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Just an FYI because I see a particular piece of info repeated everywhere. The fed is NOT out to increase unemployment or lower wages. They are out to combat in

Just an FYI because I see a particular piece of info repeated everywhere. The fed is NOT out to increase unemployment or lower wages. They are out to combat inflation. Making money more expensive to borrow does this. Corporations may choose to lower wages or lay folks off, but they don't have to. The fed could care less. They aren't out to get workers. Note that I'm not defending them, but you are the 4th person to claim that the fed is looking to increase unemployment and decrease wages. If inflation hit zero tomorrow, rate changes would stop. tl;dr - please stop confusing correlation and causation.

treyfitty 3y ago
Fed has a dual mandate. High inflation is often correlated with low unemployment and Vice versa.
lucubratory 3y ago
This is just flatly wrong. The head of the Federal Reserve has been very clear that he considers wage growth to be the principal contributor to inflation, and "combating wage growth" to therefore be an important part of decreasing inflation. What do you think "combating wage growth" means if not lowering wages and increasing unemployment?
- Aunche 3y ago
  >The head of the Federal Reserve has been very clear that he considers wage growth to be the principal contributor to inflation This is not what he said, and despite putting it in quotes, he never said that he was "combatting wage growth". Even if he was, it doesn't matter because regardless of the source of inflation, the only thing that the Fed can do to control it is to raise interest rates. By the time the Fed did so, inflation was already outpacing wage growth, so the narrative that a worker revolution is just around the corner that the Federal Reserve wanted to suppress is completely unfounded.
  - DangitBobby 3y ago
    It's pretty close to what he said. > The chairman of the U.S. Federal Reserve, Jerome Powell, said his goal is “to get wages down.” > In a press conference on May 4, Powell announced that the Fed would be raising interest rates by half a percentage and implementing policies aimed at reducing inflation in the United States, which is at its highest level in 40 years. > According to a transcript of the presser published by the Wall Street Journal, Powell blamed this inflation crisis, which is global, not on the proxy war in Ukraine and Western sanctions on Russia, but rather on U.S. workers supposedly making too much money. > “Employers are having difficulties filling job openings, and wages are rising at the fastest pace in many years,” Powell complained. > The Fed’s proposed solution: bring down wages. > There are more job vacancies than there are unemployed people in the United States, as the economy recovers from the Covid-19 pandemic. > Powell claimed this discrepancy between job vacancies and unemployment is due to high wages, which discourage workers from taking bad, low-paying jobs with few benefits, and therefore give them too much power. 1. https://mronline.org/2022/05/26/u-s-federal-reserve-says-its-goal-is-to-get-wages-down/ https://mronline.org/2022/05/26/u-s-federal-reserve-says-its... So yes, apparently workers are getting a bit uppity and it's time to put them back into place.
    - dragonwriter 3y ago
      > The Fed’s proposed solution: bring down wages. Its too bad that Powell directly says in the press conference this characterizes that they believe and intend for the outcome to be continued rapid wage growth: https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220504.pdf https://www.federalreserve.gov/mediacenter/files/FOMCprescon... “So we think through our policies—through further healing in the labor market, higher rates, for example, of vacancy filling and things like that, and more people coming back in—we’d like to think that supply and demand will come back into balance and that, therefore, wage inflation will moderate to still high levels of wage increases, but ones that are more consistent with 2 percent inflation. That’s our expectation.”
    - Aunche 3y ago
      A bunch of accusations that references a few cherry-picked quotes that was written by an author who regularly parrots Russian propaganda [1] isn't exactly a trustworthy source. [1] https://geopoliticaleconomy.com/2022/02/20/west-ukraine-crisis-sanctions-russia/ https://geopoliticaleconomy.com/2022/02/20/west-ukraine-cris...
- CoastalCoder 3y ago
  Not sure why the parent post was downvoted. Maybe it would help to give a citation for that quote?
whitemary 3y ago
It is not wrong to say the fed wants to increase unemployment. The fact is the fed doesn't have any other ideas so they want to do this one. Maybe they would prefer not to, but who cares? They are going to do it anyway because they don't have any other ideas. How many ways do you need someone to say it before you accept it?
bugglebeetle 3y ago
“In the labor market, demand for workers far exceeds the supply of available workers, and nominal wages have been growing at a pace well above what would be consistent with 2 percent inflation over time. Thus, another condition we are looking for is the restoration of balance between supply and demand in the labor market.” https://www.federalreserve.gov/newsevents/speech/powell20221130a.htm https://www.federalreserve.gov/newsevents/speech/powell20221... A greater supply of workers relative to current inflation is only possible if more people are made unemployed, forced out of retirement, or there are massive changes to immigration policy. And historically, rapidly raising interest rates always results in the first.
- drdec 3y ago
  Agreeing and just pointing out how the ultimate cost of inflation is being borne by the wage earners. Once again they lose out.
barumrho 3y ago
I agree with your sentiment that the Fed isn't "out to increase unemployment" but I think it's not entirely correct to ignore the trade off of raising rates. It's the low employment that allows the Fed to keep increasing rates. The Fed has a dual mandate for a reason which I believe is based on Phillips curve (https://www.investopedia.com/terms/p/phillipscurve.asp https://www.investopedia.com/terms/p/phillipscurve.asp) that inflation and unemployment is inversely correlated. Now, it's fair to question this relationship...(I don't think it's as rock solid as it used to be), but the Fed's dual mandate is based on this theory. So, in some sense the goal of lower inflation implies higher unemployment.

treyfitty 3y ago

Fed has a dual mandate. High inflation is often correlated with low unemployment and Vice versa.

lucubratory 3y ago

This is just flatly wrong. The head of the Federal Reserve has been very clear that he considers wage growth to be the principal contributor to inflation, and "combating wage growth" to therefore be an important part of decreasing inflation. What do you think "combating wage growth" means if not lowering wages and increasing unemployment?

Aunche 3y ago
>The head of the Federal Reserve has been very clear that he considers wage growth to be the principal contributor to inflation This is not what he said, and despite putting it in quotes, he never said that he was "combatting wage growth". Even if he was, it doesn't matter because regardless of the source of inflation, the only thing that the Fed can do to control it is to raise interest rates. By the time the Fed did so, inflation was already outpacing wage growth, so the narrative that a worker revolution is just around the corner that the Federal Reserve wanted to suppress is completely unfounded.
- DangitBobby 3y ago
  It's pretty close to what he said. > The chairman of the U.S. Federal Reserve, Jerome Powell, said his goal is “to get wages down.” > In a press conference on May 4, Powell announced that the Fed would be raising interest rates by half a percentage and implementing policies aimed at reducing inflation in the United States, which is at its highest level in 40 years. > According to a transcript of the presser published by the Wall Street Journal, Powell blamed this inflation crisis, which is global, not on the proxy war in Ukraine and Western sanctions on Russia, but rather on U.S. workers supposedly making too much money. > “Employers are having difficulties filling job openings, and wages are rising at the fastest pace in many years,” Powell complained. > The Fed’s proposed solution: bring down wages. > There are more job vacancies than there are unemployed people in the United States, as the economy recovers from the Covid-19 pandemic. > Powell claimed this discrepancy between job vacancies and unemployment is due to high wages, which discourage workers from taking bad, low-paying jobs with few benefits, and therefore give them too much power. 1. https://mronline.org/2022/05/26/u-s-federal-reserve-says-its-goal-is-to-get-wages-down/ https://mronline.org/2022/05/26/u-s-federal-reserve-says-its... So yes, apparently workers are getting a bit uppity and it's time to put them back into place.
  - dragonwriter 3y ago
    > The Fed’s proposed solution: bring down wages. Its too bad that Powell directly says in the press conference this characterizes that they believe and intend for the outcome to be continued rapid wage growth: https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220504.pdf https://www.federalreserve.gov/mediacenter/files/FOMCprescon... “So we think through our policies—through further healing in the labor market, higher rates, for example, of vacancy filling and things like that, and more people coming back in—we’d like to think that supply and demand will come back into balance and that, therefore, wage inflation will moderate to still high levels of wage increases, but ones that are more consistent with 2 percent inflation. That’s our expectation.”
  - Aunche 3y ago
    A bunch of accusations that references a few cherry-picked quotes that was written by an author who regularly parrots Russian propaganda [1] isn't exactly a trustworthy source. [1] https://geopoliticaleconomy.com/2022/02/20/west-ukraine-crisis-sanctions-russia/ https://geopoliticaleconomy.com/2022/02/20/west-ukraine-cris...
CoastalCoder 3y ago
Not sure why the parent post was downvoted. Maybe it would help to give a citation for that quote?

whitemary 3y ago

It is not wrong to say the fed wants to increase unemployment. The fact is the fed doesn't have any other ideas so they want to do this one. Maybe they would prefer not to, but who cares? They are going to do it anyway because they don't have any other ideas. How many ways do you need someone to say it before you accept it?

bugglebeetle 3y ago

“In the labor market, demand for workers far exceeds the supply of available workers, and nominal wages have been growing at a pace well above what would be consistent with 2 percent inflation over time. Thus, another condition we are looking for is the restoration of balance between supply and demand in the labor market.” https://www.federalreserve.gov/newsevents/speech/powell20221130a.htm https://www.federalreserve.gov/newsevents/speech/powell20221... A greater supply of workers relative to current inflation is only possible if more people are made unemployed, forced out of retirement, or there are massive changes to immigration policy. And historically, rapidly raising interest rates always results in the first.

drdec 3y ago
Agreeing and just pointing out how the ultimate cost of inflation is being borne by the wage earners. Once again they lose out.

barumrho 3y ago

I agree with your sentiment that the Fed isn't "out to increase unemployment" but I think it's not entirely correct to ignore the trade off of raising rates. It's the low employment that allows the Fed to keep increasing rates. The Fed has a dual mandate for a reason which I believe is based on Phillips curve (https://www.investopedia.com/terms/p/phillipscurve.asp https://www.investopedia.com/terms/p/phillipscurve.asp) that inflation and unemployment is inversely correlated. Now, it's fair to question this relationship...(I don't think it's as rock solid as it used to be), but the Fed's dual mandate is based on this theory. So, in some sense the goal of lower inflation implies higher unemployment.