22 ms·

Banks as collateral damage in a class war

113 points by lapcat 4y ago

newaccount2023 4y ago
[flagged]
- it_citizen 4y ago
  [flagged]
- lapcat 4y ago
  1) Jay Powell was nominated for Fed chair by Trump himself, so Trump had only himself to blame for any consequences of this. 2) You rhetorically switched from "the establishment went ballistic" to "Fed bashing is fashionable" without saying who is bashing the Fed now. The establishment? No, I'm not seeing that.
  - vuln 4y ago
    > 1) Jay Powell was nominated for Fed chair by Trump himself, so Trump had only himself to blame for any consequences of this. Why did Trump do this? https://www.nytimes.com/2021/11/22/business/economy/fed-chair-jerome-powell-biden.html https://www.nytimes.com/2021/11/22/business/economy/fed-chai... https://en.wikipedia.org/wiki/Jerome_Powell https://en.wikipedia.org/wiki/Jerome_Powell
- hawk_ 4y ago
  (Wannabe) Despots attack all institutions. That by itself doesn't mean anything.
- mindslight 4y ago
  He said that as part of pressuring the Fed to keep rates ridiculously low, kicking the can down the road and adding to the problem we now have to confront.
rob74 4y ago
>what central bankers are doing, not just by raising rates, suppressing demand, and lowering wages I'm not a finance expert by any stretch, but I thought inflation was lowering wages, and raising the rates is done to combat inflation, i.e. reduce devaluation of wages (and savings, and other stuff)?
- mschuster91 4y ago
  That is if you follow the theory that wage costs are the dominant part of the cost of goods that make up the product baskets used to track inflation. Sounds like a good idea in theory, but completely ignores the real-world consequences of such shortsightedness: billionaires getting richer and richer without anyone caring is bad enough, but COVID and then the consequences of the Russian invasion forcibly exposed the worst issue that had been swept under the rug: low wages kill resiliency. When two thirds of the population barely keep up living paycheck to paycheck, even the tiniest disruption wipes them out financially and forces them into debt. And for what it's worth, we're seeing it right now where all the inflation ends up: in the pockets of the rich. Corporate profits are at record levels, even though economies just got out of the devastation that was COVID and we're having a full blown war at the European borders - one might expect the opposite, massive economical problems after all this chaos. It is high time that minimum wage rises and employee direct action (i.e. strikes) end up redistributing these indecent profits to the pockets of the people.
  - ajmurmann 4y ago
    It also ignores that we have been having massive supply chain issues that had nothing to do with the cost of labor but a pandemic that even until recently saw lockdowns in some very major manufacturing locations. Thanks to three bull whip effect the effects will take a while after the incident to iron out.
- fnordpiglet 4y ago
  Inflation can reduce my purchasing power for things experiencing inflation. Unemployment can reduce my income by 100% making my purchasing power equal to zero. Further, underemployment and lagging wage growth will be far worse for workers than 5% inflation. The fed is a mechanical device designed to combat inflation by destroying productivity and growth and inducing economic contraction by spurring savings and making expansion more expensive and making businesses that operate on revolving credit lines impossible to run. Not everything is inflating, and even if inflation eats away wage growth, at least people have jobs. Over time inflation drives investment - as there are more dollars the ability to capture them increases if you can increase your productivity and reduce the prices you charge. It’s perhaps counter intuitive but inflation induces a decrease in prices over time so long as you don’t make borrowing more expensive. the typical response to inflation is to raise borrowing which inhibits price competition. Inflation is an excess of demand for supply. Supply increases to meet demand over time. It is true if you print money you see inflation. But when you stop printing money supply grows to meet demand. We stopped printing money already. If we left borrowing cheap, supply would meet demand and inflation would stop and we would probably see a growth based deflationary period.
recursivedoubts 4y ago
The only ethical way out of this is a modern debt jubilee, as Steve Keen has been advocating for for years. Keeping nominal interest rates low will just continue the malinvestment and speculative ridiculousness of the last decade (or three) and risk serious inflation and political instability. Raising nominal interest rates hurts everyone and, as always, the primary burden will fall on the now heavily-indebted working and middle classes (capitalism, red in tooth and claw, for the masses, socialism for the rich). The problem is too much debt, full stop. The fair way to address this is a modern debt jubilee: everyone gets the same nominal payout, debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it. https://think-beyondtheobvious.com/reducing-debt-via-a-modern-debt-jubilee/ https://think-beyondtheobvious.com/reducing-debt-via-a-moder... Of course, Keen is completely ignored by modern economists becase "debt doesn't matter" and "we owe it to ourselves." Meanwhile, in the real world, the who are whomsting the whom, good and hard, and paying court economists a tidy speakers fee to not notice. So it goes. At the end of the day, we get what we deserve.
- gruez 4y ago
  >The problem is too much debt, full stop. The fair way to address this is a modern debt jubilee: everyone gets the same nominal payout, debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it. Doesn't this fuck over savers who have their money parked in fixed income securities, while giving a huge boon to anyone owning equity in indebted companies? On a comparative basis, it also hugely benefits people in their late twenties/thirties who were able to take out massive loans (ie. mortgage) while not doing much for everyone else.
  - recursivedoubts 4y ago
    Individuals (not corporations) get the same payout, rich, poor, everyone. If you don't have debt, you get that money free and clear. It does dig younger people out of crushing debt, yes. That's the point: they can start a life without exponentially increasing debt grinding them to dust. This lets them participate in the wealth of the nation and incentivizes them to work and build families, thus producing more real wealth, rather than checking out and making just enough to pay the interest and monthly subscriptions. There is no way out of this that doesn't involve helping young people throw off the yoke of crushing usury. A modern debt jubilee is the fairest way to do that: it rewards savers to an extent with free and clear money while paying off the debt of debtors.
michaelje 4y ago
Why should controlling inflation be used to transfer wealth from individuals to a for-profit third party (banks)? Also, it doesn’t target the entire population fairly - surely there is a better way? I found this a thought provoking starting place: https://podcasts.apple.com/ca/podcast/abc-news-daily/id1349523628?i=1000599795942 https://podcasts.apple.com/ca/podcast/abc-news-daily/id13495...
- HPsquared 4y ago
  "Never let a good crisis go to waste"
- pjc50 4y ago
  The short answer is that the standard inflation control model can be done through either monetary or fiscal policy, but monetary policy is depoliticised enough that it's easier to do it there. Doing it through fiscal policy by raising taxes, especially at the top end, is just too politically infeasible. (also, this process does not in and of itself transfer profit to banks! the bank's margin is generally a fixed number on top of the floating central bank rate)
ethhics 4y ago
This paragraph summarized the piece fairly well. It describes the ideology that the author thinks central bankers have: > The answer may be down to the grip of an economic ideology espoused by tenured Harvard Professors like Larry Summers and Ken Rogoff. Both appear to believe that inflation exceeds in its power all other threats. And that inflation is largely caused by rising wages (even as real wages are falling) - or even the expectation that wages might rise. That to suppress wages and therefore inflation, central bankers are required to continue hiking aggressively even if this does depress demand, raise unemployment and slash wages further. I don’t think that’s true though. The most mainline Keynesian would say that inflation has many more causes that just wage growth. And since one of the charter goals of the Fed is to reach maximum employment, I would imagine that rate hikes are trying to minimize impact on workers while still keeping inflation down (their real wages intact). The author, in my mind, has tunnel vision for workers’ rights and wages, and won’t see the impacts of 6% inflation on the lives of that same working class. The rhetoric makes me think that they’re boiling the frog for a more commanded economy.
- lapcat 4y ago
  > The author, in my mind, has tunnel vision for workers’ rights and wages, and won’t see the impacts of 6% inflation on the lives of that same working class. The very next paragraph after the one you quoted: "today’s inflation is caused by commodity market speculation, not wages. And if workers demand higher wages to deal with the inflationary impact of higher energy and other commodity prices - that is a consequence, not a cause of commodity price inflation"
  - Kalium 4y ago
    Something can be both a consequence and a cause. That's how feedback loops work, and inflation is distinctly prone to feedback loops. Insisting that something is a consequence and therefore not a cause smells like politics being placed over rigor.
    - lapcat 4y ago
      The author has analyzed this elsewhere, for example: https://annpettifor.substack.com/p/grain-inflation-starve-the-poor-feed https://annpettifor.substack.com/p/grain-inflation-starve-th...
musha68k 4y ago
Jon Stewart / Larry Summers (ex secretary of the treasury) interview excerpts that the article is partially alluding to: https://www.youtube.com/watch?v=MV7d6PaXkcM https://www.youtube.com/watch?v=MV7d6PaXkcM
- camgunz 4y ago
  Everyone knows raising interest rates deflates the economy by depressing wages via job losses--that's the mechanism. Combine that with record corporate profits, and you've got a classic capital vs labor conflict. Incredible to watch Stewart wade through the swamp of Summers' terrible misdirects and bad arguments to make him admit this simple fact. I can't imagine what it's like to work with Summers, or idk, interact with him even a little.
AndrewKemendo 4y ago
I'm glad people are starting to actually be honest about the class warfare situation finally but we need to acknowledge that the "wannabe capital class" is the key enabler of all of this. The class of people who clearly fall into the "labor" class, behaving as though they will one day be the "capital" class, is probably the majority of the posters on HN (this used to be me too). How do you know if you're in the labor class? Here's a quick test: - Do you have or represent the voting position of a controlling or influential number of shares in a for-profit stock organization? - Could you choose at any point, not to be employed for a wage, and maintain your current consumption pattern or grow your consumption indefinitely? If not, then you're firmly "labor" and unless you're on the trajectory to be one of these then you won't become it no matter how much money you put in your bank from your salary. As "labor" you have basically zero control of your working destiny compared to oligarchs. Which of course is why so many people want to get out of this class! In the best case however, people will get to "wannabe capital" status - which is kind of the worst place to be, I know cause I've been there. This class - also known as the petite-bougeoise - is typically just down the line management through SVP in most large corporations, and are the ground troops for Capital, with the promise of power just dangling out of reach. People in this class in my experience fall into two categories: Think that someday they will rule the world with their genius and magnanimous ideas, or they just don't care and "fuck you got mine" to buy an island. They'll retire with up to - lets say $10 or $20M in the bank - put their kids through college, do some angel investing, donate to some charitable things and get your name on the wall at your kids school for donating a new basketball hoop. They might be a local micro-celebrity in their community - but otherwise don't really control or have any say over how major things in the world run. Most importantly though, they ensure that people below them never get the power. They will do whatever it takes to ensure that they do not support anything that could possibly get in their way of future riches and power (which most will never even get close to). They will fight Unions and cooperatives and anything that might reduce their total overall earning capacity - you see these arguments CONSTANTLY on HN. So until we end that striving and people trying to get into the capital class, then there will always have a forever group of psychopaths willing to step up and crush labor for the promise (that never comes) of riches and power.
- FormerBandmate 4y ago
RyanShook 4y ago
It makes sense for the Fed to raise rates to something closer to historical averages. But the speed at which they've chosen to hike rates shows they were asleep at the wheel for the past two years and are now slamming the breaks - there will be more collateral damage.
- bequanna 4y ago
  They were having too much fun playing with their monetary policy toys. Crazy to think they were still buying MBS into 2022 when easing was in no way necessary.
- fundad 4y ago
  Fed chief was afraid of losing his job so he kept rates too low before pandemic. Timing is everything.
anerik 4y ago
Interesting take, lapcat. I'm curious and I'm sure someone has an answer. It baffles me that Wall Street investors were shorting SVB in January and the FDIC did not step in until the bank run made it necessary two weeks ago. Especially in the U.S., why doesn't a regulatory body like the FDIC not have a dashboard that would monitor items like the debt exposure SVB had so they could get involved before a takeover had to happen?
jmyeet 4y ago
I wouldn't call this "class war". It's more accurate to say "neofeudalism". Real wages have been relatively stagnant for 40+ years while we've seen a massive concentration of wealth at the top. Trickle-down economics and deregulation have repeatedly shown themselves to be nothing more than tools for increasing income and wealth inequality. Every aspect of your life is increasingly financialized. College, once free or cheap, now saddles you with lifelong debt. Mortgage debt and rent as a ratio to income have massively increased. Medical debt can wipe you out in the blink of an eye. All of this is by design. It's an inevitable consequence of hyper-capitalist neoliberalism. All of this debt without a real increase in wages is designed to keep you a compliant worker. After all, with any kind of real freedom or financial independence, you're absolutely showing up for work tomorrow. Additionally, inflation could be tackled way more effectively with a windfall profits tax without indiscriminately hitting all businesses as well as individual borrowers. Even if it did it would fill government coffers so the most in need could be helped. You get the same sentiments as the Bank of England governor from Larry Summers [1]. All of this is built on the lie that wages are the real threat to inflation rather than boundles corporate greed and profiteering. [1]: https://www.youtube.com/watch?v=tU3rGFyN5uQ https://www.youtube.com/watch?v=tU3rGFyN5uQ
- marcusverus 4y ago
  > Real wages have been relatively stagnant for 40+ years This is FUD. The only way to argue that this is the case is to lean heavily on a specious focus on "wages" while excluding other forms of compensation.[0] When looking at the whole picture, it's clear that real median personal income has been rising for past 50 years.[1] [0]https://fee.org/articles/the-myth-of-the-pay-productivity-gap/ https://fee.org/articles/the-myth-of-the-pay-productivity-ga... [1]https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N
  - jmyeet 4y ago
    FEE is, by their own admission, a conservative think tank whose alumni includes Charles Koch [1]. Their claimed influences include Ronald Reagan and Rand Paul [2]. Come on. Show some media literacy. [1]: https://en.wikipedia.org/wiki/Foundation_for_Economic_Education https://en.wikipedia.org/wiki/Foundation_for_Economic_Educat... [2]: https://fee.org/media/41248/fees-2021-annual-report.pdf https://fee.org/media/41248/fees-2021-annual-report.pdf
andrewmutz 4y ago
> I disagree and have argued elsewhere that today’s inflation is caused by commodity market speculation, not wages. And if workers demand higher wages to deal with the inflationary impact of higher energy and other commodity prices - that is a consequence, not a cause of commodity price inflation It should be noted that the author takes a very heterodox view of economics. Expert consensus does not agree with her perspective.
- lapcat 4y ago
  > It should be noted that the author takes a very heterodox view of economics. Of course. The author has been writing about economics for a long time, for example: https://www.amazon.com/Coming-First-World-Debt-Crisis/dp/0230007848 https://www.amazon.com/Coming-First-World-Debt-Crisis/dp/023... > Expert consensus does not agree with her perspective. The author is an expert, but in any case, the consensus can't exactly take victory lap at this moment in time.
- wrycoder 4y ago
  Nor do I. General inflation is just too much money chasing too few good and services. “Inflation” in specific sectors of the economy is just the overall market adjusting to new conditions. Discussing commodity inflation is useless. For example, if real worker’s wages decline, that indicates that the diminished utility of individual workers has outstripped their productivity increases. In other words, automation is replacing the workers themselves, instead of just assisting them.
hn_throwaway_99 4y ago
If anything, the class warfare was the low rates of the past two decades. There were a bunch of different reasons for the widening inequality gap of this millennium, but ultra low rates were a giant part of it. Low rates increase the value of assets (stocks, homes), and assets are, generally, owned by rich people. Meanwhile, poorer people, retirees, etc. basically earn nothing on their (meager) bank deposits and were often forced (please don't get into a semantic discussion about what "forced" means, have had that unhelpful conversation before...) to speculate in markets where they were least prepared and where they often lost.
- lapcat 4y ago
  > If anything, the class warfare was the low rates of the past two decades. There were a bunch of different reasons for the widening inequality gap of this millennium, but ultra low rates were a giant part of it. This can be true, while at the same time it can also be true that it's irresponsible to suddenly jack up interest rates in the post-pandemic economy. Indeed, it's a kind of consistent class warfare to keep the rates artificially low unless and until wages start to suddenly grow.
- jgalt212 4y ago
  Wholeheartedly agree nothing did more over the last 12 years to worsen wealth inequality than ZIRP. A close second was quantitative easy. It was helicopter money for the plutocrats.
- BeFlatXIII 4y ago
  Arguably, money printing in the fallout of the 2008 crisis didn't create inflation because it went to the wealthy. They bid up prices on houses and stocks—which aren't included in most laymen's definitions of inflation. The 2020+21 stimulus went to normal people who bid up the prices on normal people goods, thus inflation.
- AnimalMuppet 4y ago
  Both and neither. If you're rich, and you're doing class warfare (in the form of economically exploiting the less-well-off), and rates are low, you'll find a way to use that for class warfare. If rates go up, you'll find a way to use that for class warfare. All policies can lead to class warfare, but it isn't the fault of the policies.
Aunche 4y ago
If the rich and powerful are winning a "class war" it's because they actually bother to try to understand complicated issues like monetary policy, or at least can hire people that do. Meanwhile, they can spread populist disinformation campaigns that their base is completely oblivious of. The premise that central bankers who work modest public sector wages are obsessed with suppressing workers to serve their former classmates who got ultrarich doing similar work in the private sector is absurd and lacks a single thread of corroborating empirical evidence. 15 years of cheap money didn't spark a mass uplifting of the proletariat, and it won't anytime in the future either. Indeed, by the time Federal Reserve raised interest rates, inflation was already outpacing wage growth. The only people who want to keep low interest rates are stakeholders of failing institutions like SVB and far leftist politicians who want to ensure that they don't get the blame for the upcoming recession.
jhallenworld 4y ago
Is there any other way to control inflation? I guess you could try to have some kind of price controls to limit corporate profits. Break up monopolies since they have too much pricing power. My understanding of economics is that median wage is everything- it's the basic unit of wealth. The wealth of rich people is measured as a multiple of this value. So if median wage goes up, the wealthy are less so. Thus upper classes care very much about this. What is wealth other than the power to control a bunch of workers?
- kneebonian 4y ago
  > guess you could try to have some kind of price controls to limit corporate profits. That just creates shortages, and then you still have inflation, in fact you make it worse, because people still want the stuff, but then getting that stuff just involves off the book transactions, insider deals, and other nefarious and illicit actions to get the stuff. I mean look at the USSR, being rich wasn't important, there were no rich. Yet there was still an exploitative parasitic upper class that dined on caviar and fine wine everyday while most of the population was waiting for hours in the cold to get bread. The only difference was, now it was based on who you knew and being connected instead of the amount of money you had.
  - jhallenworld 4y ago
    Another way: collective purchasing- the high quantity gives them more negotiating power. I think that was the original idea of buyer's clubs. A good example of this is my parent's internet fee. It is way less than mine since their gated community is buying it for everyone in the community.
  - teeray 4y ago
    You can analyze it considering “time required to acquire a good” as a currency. A shortage is inflation in the time dimension to compensate for lack of inflation in the “dollars & cents” dimension.
Invictus0 4y ago
This is a wildly ideological hottake on the role of the central banks. Right at the outset you've got this: > After tightening Bank of England monetary policy and raising rates in February, 2022, the £575,000-a-year BoE governor, Andrew Bailey, was asked whether he wanted to inflict more pain on workers? His answer was direct: >> "Broadly, yes - in the sense of saying: we do need to see a moderation of wage rises. That's painful - I don't want to in any sense sugar that message, it is painful." Powell said more or less the same thing. This is misleading because: 1) What does his salary have to do with anything? If he was paid $1 would that change the meaning of his words? 2) It leaves out the key point of the rate hikes, which is that this is a necessary pain to prevent inflation from rising out of control. What does the author propose: printing money forever? Let inflation keep rising? Apparently yes, since she brags about eliminating $100B of debt in her bio some 20 years ago. 3) It maliciously assigns the primary reason for the hike to "hurting workers", as if Andrew Bailey gets his rocks off at night based on how much pain he causes the working class, and not to crushing inflation back to normal levels. Nothing after this is worth your time reading.
- InCityDreams 4y ago
  ...a £million every two years and £75k spending money each year. >1) What does his salary have to do with anything? If he was paid $1 would that change the meaning of his words? Yes.
  - Invictus0 4y ago
    Your comment is pretty clearly against the community guidelines but ok. Donald Trump donated his entire salary every year he was in office, effectively zeroing it. Do you like him more now? source: https://www.usatoday.com/story/news/factcheck/2023/02/02/fact-check-partly-false-claim-trump-tax-returns-salary-donation/11132712002/ https://www.usatoday.com/story/news/factcheck/2023/02/02/fac...
    - jgeada 4y ago
      And then paid himself handsomely by golfing every possible opportunity at his own resorts. Save me the theatrics on salary.
erikerikson 4y ago
It is awkward for the author that wages have not been keeping pace with inflation.
MisterBastahrd 4y ago
A debt jubilee was my argument when student loan forgiveness was all the rage. We're making carte blanche value judgments on the debt that people hold as if getting a degree in Computer Science is a more noble use of money than bridging the gap between paychecks when life comes at you unexpectedly. Nobody should be stuck paying 30% interest year over year. Those rates should be categorically illegal, and if anyone thinks they're truly necessary, then we need to re-examine our society as a whole. Debt repayment needs to be capped at the original sum plus an additional total value.
- chasd00 4y ago
  student loan forgiveness was floated to buy votes, that's all. Everyone knew it would get struck down by the supreme court but, hey, empty promises never stopped a politician before.

113 points by lapcat 4y ago

newaccount2023 4y ago

[flagged]

it_citizen 4y ago
[flagged]
lapcat 4y ago
1) Jay Powell was nominated for Fed chair by Trump himself, so Trump had only himself to blame for any consequences of this. 2) You rhetorically switched from "the establishment went ballistic" to "Fed bashing is fashionable" without saying who is bashing the Fed now. The establishment? No, I'm not seeing that.
- vuln 4y ago
  > 1) Jay Powell was nominated for Fed chair by Trump himself, so Trump had only himself to blame for any consequences of this. Why did Trump do this? https://www.nytimes.com/2021/11/22/business/economy/fed-chair-jerome-powell-biden.html https://www.nytimes.com/2021/11/22/business/economy/fed-chai... https://en.wikipedia.org/wiki/Jerome_Powell https://en.wikipedia.org/wiki/Jerome_Powell
hawk_ 4y ago
(Wannabe) Despots attack all institutions. That by itself doesn't mean anything.
mindslight 4y ago
He said that as part of pressuring the Fed to keep rates ridiculously low, kicking the can down the road and adding to the problem we now have to confront.

rob74 4y ago

>what central bankers are doing, not just by raising rates, suppressing demand, and lowering wages I'm not a finance expert by any stretch, but I thought inflation was lowering wages, and raising the rates is done to combat inflation, i.e. reduce devaluation of wages (and savings, and other stuff)?

mschuster91 4y ago
That is if you follow the theory that wage costs are the dominant part of the cost of goods that make up the product baskets used to track inflation. Sounds like a good idea in theory, but completely ignores the real-world consequences of such shortsightedness: billionaires getting richer and richer without anyone caring is bad enough, but COVID and then the consequences of the Russian invasion forcibly exposed the worst issue that had been swept under the rug: low wages kill resiliency. When two thirds of the population barely keep up living paycheck to paycheck, even the tiniest disruption wipes them out financially and forces them into debt. And for what it's worth, we're seeing it right now where all the inflation ends up: in the pockets of the rich. Corporate profits are at record levels, even though economies just got out of the devastation that was COVID and we're having a full blown war at the European borders - one might expect the opposite, massive economical problems after all this chaos. It is high time that minimum wage rises and employee direct action (i.e. strikes) end up redistributing these indecent profits to the pockets of the people.
- ajmurmann 4y ago
  It also ignores that we have been having massive supply chain issues that had nothing to do with the cost of labor but a pandemic that even until recently saw lockdowns in some very major manufacturing locations. Thanks to three bull whip effect the effects will take a while after the incident to iron out.
fnordpiglet 4y ago
Inflation can reduce my purchasing power for things experiencing inflation. Unemployment can reduce my income by 100% making my purchasing power equal to zero. Further, underemployment and lagging wage growth will be far worse for workers than 5% inflation. The fed is a mechanical device designed to combat inflation by destroying productivity and growth and inducing economic contraction by spurring savings and making expansion more expensive and making businesses that operate on revolving credit lines impossible to run. Not everything is inflating, and even if inflation eats away wage growth, at least people have jobs. Over time inflation drives investment - as there are more dollars the ability to capture them increases if you can increase your productivity and reduce the prices you charge. It’s perhaps counter intuitive but inflation induces a decrease in prices over time so long as you don’t make borrowing more expensive. the typical response to inflation is to raise borrowing which inhibits price competition. Inflation is an excess of demand for supply. Supply increases to meet demand over time. It is true if you print money you see inflation. But when you stop printing money supply grows to meet demand. We stopped printing money already. If we left borrowing cheap, supply would meet demand and inflation would stop and we would probably see a growth based deflationary period.

recursivedoubts 4y ago

The only ethical way out of this is a modern debt jubilee, as Steve Keen has been advocating for for years. Keeping nominal interest rates low will just continue the malinvestment and speculative ridiculousness of the last decade (or three) and risk serious inflation and political instability. Raising nominal interest rates hurts everyone and, as always, the primary burden will fall on the now heavily-indebted working and middle classes (capitalism, red in tooth and claw, for the masses, socialism for the rich). The problem is too much debt, full stop. The fair way to address this is a modern debt jubilee: everyone gets the same nominal payout, debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it. https://think-beyondtheobvious.com/reducing-debt-via-a-modern-debt-jubilee/ https://think-beyondtheobvious.com/reducing-debt-via-a-moder... Of course, Keen is completely ignored by modern economists becase "debt doesn't matter" and "we owe it to ourselves." Meanwhile, in the real world, the who are whomsting the whom, good and hard, and paying court economists a tidy speakers fee to not notice. So it goes. At the end of the day, we get what we deserve.

gruez 4y ago
>The problem is too much debt, full stop. The fair way to address this is a modern debt jubilee: everyone gets the same nominal payout, debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it. Doesn't this fuck over savers who have their money parked in fixed income securities, while giving a huge boon to anyone owning equity in indebted companies? On a comparative basis, it also hugely benefits people in their late twenties/thirties who were able to take out massive loans (ie. mortgage) while not doing much for everyone else.
- recursivedoubts 4y ago
  Individuals (not corporations) get the same payout, rich, poor, everyone. If you don't have debt, you get that money free and clear. It does dig younger people out of crushing debt, yes. That's the point: they can start a life without exponentially increasing debt grinding them to dust. This lets them participate in the wealth of the nation and incentivizes them to work and build families, thus producing more real wealth, rather than checking out and making just enough to pay the interest and monthly subscriptions. There is no way out of this that doesn't involve helping young people throw off the yoke of crushing usury. A modern debt jubilee is the fairest way to do that: it rewards savers to an extent with free and clear money while paying off the debt of debtors.

michaelje 4y ago

Why should controlling inflation be used to transfer wealth from individuals to a for-profit third party (banks)? Also, it doesn’t target the entire population fairly - surely there is a better way? I found this a thought provoking starting place: https://podcasts.apple.com/ca/podcast/abc-news-daily/id1349523628?i=1000599795942 https://podcasts.apple.com/ca/podcast/abc-news-daily/id13495...

HPsquared 4y ago
"Never let a good crisis go to waste"
pjc50 4y ago
The short answer is that the standard inflation control model can be done through either monetary or fiscal policy, but monetary policy is depoliticised enough that it's easier to do it there. Doing it through fiscal policy by raising taxes, especially at the top end, is just too politically infeasible. (also, this process does not in and of itself transfer profit to banks! the bank's margin is generally a fixed number on top of the floating central bank rate)

ethhics 4y ago

This paragraph summarized the piece fairly well. It describes the ideology that the author thinks central bankers have: > The answer may be down to the grip of an economic ideology espoused by tenured Harvard Professors like Larry Summers and Ken Rogoff. Both appear to believe that inflation exceeds in its power all other threats. And that inflation is largely caused by rising wages (even as real wages are falling) - or even the expectation that wages might rise. That to suppress wages and therefore inflation, central bankers are required to continue hiking aggressively even if this does depress demand, raise unemployment and slash wages further. I don’t think that’s true though. The most mainline Keynesian would say that inflation has many more causes that just wage growth. And since one of the charter goals of the Fed is to reach maximum employment, I would imagine that rate hikes are trying to minimize impact on workers while still keeping inflation down (their real wages intact). The author, in my mind, has tunnel vision for workers’ rights and wages, and won’t see the impacts of 6% inflation on the lives of that same working class. The rhetoric makes me think that they’re boiling the frog for a more commanded economy.

lapcat 4y ago
> The author, in my mind, has tunnel vision for workers’ rights and wages, and won’t see the impacts of 6% inflation on the lives of that same working class. The very next paragraph after the one you quoted: "today’s inflation is caused by commodity market speculation, not wages. And if workers demand higher wages to deal with the inflationary impact of higher energy and other commodity prices - that is a consequence, not a cause of commodity price inflation"
- Kalium 4y ago
  Something can be both a consequence and a cause. That's how feedback loops work, and inflation is distinctly prone to feedback loops. Insisting that something is a consequence and therefore not a cause smells like politics being placed over rigor.
  - lapcat 4y ago
    The author has analyzed this elsewhere, for example: https://annpettifor.substack.com/p/grain-inflation-starve-the-poor-feed https://annpettifor.substack.com/p/grain-inflation-starve-th...

musha68k 4y ago

Jon Stewart / Larry Summers (ex secretary of the treasury) interview excerpts that the article is partially alluding to: https://www.youtube.com/watch?v=MV7d6PaXkcM https://www.youtube.com/watch?v=MV7d6PaXkcM

camgunz 4y ago
Everyone knows raising interest rates deflates the economy by depressing wages via job losses--that's the mechanism. Combine that with record corporate profits, and you've got a classic capital vs labor conflict. Incredible to watch Stewart wade through the swamp of Summers' terrible misdirects and bad arguments to make him admit this simple fact. I can't imagine what it's like to work with Summers, or idk, interact with him even a little.

AndrewKemendo 4y ago

I'm glad people are starting to actually be honest about the class warfare situation finally but we need to acknowledge that the "wannabe capital class" is the key enabler of all of this. The class of people who clearly fall into the "labor" class, behaving as though they will one day be the "capital" class, is probably the majority of the posters on HN (this used to be me too). How do you know if you're in the labor class? Here's a quick test: - Do you have or represent the voting position of a controlling or influential number of shares in a for-profit stock organization? - Could you choose at any point, not to be employed for a wage, and maintain your current consumption pattern or grow your consumption indefinitely? If not, then you're firmly "labor" and unless you're on the trajectory to be one of these then you won't become it no matter how much money you put in your bank from your salary. As "labor" you have basically zero control of your working destiny compared to oligarchs. Which of course is why so many people want to get out of this class! In the best case however, people will get to "wannabe capital" status - which is kind of the worst place to be, I know cause I've been there. This class - also known as the petite-bougeoise - is typically just down the line management through SVP in most large corporations, and are the ground troops for Capital, with the promise of power just dangling out of reach. People in this class in my experience fall into two categories: Think that someday they will rule the world with their genius and magnanimous ideas, or they just don't care and "fuck you got mine" to buy an island. They'll retire with up to - lets say $10 or $20M in the bank - put their kids through college, do some angel investing, donate to some charitable things and get your name on the wall at your kids school for donating a new basketball hoop. They might be a local micro-celebrity in their community - but otherwise don't really control or have any say over how major things in the world run. Most importantly though, they ensure that people below them never get the power. They will do whatever it takes to ensure that they do not support anything that could possibly get in their way of future riches and power (which most will never even get close to). They will fight Unions and cooperatives and anything that might reduce their total overall earning capacity - you see these arguments CONSTANTLY on HN. So until we end that striving and people trying to get into the capital class, then there will always have a forever group of psychopaths willing to step up and crush labor for the promise (that never comes) of riches and power.

FormerBandmate 4y ago

RyanShook 4y ago

It makes sense for the Fed to raise rates to something closer to historical averages. But the speed at which they've chosen to hike rates shows they were asleep at the wheel for the past two years and are now slamming the breaks - there will be more collateral damage.

bequanna 4y ago
They were having too much fun playing with their monetary policy toys. Crazy to think they were still buying MBS into 2022 when easing was in no way necessary.
fundad 4y ago
Fed chief was afraid of losing his job so he kept rates too low before pandemic. Timing is everything.

anerik 4y ago

Interesting take, lapcat. I'm curious and I'm sure someone has an answer. It baffles me that Wall Street investors were shorting SVB in January and the FDIC did not step in until the bank run made it necessary two weeks ago. Especially in the U.S., why doesn't a regulatory body like the FDIC not have a dashboard that would monitor items like the debt exposure SVB had so they could get involved before a takeover had to happen?

jmyeet 4y ago

I wouldn't call this "class war". It's more accurate to say "neofeudalism". Real wages have been relatively stagnant for 40+ years while we've seen a massive concentration of wealth at the top. Trickle-down economics and deregulation have repeatedly shown themselves to be nothing more than tools for increasing income and wealth inequality. Every aspect of your life is increasingly financialized. College, once free or cheap, now saddles you with lifelong debt. Mortgage debt and rent as a ratio to income have massively increased. Medical debt can wipe you out in the blink of an eye. All of this is by design. It's an inevitable consequence of hyper-capitalist neoliberalism. All of this debt without a real increase in wages is designed to keep you a compliant worker. After all, with any kind of real freedom or financial independence, you're absolutely showing up for work tomorrow. Additionally, inflation could be tackled way more effectively with a windfall profits tax without indiscriminately hitting all businesses as well as individual borrowers. Even if it did it would fill government coffers so the most in need could be helped. You get the same sentiments as the Bank of England governor from Larry Summers [1]. All of this is built on the lie that wages are the real threat to inflation rather than boundles corporate greed and profiteering. [1]: https://www.youtube.com/watch?v=tU3rGFyN5uQ https://www.youtube.com/watch?v=tU3rGFyN5uQ

marcusverus 4y ago
> Real wages have been relatively stagnant for 40+ years This is FUD. The only way to argue that this is the case is to lean heavily on a specious focus on "wages" while excluding other forms of compensation.[0] When looking at the whole picture, it's clear that real median personal income has been rising for past 50 years.[1] [0]https://fee.org/articles/the-myth-of-the-pay-productivity-gap/ https://fee.org/articles/the-myth-of-the-pay-productivity-ga... [1]https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N
- jmyeet 4y ago
  FEE is, by their own admission, a conservative think tank whose alumni includes Charles Koch [1]. Their claimed influences include Ronald Reagan and Rand Paul [2]. Come on. Show some media literacy. [1]: https://en.wikipedia.org/wiki/Foundation_for_Economic_Education https://en.wikipedia.org/wiki/Foundation_for_Economic_Educat... [2]: https://fee.org/media/41248/fees-2021-annual-report.pdf https://fee.org/media/41248/fees-2021-annual-report.pdf

andrewmutz 4y ago

> I disagree and have argued elsewhere that today’s inflation is caused by commodity market speculation, not wages. And if workers demand higher wages to deal with the inflationary impact of higher energy and other commodity prices - that is a consequence, not a cause of commodity price inflation It should be noted that the author takes a very heterodox view of economics. Expert consensus does not agree with her perspective.

lapcat 4y ago
> It should be noted that the author takes a very heterodox view of economics. Of course. The author has been writing about economics for a long time, for example: https://www.amazon.com/Coming-First-World-Debt-Crisis/dp/0230007848 https://www.amazon.com/Coming-First-World-Debt-Crisis/dp/023... > Expert consensus does not agree with her perspective. The author is an expert, but in any case, the consensus can't exactly take victory lap at this moment in time.
wrycoder 4y ago
Nor do I. General inflation is just too much money chasing too few good and services. “Inflation” in specific sectors of the economy is just the overall market adjusting to new conditions. Discussing commodity inflation is useless. For example, if real worker’s wages decline, that indicates that the diminished utility of individual workers has outstripped their productivity increases. In other words, automation is replacing the workers themselves, instead of just assisting them.

hn_throwaway_99 4y ago

If anything, the class warfare was the low rates of the past two decades. There were a bunch of different reasons for the widening inequality gap of this millennium, but ultra low rates were a giant part of it. Low rates increase the value of assets (stocks, homes), and assets are, generally, owned by rich people. Meanwhile, poorer people, retirees, etc. basically earn nothing on their (meager) bank deposits and were often forced (please don't get into a semantic discussion about what "forced" means, have had that unhelpful conversation before...) to speculate in markets where they were least prepared and where they often lost.

lapcat 4y ago
> If anything, the class warfare was the low rates of the past two decades. There were a bunch of different reasons for the widening inequality gap of this millennium, but ultra low rates were a giant part of it. This can be true, while at the same time it can also be true that it's irresponsible to suddenly jack up interest rates in the post-pandemic economy. Indeed, it's a kind of consistent class warfare to keep the rates artificially low unless and until wages start to suddenly grow.
jgalt212 4y ago
Wholeheartedly agree nothing did more over the last 12 years to worsen wealth inequality than ZIRP. A close second was quantitative easy. It was helicopter money for the plutocrats.
BeFlatXIII 4y ago
Arguably, money printing in the fallout of the 2008 crisis didn't create inflation because it went to the wealthy. They bid up prices on houses and stocks—which aren't included in most laymen's definitions of inflation. The 2020+21 stimulus went to normal people who bid up the prices on normal people goods, thus inflation.
AnimalMuppet 4y ago
Both and neither. If you're rich, and you're doing class warfare (in the form of economically exploiting the less-well-off), and rates are low, you'll find a way to use that for class warfare. If rates go up, you'll find a way to use that for class warfare. All policies can lead to class warfare, but it isn't the fault of the policies.

Aunche 4y ago

If the rich and powerful are winning a "class war" it's because they actually bother to try to understand complicated issues like monetary policy, or at least can hire people that do. Meanwhile, they can spread populist disinformation campaigns that their base is completely oblivious of. The premise that central bankers who work modest public sector wages are obsessed with suppressing workers to serve their former classmates who got ultrarich doing similar work in the private sector is absurd and lacks a single thread of corroborating empirical evidence. 15 years of cheap money didn't spark a mass uplifting of the proletariat, and it won't anytime in the future either. Indeed, by the time Federal Reserve raised interest rates, inflation was already outpacing wage growth. The only people who want to keep low interest rates are stakeholders of failing institutions like SVB and far leftist politicians who want to ensure that they don't get the blame for the upcoming recession.

jhallenworld 4y ago

Is there any other way to control inflation? I guess you could try to have some kind of price controls to limit corporate profits. Break up monopolies since they have too much pricing power. My understanding of economics is that median wage is everything- it's the basic unit of wealth. The wealth of rich people is measured as a multiple of this value. So if median wage goes up, the wealthy are less so. Thus upper classes care very much about this. What is wealth other than the power to control a bunch of workers?

kneebonian 4y ago
> guess you could try to have some kind of price controls to limit corporate profits. That just creates shortages, and then you still have inflation, in fact you make it worse, because people still want the stuff, but then getting that stuff just involves off the book transactions, insider deals, and other nefarious and illicit actions to get the stuff. I mean look at the USSR, being rich wasn't important, there were no rich. Yet there was still an exploitative parasitic upper class that dined on caviar and fine wine everyday while most of the population was waiting for hours in the cold to get bread. The only difference was, now it was based on who you knew and being connected instead of the amount of money you had.
- jhallenworld 4y ago
  Another way: collective purchasing- the high quantity gives them more negotiating power. I think that was the original idea of buyer's clubs. A good example of this is my parent's internet fee. It is way less than mine since their gated community is buying it for everyone in the community.
- teeray 4y ago
  You can analyze it considering “time required to acquire a good” as a currency. A shortage is inflation in the time dimension to compensate for lack of inflation in the “dollars & cents” dimension.

Invictus0 4y ago

This is a wildly ideological hottake on the role of the central banks. Right at the outset you've got this: > After tightening Bank of England monetary policy and raising rates in February, 2022, the £575,000-a-year BoE governor, Andrew Bailey, was asked whether he wanted to inflict more pain on workers? His answer was direct: >> "Broadly, yes - in the sense of saying: we do need to see a moderation of wage rises. That's painful - I don't want to in any sense sugar that message, it is painful." Powell said more or less the same thing. This is misleading because: 1) What does his salary have to do with anything? If he was paid $1 would that change the meaning of his words? 2) It leaves out the key point of the rate hikes, which is that this is a necessary pain to prevent inflation from rising out of control. What does the author propose: printing money forever? Let inflation keep rising? Apparently yes, since she brags about eliminating $100B of debt in her bio some 20 years ago. 3) It maliciously assigns the primary reason for the hike to "hurting workers", as if Andrew Bailey gets his rocks off at night based on how much pain he causes the working class, and not to crushing inflation back to normal levels. Nothing after this is worth your time reading.

InCityDreams 4y ago
...a £million every two years and £75k spending money each year. >1) What does his salary have to do with anything? If he was paid $1 would that change the meaning of his words? Yes.
- Invictus0 4y ago
  Your comment is pretty clearly against the community guidelines but ok. Donald Trump donated his entire salary every year he was in office, effectively zeroing it. Do you like him more now? source: https://www.usatoday.com/story/news/factcheck/2023/02/02/fact-check-partly-false-claim-trump-tax-returns-salary-donation/11132712002/ https://www.usatoday.com/story/news/factcheck/2023/02/02/fac...
  - jgeada 4y ago
    And then paid himself handsomely by golfing every possible opportunity at his own resorts. Save me the theatrics on salary.

erikerikson 4y ago

It is awkward for the author that wages have not been keeping pace with inflation.

MisterBastahrd 4y ago

A debt jubilee was my argument when student loan forgiveness was all the rage. We're making carte blanche value judgments on the debt that people hold as if getting a degree in Computer Science is a more noble use of money than bridging the gap between paychecks when life comes at you unexpectedly. Nobody should be stuck paying 30% interest year over year. Those rates should be categorically illegal, and if anyone thinks they're truly necessary, then we need to re-examine our society as a whole. Debt repayment needs to be capped at the original sum plus an additional total value.

chasd00 4y ago
student loan forgiveness was floated to buy votes, that's all. Everyone knew it would get struck down by the supreme court but, hey, empty promises never stopped a politician before.