The Fed plans to sharply boost unemployment • Hacker News Board

Re: The Fed plans to sharply boost unemployment

#131

Post by PaulDavisThe1st » Sun, Sep 25, 2022, 5:27 PM UTC

rufus_foreman wrote: post #78

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…

Companies are increasing prices now. If they could have profitably increased them before, why did they wait until now?

Because genuine supply chain problem-induced price increases gave them cover to increase prices on things without supply chain problems.

And also because in late 2020/early 2021, it appeared that labor was about to get a bit uppity and wee bit more powerful than it had been, so price increases were a nice preemptive move to deal with upcoming compensation issues.

Re: The Fed plans to sharply boost unemployment

#132

Post by pclmulqdq » Sun, Sep 25, 2022, 5:28 PM UTC

PaulDavisThe1st wrote: post #127

NeverFade wrote: post #69

Earlier quoted context omitted.

It's easy to scapegoat the Fed for the ongoing recession and inevitable layoffs.

What recession? Measured with what metrics?

Two consecutive quarters of negative growth is the standard definition used around the world. Except in the US today.

Re: The Fed plans to sharply boost unemployment

#133

Post by blockwriter » Sun, Sep 25, 2022, 5:30 PM UTC

Is the term "boost" in regards to unemployment a phrase that the Fed uses, or is it editorializing?

Re: The Fed plans to sharply boost unemployment

#134

Post by econ101time » Sun, Sep 25, 2022, 5:30 PM UTC

vsareto wrote: post #121

koheripbal wrote: post #57

Earlier quoted context omitted.

Supply-Demand pricing is probably one of the most well studies aspects of modern economics. There is a range of prices between the underlying costs+overhead to the price point where demand drops off. In that range, several factors influence where a company sets its price. In a case where a company produces a unique product on the market, then it will price in the higher end of the range where demand drops off. On the…

Shrinkflation is very real and illustrates that companies still have some agency based on profit/greed in determining prices.

The alternative to shrinkflation is just raising the price (or raising it more). Yes, it's toying with sticky demand psychology, such that a plain price increase would produce a less favorable equilibrium for the seller, but I'd be surprised if it was a significant driver of inflation.

Re: The Fed plans to sharply boost unemployment

#135

Post by econ101time » Sun, Sep 25, 2022, 5:36 PM UTC

PaulDavisThe1st wrote: post #129

econ101time wrote: post #15

Earlier quoted context omitted.

> 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…

Do you think that Robert Reich also doesn't understand supply and demand? https://www.theguardian.com/commentisfree/2022/sep/25/inflat...

Robert Reich is a politico with a political agenda, and that article is in a US politics opinion section. Inflation is a major US electoral issue, and the Biden admin has tried to shift blame to greedy companies (not that it's necessarily fair to put the blame on the Biden admin, that's another issue altogether). And even if he were an economist (which he's not, despite the PPE degree), economists can be political hacks just like anyone else (Paul Krugman comes to mind).

Re: The Fed plans to sharply boost unemployment

#136

Post by nilsbunger » Sun, Sep 25, 2022, 5:39 PM UTC

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?

We should do everything we can to fix supply issues. The sooner we do, the better.

But in the meantime , demand has to adjust. Either we do it via monetary policy and any other levers, or inflation will do the job for us.

Re: The Fed plans to sharply boost unemployment

#137

Post by generj » Sun, Sep 25, 2022, 5:39 PM UTC

bjourne wrote: post #113

propernoun wrote: post #53

Earlier quoted context omitted.

> 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 psychopath…

They do this knowing taking no action will be far far worse for everyone. We saw what a decade of stagflation looked like and it’s much worse than limited job losses. Even those who lose jobs will be better off with a short recession rather than costs inflating away their earnings.

The actions taken in 2007 and 2008 were largely because of how terrified decision makers were of the Great Depression (Bernanke in particular was a deep student of that era and saw lots of similarities).

The Fed’s mandate has always been to control inflation and promote employment. The goals sometimes oppose each other. There’s no evidence they have stepped aside from this mandate. Employment was so prioritized by the Fed for so long that their actions promoting it probably fueled some of this inflation, and led to them to not fighting the inflation sooner. Hardly the actions of Vladimir Putin.

Re: The Fed plans to sharply boost unemployment

#138

Post by afpx » Sun, Sep 25, 2022, 5:46 PM UTC

starkd wrote: post #102

afpx wrote: post #77

Earlier quoted context omitted.

These jobs allow something like 60-100M households escape poverty every year. That's a good thing for everyone (except the Earth).

Economic activity is not inimical to humanity. Not in and of itself. That's a terrible way to think of your fellow man and our relationship to nature.

Believe me, I'd love it if people cared for nature. But, people tend to choose having kids and keeping those kids out of poverty before they choose nature. And, having kids requires economic activity, unfortunately.

I didn't create the system. Someone started this ball rolling 10k years ago.

Re: The Fed plans to sharply boost unemployment

#139

Post by nilsbunger » Sun, Sep 25, 2022, 5:46 PM UTC

slaw wrote: post #114

alooPotato wrote: post #99

Earlier quoted context omitted.

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?

It’s not only china zero covid policy. For example , there’s a huge worker shortage in industries like airlines and hospitality. That’s a supply shortage too.

Re: The Fed plans to sharply boost unemployment

#140

Post by nilsbunger » Sun, Sep 25, 2022, 5:48 PM UTC

marcosdumay wrote: post #112

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.

It’s pretty tightly linked. Lots of loans don’t happen when interest rates go up. On the consumer side , car loans, mortgages , etc. on the biz side, capital loans and lines of credit. All of this significantly reduces purchases and money in our pockets, thus putting downward pressure on gdp and demand.