the average worker who saw their 10% pay raise disappear with 13% inflation. The 70’s were an absolute dump in terms of the economy. 8% unemployment in ‘75. Nobody wants to go back to that.
boringg 4y ago
[flagged]
- lapcat 4y ago
  Your reply grossly violates the HN guidelines. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html Mostly for your own benefit but also to drive better conversation here, please review them.
Aunche 4y ago
This is the nonsense narrative the mainstream media is trying to pedal to drive populist engagement, but it doesn't make any sense. The interest rate hikes have dramatically decreased wealth inequality and tempered inflation without affecting unemployment. The Federal Reserve has shown that they don't care that their high interest rates are driving down stocks, so they'll continue to allow them to tumble. By contrast, they have said that they would lower interest rates again if unemployment increases to much, but by some twisted logic, people think that it means that it's their goal to decrease employment rather than unemployment being something that they actually care about.
- lapcat 4y ago
  > The interest rate hikes have dramatically decreased wealth inequality Citation please. > tempered inflation without affecting unemployment If they've tempered inflation, then why did the Fed just raise them again, and suggest they might be raised even more? > people think that it means that it's their goal to decrease employment No, the Fed has explicitly said that their goal is to reduce wage growth. They're happy to have people employed, as long as the workers don't ask for higher wages. You're painting a false dichotomy: employed or unemployed. But how much you make while employed is crucial.
  - Aunche 4y ago
    > Citation please. Look at stock prices, which are primarily owned by the wealthy. The richest 500 people collectively lost $1.4 trillion last year. https://www.bloomberg.com/news/features/2022-12-29/billionaire-wealth-losses-in-2022-hit-1-4-trillion-led-by-elon-musk-jeff-bezos https://www.bloomberg.com/news/features/2022-12-29/billionai... > If they've tempered inflation, then why did the Fed just raise them again, and suggest they might be raised even more? Inflation is still at 6.5%, which is greater than the interest rate. > No, the Fed has explicitly said that their goal is to reduce wage growth. No, they explicitly did not say this. This is the nonsense framing that I'm talking about. The Federal Reserve does fear a wage price spiral, but that's because that's a feedback loop that undermines economic stability. Inflation affects everyone. Meanwhile, wage increases benefit some people more than others, for example younger workers who are happy to job hop. Meanwhile, others are stuck paying higher prices on the same income.

unity1001 4y ago

> People employed can afford to buy stuff though, which also increases profit. Such long-term thinking does not exist in the free market religion. They want maximum profits now, and everything else is "someone else's problem".

lamontcg 4y ago

That's more or less exactly what the comment you're responding to is saying. The way that higher unemployment and lower wages and income inequality is maintained is by the fed hiking rates until it engineers a recession (which hurts stocks).