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The Fed plans to sharply boost unemployment

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Re: The Fed plans to sharply boost unemployment

#111

Post by uup »

yuan43 wrote: post #89

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…

It’s going to kill the economy because the Fed is basically setting up perfect conditions for stagflation. Congress and the Fed caused the M1 money supply to 5X in just a period of two years. Of course there is going to be inflation in such a scenario. And yes, while the money supply isn’t the only factor that determines inflation, it certainly is a part and such a drastic change in the money supply almost certainly is a major cause of inflation.

But at least labor is strong. People are working and yes, they’re being squeezed by inflation, but they at least have some opportunity to change jobs for a raise or form a union to demand a higher share of profits. And that’s what we’re seeing in the economy. Now the Fed is saying that they want to pull some of the money back in, but the only way to do that is to hurt employment. People won’t get raises. People will be afraid to unionize. And Powell himself has said he has no idea if raising rates will even work to tame inflation. And despite this uncertainty, Powell has his pedal to the metal. He’s raising rates so fast he’s not even stopping to assess impact. So we’re basically trading a bird in hand (low unemployment) for two in the bush. People should be very afraid.

Re: The Fed plans to sharply boost unemployment

#112

Post by marcosdumay »

nilsbunger wrote: post #66

Inflation is high because demand exceeds supply. You have to reduce demand to match the available supply. Interest rates are the main tool to do that. This is true even if the ultimate cause is supply chain issues.

There isn't a simple, first-order relation between the monetary and the real economies. The only thing that exists is an absurdly complex web of small second or higher order interactions.

Re: The Fed plans to sharply boost unemployment

#113

Post by bjourne »

propernoun wrote: post #53
bjourne wrote: post #28

> In plain English, that means unemployment. The Fed forecasts the unemployment rate to rise to 4.4% next year, from 3.7% today — a number that implies an additional 1.2 million people losing their jobs. > "I wish there were a painless way to do that," Powell said. "There isn't." A reminder to us that psychopaths are running the world economy.

> A reminder to us that psychopaths are running the world economy. Labeling Powell/the Fed as a psychopath simply because they're turning one of the very few if not only inflation control knobs they have seems extreme. A psychopath would have done this randomly or at an illogical time (say by raising rates at the outset of the Great Recession). Just because you don't like the outcome of a decision doesn't make the de…

They are psychopaths because they have no concern for the misery they cause. If it were themselves or their families who would have their lives ruined, rather than 1.2 million innocent Americans, they wouldn't be so quick to enact this policy. A policy only supported by very dubious research, mind you. They are no better than the generals that dropped the atomic bombs on Japan, Vladimir Putin, or any other psychopaths to full of shit to give a damn about the well-being of others.

Re: The Fed plans to sharply boost unemployment

#114

Post by slaw »

alooPotato wrote: post #99
nilsbunger wrote: post #66

Inflation is high because demand exceeds supply. You have to reduce demand to match the available supply. Interest rates are the main tool to do that. This is true even if the ultimate cause is supply chain issues.

Why not help with supply issues too?

Another name for supply chain issue is China's zero Covid policy. How do you think US government can help with it?

Re: The Fed plans to sharply boost unemployment

#115

Post by slenk »

starkd wrote: post #96
spaceman_2020 wrote: post #93

Earlier quoted context omitted.

I can’t see how killing off a bunch of zombie companies surviving on cheap debt is bad for the economy in even the medium term.

Killing off the zombie companies will drive unemployment rate higher. Good in the longer term, but it won't come without a cost. That's the price we pay for such an extended period of cheap credit.

Zombie company to me sounds like a shell company with one or two people - that is not going to spike unemployment. Unless I don't understand what a zombie company is

Re: The Fed plans to sharply boost unemployment

#116

Post by BlargMcLarg »

echelon wrote: post #87
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…

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…

Blue collar shortage in a non-US area. Here, you're not getting the big bucks until you have quite a few years underneath your belt. Additionally, you'll have to be self-employed.

That's what people are complaining about. The hurdles are higher and more frequent than before. It's still there, but having your first home at 35 is vastly different from having it at 25. My friend group is filled with people privileged enough to work lucrative white collar jobs, and it's still a massive challenge despite earning more than 90% of all households.

Now imagine what happens when blue collars get saturated again. They can't beat white collar work during or after 25-35 without going off the beaten path, while white collar is struggling.

Cherry on top: households are getting less while doing more work per household.

Re: The Fed plans to sharply boost unemployment

#117

Post by nine_zeros »

throwaway9870 wrote: post #101
nine_zeros wrote: post #43

The CPI number is high because rents are high. Every other measure of CPI has dropped. But housing prices and rents just won't budge. This is a battle between the fed and sticky rent-seeking homeowners. Everyone else is a pawn. Our healthcare, livelihoods and families are mere collateral damage.

Please clarify what you mean by "dropped". If you are talking over a 12 month window, that is most certainly not the case: https://www.bls.gov/cpi/ Ignoring CPI, inflation is rampant in many other areas such as agriculture (basically everything is up) and manufacturing of good (again, everything seems up, metal, paint, fasteners, etc.)

In the final CPI number, "Services less energy services" has the highest weightage. https://www.bls.gov/charts/consumer-price-index/consumer-pri...

"Services less energy services" contains Shelter, transportation and medical services, of which, shelter has the highest weightage: https://www.pewresearch.org/fact-tank/2022/01/24/as-inflatio...

which is still increasing month over month as much as other things but increases CPI measure disproportionately higher: https://www.bls.gov/news.release/cpi.nr0.htm

Re: The Fed plans to sharply boost unemployment

#118

Post by polio »

taolegal wrote: post #64
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…

> 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. This "people are going die" justification has been behind so much catastrophically unwise policy, because there is no argument against it that matches the visceral alarms-blaring rhetoric. It's a blunt weapon and there's not a matching response, since the honest & sincere resp…

It should be possible to bail out the people without bailing out the companies, and it should be doable without generic QE. What if the government builds its own farms and grocery stores and housing complexes? Would that be bad because of how much control it would give the government or would it be good because of how much control it wrests away from private industry?

Re: The Fed plans to sharply boost unemployment

#119

Post by civilized »

yuan43 wrote: post #89

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…

A non-negative real yield on cash means its purchasing power never decreases. Is there an objective reason that the purchasing power of cash should never decrease? Negative yields encourage economic activity and discourage hoarding (use it or lose it).

Re: The Fed plans to sharply boost unemployment

#120

Post by bombcar »

slenk wrote: post #115
starkd wrote: post #96

Earlier quoted context omitted.

Killing off the zombie companies will drive unemployment rate higher. Good in the longer term, but it won't come without a cost. That's the price we pay for such an extended period of cheap credit.

Zombie company to me sounds like a shell company with one or two people - that is not going to spike unemployment. Unless I don't understand what a zombie company is

Zombie company usually means a company that should close down but continues to exist because capital is soooooo cheap.

Imagine things like unprofitable companies that are riding venture capital, etc. Uber could be one, perhaps.

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