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The Fed plans to sharply boost unemployment

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Re: The Fed plans to sharply boost unemployment

#151

Post by pclmulqdq »

PaulDavisThe1st wrote: post #149
pclmulqdq wrote: post #132

Earlier quoted context omitted.

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

Current economic metrics are all over the place following the worst global pandemic in a century. It's true that the metric(s) typically used to define/measure growth are down as you describe, there are lots (and lots) of related metrics that say something quite different. I think overall it's most accurate to suggest that we're in a strange time indeed, not just a repeat of the last 3 or 5 recessions.

Yes, and that the strange time we are in includes a recession.

The NBER has never failed to call a recession on 2 quarters of negative growth in the past, including during the very same pandemic we are now exiting, which was also a pretty strange time. Past recessions have involved other circumstances, too.

It's literally called a recession because it is a time when the economy is receding. If I had said "depression" or "financial crisis" you could argue that we don't have one of those.

Re: The Fed plans to sharply boost unemployment

#152

Post by pitaj »

PaulDavisThe1st wrote: post #128
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.

Inflation is high because corporations have increased consumer prices well above their own increases in costs. There's just as much evidence for this claim as "inflation is demand > supply" or "inflation is M2".

The "corporations are just greedy" thing makes zero sense. If it's just greed, then why have they just recently started? It's not like they all got together and decided to raise prices.

Re: The Fed plans to sharply boost unemployment

#153

Post by ShredKazoo »

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…

>The idea that we'd want to increase unemployment rather than have everyone working is frustrating.

Keeping unemployment low is part of the Fed's mandate -- along with keeping inflation low. But sometimes you can't get everything you want.

Re: The Fed plans to sharply boost unemployment

#154

Post by ShredKazoo »

socialismisok wrote: post #49
deburo wrote: post #45

Earlier quoted context omitted.

You must be underestimating the negative effect high long-term inflation has on a society. Labor doesn’t gain leverage, it loses a lot of buying power.

Not at all. I'm saying we have many levers to control inflation, worker power is only one.

What levers would you use?

In the article Powell says:

>"I wish there were a painless way to do that," Powell said. "There isn't."

Maybe you should email him your idea.

Also, I don't think it is accurate to say that the Fed sees worker power as a "lever" to control inflation. Their "lever" is interest rates. The problem is that hiking rates has the unintended side effect of increasing unemployment, in addition to fighting inflation. And this unemployment increase is due to a generalized economic slowdown, which hurts both labor and capital -- that's why the stock market is falling.

Recommended: https://www.amazon.com/Cartoon-Introduction-Economics-Two-Ma...

Re: The Fed plans to sharply boost unemployment

#155

Post by AnimalMuppet »

echelon wrote: post #125
BlargMcLarg wrote: post #116

Earlier quoted context omitted.

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 en…

What's the fix for this? America won't be regaining its 1940's unilateral industrial superpower status again. Do we just say that the Silent and Boomer generations were a fluke? Do politicians that promise to redistribute wealth get elected? Does automation really save us? Or lead to greater inequality?

> Do we just say that the Silent and Boomer generations were a fluke?

Yes we do, because yes, they were a fluke. The question is, can we re-create conditions approximately that good (without bombing the rest of the planet back to the stone age)? I must admit that I don't see a way to do so.

Re: The Fed plans to sharply boost unemployment

#156

Post by dehrmann »

nemo44x wrote: post #18

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.

I don't think you realize how hard it was to get this right. Between covid, reopenings, and the war in Ukraine, there were massive supply and demand shifts in the last 3 years.

Re: The Fed plans to sharply boost unemployment

#157

Post by mrtesthah »

LUmBULtERA wrote: post #97
hedora wrote: post #20

> 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.

In economics, the Phillips curve is well known. The Phillips curve specifies that there is a short-run tradeoff between unemployment and inflation. Thus, trying to tamp down inflation in the short-run would inevitably increase some unemployment.

Evidence that the Phillips Curve has never been true, even in the 1970s:

https://paulkrugman.substack.com/p/stagflation-revisited

Re: The Fed plans to sharply boost unemployment

#158

Post by uup »

pgwhalen wrote: post #141
uup wrote: post #111

Earlier quoted context omitted.

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…

> Congress and the Fed caused the M1 money supply to 5X in just a period of two years. Oft-repeated, but incorrect. The way M1 is calculated was changed in 2020, and the apples to apples comparison is actually a little bit less than 2X. https://fred.stlouisfed.org/series/M1SL

Thank you for the correction.

Re: The Fed plans to sharply boost unemployment

#159

Post by paulmd »

pclmulqdq wrote: post #130
NeverFade wrote: post #69

Earlier quoted context omitted.

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

You could make a decent argument that they have actually caused this recession. 75 bps rate hikes immediately after a crisis where they slam rates to 0 and do a ton of QE does not sound like a particularly responsible form of monetary policy.

Both of those moves are sensible given the circumstances.

What was not responsible was dropping rates 75bps in 2019, the “mid-cycle adjustment” period referenced here. The economy was already roaring and it was widely acknowledged even at the time that this was unnecessary and a concession to political pressure.

https://www.forbes.com/advisor/investing/fed-funds-rate-hist...

Those politically-motivated cuts left the fed with no maneuvering room when (inevitably) a crisis did strike. And we’re still feeling the ramifications of that today, because now we get to do those rate increases during what’s already a recession, instead of during a booming 2019 economy.

This whole situation is a textbook lesson on “why you don’t lower rates while the economy is already roaring just to pump the president’s numbers a little further going into an election year”.

Re: The Fed plans to sharply boost unemployment

#160

Post by rightbyte »

civilized wrote: post #119
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).

Why would you want economic activity for the sake of it. Sounds wasteful.
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