- Consumer Price Index is 9.1%. year over year. The Fed’s solution is to raise interest rates, killing the economy to bring down. A thread about establishment logic. #CPI 9.1%
- Fed Chair Powell wants to raise unemployment and lower wages to fight inflation. Recession risk is a lower priority. https://www.marketplace.org/2022/05/12/fed-chair-jerome-powell-controlling-inflation-will-include-some-pain/
- But, many sectors of the economy are not interest-rate sensitive. Interest rates are a blunt tool for managing inflation. https://www.federalreserve.gov/econres/feds/why-isn39t-investment-more-sensitive-to-interest-rates-evidence-from-surveys.htm
- To affect the economy, the Fed will have to move interest rates drastically to crash a big enough market, like housing, so contagion spreads.
- If builders start layoffs, workers buy less. With fewer customers, unrelated businesses will have to lay off their workers and cut prices, too.
- In capitalism everyone’s spending is someone else’s income. Our government’s plan is to create a deflationary spiral. Inflation defeated!
- Unfortunately, interest rate changes are the only politically viable solution when your constituents are billionaires and corporations.
- Also, rate hikes increase payments to gov’t bondholders. YTD cost is >$300 billion. That new money creation is likely to increase wealth disparity.
- Better solutions would focus on government investment to supply scarce resources and taming monopolistic pricing by corporations.
- Smart gov’t spending would seek to increase productive capacity, where $1 invested returns $2 worth of stuff. This is taken for granted in business but not in government spending.
3 thoughts on “Fed Chairman Powell Wants Higher Unemployment to Stop Inflation”
Not in the “news:” Jerome Powell did not disclose that he stands to gain personal wealth from the Fed actions he recommends; a “conflict of interest,” or (less politely) blatant corruption at the highest level. If there were justice at this level, Powell would be impeached or go to jail.
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Raising interest rates is inflationary.