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You seem to be saying essentially the same thing. The fed has been pretty clear that it sees wage growth as a serious inflation problem (because it's sticky) a

You seem to be saying essentially the same thing. The fed has been pretty clear that it sees wage growth as a serious inflation problem (because it's sticky) and they're intentionally raising rates to force cuts to wages and employment. Personally - I'm a little mixed, since I believe rates were far too low and have created a very strange economy where you have companies that never actually make money become household names (ex: WeWork, Carvana, Uber, Zillow, Pinterest, etc...) because they gobble up debt banking on some mythical future profits once they capture the market. But on the other hand, I feel like the current stance of the fed - "raise the rates to stop hot employment and wage growth" - is a cop out. Inflation control is the second of their two mandates, employment is the first. They could have been raising rates during good years before this to curtail some of the bubbles we're seeing, but instead they only chose to do it to protect businesses from wage growth. Which... feels a bit scummy, and much like they're protecting the wealthy at the expense of increasing wage equality. --- Now, on the other hand - the market's reaction is not at all surprising, I agree that given what the fed is saying, this will likely push the balance back towards a larger rate hike, and the market is predicting that as well, and dropping to account.

mastax 4y ago
The Fed did raise rates during the good years before this. And that was with a certain president threatening to fire the Fed chair for raising rates.
- horsawlarway 4y ago
  raised 225 points in the years between 2015 & 2018 (very slow return to some sanity after the cuts in 2008 down to nearly 0) Immediately dropped by 75 points in 2019 due to trade war concerns (pre covid), then dropped another 150 points in 2020 due to covid. So back to 2008 levels. Raised by 450 points at the threat of "wage growth" and hot employment causing inflation over the last 11 months. --- So yes, they were ever so slowly hiking rates back up, but I think the current approach definitely hints at what their priorities are. To be fair - I don't really believe the fed is entirely responsible - they don't have many good levers to pull to influence the things they've been tasked with influencing. But I think the timing shows the priorities pretty well. The existence of huge zombie companies hollowing out real markets, only alive because of incredibly cheap cash, was not a serious problem. Wage growth - now that's a thing to be feared.
  - mastax 4y ago
    I'm no economist, but I think it's fair to raise rates slowly after a long slow economic recovery where you're barely seeing any inflation even when markets and jobs are hot. I also think it's fair to raise rates quickly when there's a huge spike in inflation due to at least partly to excess money supply,which does not go away after waiting a few months.
    - horsawlarway 4y ago
      And that's why I'm mixed... I don't really disagree with you either. It's one of the few levers that the fed actually has, and it's a BIG lever with lots of consequences and fallout. Moving it is tricky (and hindsight is always an unfair place to judge from). But it does feel a bit systemically unfair that we're structuring our financial regulations in a manner that seems nearly hellbent on increasing inequality across the population. That's not really the fed's fault though... I would absolutely lay blame on congress.
      - mastax 4y ago
        Yeah, Congress has much better tools to target benefits to the needy.
  - willcipriano 4y ago
    Wage increases lag behind inflation. There was a serious lack of concern about inflation with the MMT folks at the Fed and the White House telling us, with daily news reports and articles its "transatory" and not to worry about it, then wages start to tip up and it's a five alarm fire and something has to be done. It's utterly transparent.
pessimizer 4y ago
> But on the other hand, I feel like the current stance of the fed - "raise the rates to stop hot employment and wage growth" - is a cop out. Inflation control is the second of their two mandates, employment is the first. This is the real reason we need a proper, comfortable safety net and higher minimum wages. In my opinion it is very good to lower the wages of higher wage earners in order to raise interest rates, and just buffer the large number of marginal people (America the beautiful, can't afford to get a tooth pulled) who would actually suffer with transfer payments. But even if you don't believe that, lower-income people have a higher exposure to inflated prices simply because all of their income goes to consumption. So they should be supplemented.

mastax 4y ago

The Fed did raise rates during the good years before this. And that was with a certain president threatening to fire the Fed chair for raising rates.

horsawlarway 4y ago
raised 225 points in the years between 2015 & 2018 (very slow return to some sanity after the cuts in 2008 down to nearly 0) Immediately dropped by 75 points in 2019 due to trade war concerns (pre covid), then dropped another 150 points in 2020 due to covid. So back to 2008 levels. Raised by 450 points at the threat of "wage growth" and hot employment causing inflation over the last 11 months. --- So yes, they were ever so slowly hiking rates back up, but I think the current approach definitely hints at what their priorities are. To be fair - I don't really believe the fed is entirely responsible - they don't have many good levers to pull to influence the things they've been tasked with influencing. But I think the timing shows the priorities pretty well. The existence of huge zombie companies hollowing out real markets, only alive because of incredibly cheap cash, was not a serious problem. Wage growth - now that's a thing to be feared.
- mastax 4y ago
  I'm no economist, but I think it's fair to raise rates slowly after a long slow economic recovery where you're barely seeing any inflation even when markets and jobs are hot. I also think it's fair to raise rates quickly when there's a huge spike in inflation due to at least partly to excess money supply,which does not go away after waiting a few months.
  - horsawlarway 4y ago
    And that's why I'm mixed... I don't really disagree with you either. It's one of the few levers that the fed actually has, and it's a BIG lever with lots of consequences and fallout. Moving it is tricky (and hindsight is always an unfair place to judge from). But it does feel a bit systemically unfair that we're structuring our financial regulations in a manner that seems nearly hellbent on increasing inequality across the population. That's not really the fed's fault though... I would absolutely lay blame on congress.
    - mastax 4y ago
      Yeah, Congress has much better tools to target benefits to the needy.
- willcipriano 4y ago
  Wage increases lag behind inflation. There was a serious lack of concern about inflation with the MMT folks at the Fed and the White House telling us, with daily news reports and articles its "transatory" and not to worry about it, then wages start to tip up and it's a five alarm fire and something has to be done. It's utterly transparent.

pessimizer 4y ago

> But on the other hand, I feel like the current stance of the fed - "raise the rates to stop hot employment and wage growth" - is a cop out. Inflation control is the second of their two mandates, employment is the first. This is the real reason we need a proper, comfortable safety net and higher minimum wages. In my opinion it is very good to lower the wages of higher wage earners in order to raise interest rates, and just buffer the large number of marginal people (America the beautiful, can't afford to get a tooth pulled) who would actually suffer with transfer payments. But even if you don't believe that, lower-income people have a higher exposure to inflated prices simply because all of their income goes to consumption. So they should be supplemented.