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The Fed plans to sharply boost unemployment

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Re: The Fed plans to sharply boost unemployment

#81

Post by propernoun »

MereInterest wrote: post #62
socialismisok wrote: post #42

Earlier quoted context omitted.

Wages aren't the only input to inflation. It's not axiomatic that these three cannot be met simultaneously.

It also doesn't account for wage disparities. Even if I accept the premise that wages cannot increase without increasing either unemployment or inflation, it still doesn't follow that increasing the minimum wage imposes the same requirement. Under that model, employment/inflation could also be kept constant by increasing wages to workers while decreasing wages to management, or by increasing wages to both workers and…

Of course it does. You have a naive view of wages. You do not increase minimum wages and not have wage compression elsewhere in the workforce.

Increasing the minimum wage has the most dramatic impact on increasing the demand for goods because it impacts so many people. Increasing the maximum wage has little if any impact on broader demand for goods because it impacts so few. Unless your supply chain can keep up with the demand surge through raised wages, you will see inflation, which is our situation today.

You might naively assume the solution is to introduce price controls but the general outcome of that is the economy shifting transactions to barter-based, black markets, and non-denominated currency exchange, which causes more economic upheaval as GPD and tax revenues drop. There are many examples of this in the last 100 years, Venezuela being a recent one.

Re: The Fed plans to sharply boost unemployment

#82

Post by sofixa »

koheripbal wrote: post #65
xutopia wrote: post #44

This is deleterious beyond just economics. Put people out of a job and they go sick, die more frequently and have a general unpleasant time. None of these folks are willing to look at how profits are at record high... take money out of the richest hands and redistribute. The cards are stacked against the common people and asking the non-wealthy to take the brunt of the hit here is a cash grab by the elite who aren't…

Unemployment is still near record low levels. The Fed isn't firing people - they are correctly raising interest rates to keep up with inflation. There's not much wiggle room for them. If we all want this problem to go away, we should be focusing on improving our own energy independence and energy transportation quickly and ending the war in Ukraine which is disrupting markets and causing economic havoc in Europe.

> If we all want this problem to go away, we should be focusing on ending the war in Ukraine which is disrupting energy markets and causing economic havoc in Europe.

If you have contacts in the Kremlin feel free, but otherwise that's an empty idea. There are two ways to do that - Ukraine gives up, which it won't, or Russia does, which it won't. Putin cannot afford to show how weak he is or he might be gone, and Ukraine will no longer compromise on it's territorial integrity now that it has the upper hand in the fighting, and moral justification (they were invaded by a brutal genocidal regime that has murder thousands of their civilians, why would they compromise with them, especially now that they're beating them?).

Re: The Fed plans to sharply boost unemployment

#83

Post by ajackfox »

ethbr0 wrote: post #47
ajackfox wrote: post #8

For basically my entire adult life, at the macro level capital investments have basically been free for corporations. While I have an idea of will happen based on historical data, it will certainly be ‘interesting’ to experience it first hand. :/

It's healthy in that it causes unproductive firms to go bankrupt. It's painful in that unproductive firms are no longer handing out free money to employees and customers. Looking at the market of companies today, especially in the tech space, IMHO ten years or so of fiscal prudence would be really healthy. The only downside is that Apple, Amazon, Google, and Microsoft would weather it and come out more relatively dom…

No disagreements there: I was just lamenting the short term negative impacts it will have.

Further concentration of capital’s power in the tech space is a significant issue, IMO, and painful in its own right to back out of. It will be interesting to see how we deal with this problem in the future… if we address it at all.

Re: The Fed plans to sharply boost unemployment

#84

Post by MereInterest »

propernoun wrote: post #81
MereInterest wrote: post #62

Earlier quoted context omitted.

It also doesn't account for wage disparities. Even if I accept the premise that wages cannot increase without increasing either unemployment or inflation, it still doesn't follow that increasing the minimum wage imposes the same requirement. Under that model, employment/inflation could also be kept constant by increasing wages to workers while decreasing wages to management, or by increasing wages to both workers and…

Of course it does. You have a naive view of wages. You do not increase minimum wages and not have wage compression elsewhere in the workforce. Increasing the minimum wage has the most dramatic impact on increasing the demand for goods because it impacts so many people. Increasing the maximum wage has little if any impact on broader demand for goods because it impacts so few. Unless your supply chain can keep up with…

Thank you for the additional details, and that helps my understanding. That the key quantity to keep constant is the total demand, not merely the total distribution. Therefore, when working to reduce wealth disparities, an increase in the minimum wage must be coupled with a greater-than-proportional decrease in the maximum wage in order to avoid negative side effects.

Re: The Fed plans to sharply boost unemployment

#85

Post by bm3719 »

socialismisok wrote: post #16

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 som…

> Shouldn't the folks who believe in markets as a force for good want wages to be set by markets?

They do, but what's that have to do with the Fed? The Federal Reserve is arguably one of the largest central planner entities in existence in the US (which as a mixed economy, not a free market one, has many).

Re: The Fed plans to sharply boost unemployment

#86

Post by MereInterest »

SantalBlush wrote: post #73
MereInterest wrote: post #51

Earlier quoted context omitted.

Correct, because Econ 101 is based on an idealized economy that doesn't match the real world.

That's why you take Econ 102, which is an intro microeconomics course. It covers the different market types, like competitive, monopolistically competitive, duopolistic, and monopolistic, and it covers the concepts of positive and negative externalities, market failures, etc. A lot of people here are acting like these are foreign concepts to an econ curriculum, when they're completely rudimentary. It's just ignorance…

It sounds like we're in agreement. From the GP's comment, which I was attempting to support, "[Supply and demand are] 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

#87

Post by echelon »

jmoak3 wrote: post #31
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...

Wages are too high, because our entire economy is built on the backs of available race to the bottom international labor. Demographics and the security situation is changing this, and the establishment (for better and worse) is absolutely freaking out. The world as we have lived it the past 30 years cannot exist if people doing labor can command a decent wage by USA standards, we’re going to have to recalibrate for a…

Some of those on /r/antiwork seem to expect to build careers from McJobs and Starbucks. Instead of seeing these as part time jobs for high school and college students, their expectations are that these jobs can support an apartment rent in a big city without roommates. These types of complaints seem irrational or misguided.

Many of their complaints do seem grounded in truth, however. America's low hanging fruit blue collar jobs have moved to developing nations. The automotive industry doesn't have as many jobs paying what it used to.

There doesn't seem to be a lot of talk for the trade skill pipeline, which has me curious: why not?

Both plumbing and electrical work pay decently and offer a high degree of autonomy, yet these aren't hyped. Nursing can be learned at night school. Not everything requires a college degree or "book smarts".

There has to be something more at play, because the middle class is hollowing out. Maybe not enough of these jobs to go around? Or maybe that middle class can never be as big as it once was during the post war boom years that saw American manufacturing leading the world. Maybe every country gets fifty years tops before that crown moves on.

They're also not wrong in complaining about asset appreciation. Unaffordable housing and rent. These are real pressures. "Cheap housing" doesn't seem like a bone we can throw.

What do we do for these folks that can't get white collar work?

Re: The Fed plans to sharply boost unemployment

#88

Post by toomuchtodo »

onlyrealcuzzo wrote: post #68
jmoak3 wrote: post #31

Earlier quoted context omitted.

Wages are too high, because our entire economy is built on the backs of available race to the bottom international labor. Demographics and the security situation is changing this, and the establishment (for better and worse) is absolutely freaking out. The world as we have lived it the past 30 years cannot exist if people doing labor can command a decent wage by USA standards, we’re going to have to recalibrate for a…

Or we could just automate more and innovate, instead of spending most of our time & energy & capital on leveraged speculation that the Fed will continue to endlessly pump up asset prices...

The gains would just go to the wealthy without efforts to secure more of the gains for the broad working class. This is as true for the Waltons and old money as it is for your run of the mill unicorn founder.

I’m really excited to see the organizing efforts taking place in the US; without them, these workers won’t be able to secure better wages, better quality of life, and a seat at the table with the business. The CEO would just go buy yet another yacht (the CEO of Starbucks is worth $4B and owns a $120M mega yacht, for example).

Re: The Fed plans to sharply boost unemployment

#89

Post by yuan43 »

Zero direct evidence for the title's claim was provided in the article.

All the Fed is doing is to normalize interest rates. Deeply negative real yields (5% or more) are aberrations that history has shown to ultimately lead to catastrophe.

Yet talking head and Dem Senator alike are treating rate normalization as financial Armageddon.

Somebody tell me how at the very least a 0% real yield on cash is going to kill the economy. Now explain what's normal about that.

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