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Sociopaths. It breaks me to see the Fed use interest rates to cause unemployment as the lever against inflation. It all seems so cruel.
by seg_lol 11mo ago
Sociopaths. It breaks me to see the Fed use interest rates to cause unemployment as the lever against inflation. It all seems so cruel.
- zahlman 11mo agoThey use interest rates to protect against inflationary (and deflationary) spirals, which are known to be devastating. The effect on the unemployment rate is a known, and predictable, side effect. But formal unemployment is small compared to labour force dropout anyway, and the latter is not necessarily so sensitive to economic conditions anyway. Besides which, the unemployment rate can't really keep going down forever. Zoom out; recent levels are actually quite impressive in the USA. Yes, they've climbed since 2023, but they're only just reaching the pre-GFC minimum (https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm https://www.bls.gov/charts/employment-situation/civilian-une...). Zoom out further: https://fred.stlouisfed.org/series/UNRATE/ https://fred.stlouisfed.org/series/UNRATE/ Had it not been for COVID you'd be at more than 16 years without a(n NBER-determined) recession, long enough to suggest a fundamental shift vs. how things worked in the several decades before that.
- clcaev 11mo agoYet the average household seems weaker now than 16 years ago. Perhaps policy guided by this metric could use rethinking.
- dragonwriter 11mo agoYour observation is about distributional characteristics of the economy which, in terms of policy, are addressed by fiscal policy and not monetary policy; the former remains in the hands of Congress and the President without delegation to the Federal Reserve, which has been given only a narrow set of tools adapted to and a mission related to broad aggregate performance.
- ls612 11mo agoThe median household income is higher today in real terms than it was in 2008.
- ericd 11mo agoHave you ever read about people burning piles of German currency because it was better than using it to buy firewood with? Not to say we would get there, but allowing inflation to run is not kinder.
- inferiorhuman 11mo agoI think these days folks typically use Zimbabwe or Argentina as examples.
- brobdingnagians 11mo agoThose are more recent examples, but I think Germany is still a more visceral example for a lot of Western nations because Germany was a high tech, educated industrial nation that was hit with such massive problems from government policy. It's closer to home. Other countries are (wrongfully) easier to dismiss as being just too different from our wealthy and enlightened selves.
- ericd 11mo agoAlso, Germany was a great power seriously challenging the greatest power of the time, the British Empire. They fell a lot further than those other examples.
- Gibbon1 11mo agoPeople get confused the hyper inflation in Germany was right after the end of WWI when Germany's economy was collapsing. Turns out you can't fix that with monetary policy. A point. Economists like people to believe that hyper inflation lead to Hitler. When it was austerity policies at the start of the great depression 10 years later that lead to the Nazi's winning in 33. Same austerity policies in the US lead to FDR and the Democrats winning.
- inferiorhuman 11mo agoUnfortunately we're looking more like Hogan's Heroes than Germany. Both Zimbabwe and Argentina (and, quite frankly, Venezuela) were well developed before they went down the road of disastrous policies.
- rcxdude 11mo agoUnemployement is a necessary part of the economy, what is cruel is making unemployment unlivable.