The Fed plans to sharply boost unemployment • Hacker News Board

Re: The Fed plans to sharply boost unemployment

#11

Post by refurb » Sun, Sep 25, 2022, 2:44 PM UTC

mjhay wrote: post #5

Wage growth has not been keeping up with inflation, and may even be damping it. The steady chorus of claims that wages are too high strikes me as consent-manufacturing by capital. https://www.epi.org/blog/wage-growth-has-been-dampening-infl... https://insurancenewsnet.com/oarticle/inflation-continues-to...

Everybody wants to control inflation until it's time to suppress wage growth.

The Bank of Canada even came right and out said that employers should definitely not raise wages quickly.

https://www.theglobeandmail.com/business/article-wage-negoti...

Re: The Fed plans to sharply boost unemployment

#12

Post by dmm » Sun, Sep 25, 2022, 2:45 PM UTC

The fed funds rate was above 10% on avg between 1979 and 1984. If rates that high for that long were necessary to contain inflation, could we afford that at this point? Wouldn't the rates paid on the federal debt have to go way up as well?

Re: The Fed plans to sharply boost unemployment

#13

Post by refurb » Sun, Sep 25, 2022, 2:46 PM UTC

fxtentacle wrote: post #2

"With an additional million or two people out of work, the newly unemployed and their families would sharply cut back on spending, while for most people who are still working, wage growth would flatline. When companies assume their labor costs are unlikely to rise, the theory goes, they will stop hiking prices. That, in turn, slows the growth in prices." That seems like a pretty whacky theory to me because it assumes…

Their ability to raise prices is depending upon consumers having the money to spend.

Re: The Fed plans to sharply boost unemployment

#14

Post by mjhay » Sun, Sep 25, 2022, 2:47 PM UTC

refurb wrote: post #11

mjhay wrote: post #5

Wage growth has not been keeping up with inflation, and may even be damping it. The steady chorus of claims that wages are too high strikes me as consent-manufacturing by capital. https://www.epi.org/blog/wage-growth-has-been-dampening-infl... https://insurancenewsnet.com/oarticle/inflation-continues-to...

Everybody wants to control inflation until it's time to suppress wage growth. The Bank of Canada even came right and out said that employers should definitely not raise wages quickly. https://www.theglobeandmail.com/business/article-wage-negoti...

Weird how government agencies that fall to regulatory capture all keep advocating for things beneficial to the industries they oversee.

Sufficient tax increases for the well-off would have the same effect as punishing the working class, but that's never an option for some reason.

Re: The Fed plans to sharply boost unemployment

#15

Post by econ101time » Sun, Sep 25, 2022, 2:47 PM UTC

fxtentacle wrote: post #2

"With an additional million or two people out of work, the newly unemployed and their families would sharply cut back on spending, while for most people who are still working, wage growth would flatline. When companies assume their labor costs are unlikely to rise, the theory goes, they will stop hiking prices. That, in turn, slows the growth in prices." That seems like a pretty whacky theory to me because it assumes…

>That seems like a pretty whacky theory to me because it assumes that companies only increase prices when forced to do so, and not just because they can.

I see people post things like this, and I'm forced to conclude that you don't understand supply and demand.

Edit: Sure, monopoly pricing is real. But blaming monopoly pricing for inflation is dubious. You'd need an account of 1) how the goods in the CPI basket are monopoly priced and 2) why all these monopolies decided to raise prices now instead of 3 or 10 years ago. The standard account is much more plausible: Supply side crunch due to covid policies and geopolitical problems and sanctions. Increased demand due to the Fed dropping money out of helicopters for over a decade + (more acutely) covid handouts.

Re: The Fed plans to sharply boost unemployment

#16

Post by socialismisok » Sun, Sep 25, 2022, 2:47 PM UTC

Reducing power of workers in favor of capital is deeply disappointing to me. The idea that we'd want to increase unemployment rather than have everyone working is frustrating.

"But wages are too high!" Shouldn't the folks who believe in markets as a force for good want wages to be set by markets? The most profitable businesses can pay the wages for workers, and the least profitable ones can't hire?

Why do we need someone taking away power from labor when labor starts to gain even a small amount of leverage?

Re: The Fed plans to sharply boost unemployment

#17

Post by refurb » Sun, Sep 25, 2022, 2:49 PM UTC

dmm wrote: post #12

The fed funds rate was above 10% on avg between 1979 and 1984. If rates that high for that long were necessary to contain inflation, could we afford that at this point? Wouldn't the rates paid on the federal debt have to go way up as well?

Treasuries have maturities up to 10 years, so some bonds that will mature in 2030 (and new bonds need to be reissues at current rates) were issued at rates from 2020.

Thus, a relatively large portion of the federal debt may be isolated from a relatively short (3-5 year) jump in rates.

Re: The Fed plans to sharply boost unemployment

#18

Post by nemo44x » Sun, Sep 25, 2022, 2:49 PM UTC

They should start by firing themselves. In a managed economy it’s the managers who are at fault for the situation we are in. But naturally it’s the common man who will suffer. They’re just a statistic after all.

Re: The Fed plans to sharply boost unemployment

#19

Post by socialismisok » Sun, Sep 25, 2022, 2:49 PM UTC

econ101time wrote: post #15

fxtentacle wrote: post #2

"With an additional million or two people out of work, the newly unemployed and their families would sharply cut back on spending, while for most people who are still working, wage growth would flatline. When companies assume their labor costs are unlikely to rise, the theory goes, they will stop hiking prices. That, in turn, slows the growth in prices." That seems like a pretty whacky theory to me because it assumes…

> That seems like a pretty whacky theory to me because it assumes that companies only increase prices when forced to do so, and not just because they can. I see people post things like this, and I'm forced to conclude that you don't understand supply and demand. Edit: Sure, monopoly pricing is real. But blaming monopoly pricing for inflation is dubious. You'd need an account of 1) how the goods in the CPI basket are…

Supply and demand works on a idealized economy, but it's hardly true in the real world where there are cartels, monopolies, and other incentives to keep prices high even if there's supply.

Re: The Fed plans to sharply boost unemployment

#20

Post by hedora » Sun, Sep 25, 2022, 2:51 PM UTC

> Fed Chair Jerome Powell made that amply clear this week when the central bank projected its benchmark rate hitting 4.4% ...

... In plain English, that means unemployment. The Fed forecasts the unemployment rate to rise to 4.4% next year

What? The fed is setting benchmark unemployment rates now? That seems unlikely.