The anti-inflation pivot of 2022

>Those who advocate a tightening of fiscal and monetary policy in the name of stopping inflation, do so because they fear a build up of inflationary momentum. That risk may be real. No less real, however, are the costs of the contractionary policy mix being applied now.

My intuition on the problem is that no matter where we fall along the spectrum once it lands, we will have both unacceptably high inflation (which we've already had) and an unacceptably large recession. Don't know which one will hurt more yet.

1. People realized going into an officce to work was unncessary and even anachronistic for many jobs;

2. Employers like employees in the office as a form of control;

3. Employers made short-term decisions to lay off huge amounts of people (even after taking PPP loans for the purpose of preventing this);

4. After 1-2 years of suppressed demand, companies weren't equipped for the increased demand and couldn't hire back their staff at the same rate;

5. As always, there are no labor shortages, only under-market wages;

6. The pandemic created a situation where a lot of people could (and did) get their first real increase in wages in decades.

7. Much of those real wages have been eroded by inflation.

Take all this together and you realize that policymarkers consider labor movements an existential threat to profits. Suddenly it's increased wages that are responsible for inflation.

And then you have ideas (as in this post) where the only way of reining in inflation is by increasing borrowing costs, which hurts a lot of individual borrowers.

Why isn't corporate taxation being used to control the money supply? It would have the same net effect except that it would fund the government rather than lenders. Several countries have imposed windfall profits taxes.

We saw this last week with the averted rail strike. Those workers could face consequences for taking off unpaid sick days for themselves or their family. To give them all 15 paid sick days a year would cost 3.5% of the industry's profits (~$680m/year IIRC for 125,000 workers). Not revenue. Profits.

This system wants to keep you in debt, low-paid (just sufficient to service your debt) and have limited other options. Then you'll show up to work and not make trouble by asking for raises.

That underpins all the policy decisions around inflation, interest rates and the looming recession.