It's going to cause massive and unnecessary pain
It's true...corporate claims about many "shortages" of supplies and such were posed to get help from the taxpayers on one end to fund things like the PPP, and then to profit on the other end with higher prices on the shelves. Gas prices, for example...the highest majority of money gained by raising prices so ridiculously, while the government allowed it, went right into the stockholders and executives' pockets...what more do we need to know to start organizing as "we, the people" and getting back to the principles we were founded with, regarding our democratic republic foundation? Not to be ruled by money, religion, or any certain political ideology...
Jerome Powell is all about neoliberal orthodoxy. He believes that free markets left to their own devices will produce outcomes that are superior to governmental interventions. What is occurring under the Biden-Powell neoliberalism is that government is allowing giant corporations to freely pursue profit opportunities to the maximum extent. Government bails out corporations whenever profits are threatened. And of course as Stern points out capitalism can fail. The view that balanced interventions are likely to make things worse is false, so let’s stop kidding ourselves, they are out to get the most for themselves.
I suspect Mr. Powell doesn’t read Dr. Reich’s columns. how do we get out of the echo chamber? I also suspect that at least 95% of those of us who read his columns are in agreement, so preaching to the choir. I’ve written about it in our local paper with about as much effect as this column, maybe interesting to some but Mr. Powell doesn’t read my column either.
Of course they are - by design. They're only interested in protecting the rich and corporations from inflation, because inflation reduces the value of their debt based assets like mortgages, credit card balances and other loans...as well as the value of their (often tax free) bonds with a fixed interest rate.
If the average person is able to get wage and income increases to keep up with inflation, it's actually a good thing for them...they have more money (with less value) to pay off their loans.
One CEO recently said that inflation would be a "good thing" because it would cause unemployment and "put employers back in the driver's seat"...and Powell said yesterday that the interest increases were likely to cost jobs.
Follow the money. We live in a society that is of, by and for the oligarchs.
Ok. I hear you, Dr. Reich - please outline step-by-step what the people can do to force federal economic change. Thank you for your column!!!
Jerome Powell is not the government, and his mission and tools are limited -- he's doing what he can with what he's got. Going after corporate profits requires legislation, and it's not going to happen as long as the corporations have their own paid-for legislators -- in both parties, as you noted. Nothing will change until people are smart enough to vote out those not serving their interests -- and that comes back to teaching critical thinking in schools, also opposed by corporate interests.
There will be no taking on the elites from anyone that considers themselves to be an "elite"...
It seems the Fed Reserve only understands demand pull inflation. Since they only have one tool, federal funds rate, that is what they use. Now IMHO interests rates have been near 0 for decades, providing businesses and the wealthy essentially free money. I do not think this is a good thing, particularly as it keeps savings rates under 2% which is below the rate of inflation.
Under the present circumstances, what else can Powell do? It’s become another Law of Thermodynamics that the wealthy cannot be expected to give up *any* of their gains, so the bill has to be passed on to the average guy - whether he can afford it or not.
In the middle of the past Century, it was “What’s good for business is good for America”. After Reagan, it was “What’s good for the rich is good for America”. Now, what’s good for the rich is effectively the only thing that matters.
Republicans now manage the masses with lies, violence, and Psy-Ops. Democrats manage them with platitudes and token gestures. Either way, it’s not a situation that can be sustained for much longer.
Price controls are most effective in rapidly reducing inflation indices to offset very short-term forces such as a brief supply disruption. Their effectiveness rapidly diminishes. Except for specialized products (e.g., patented pharmaceuticals), corporate pricing power is constrained only by aggregate demand and competing supply. There is no substitute for greater income and wealth equality so that the money supply can be controlled without inordinately harming so many people.
It continues to amaze me how in-thrall some of our brightest minds are to the last 50 years of financial capitalism. We've gone from many corporations being cognizant and supportive of the well-being of employees and communities, to a focus on the well-being of the share price of publicly traded companies on the stock market.
Now, I'm a beneficiary of that focus. That said, small to medium businesses, privately held are the lifeblood of our "real" economy. Who will advocate for the real economy?
Quarterly earnings, stock buybacks and exorbitant management compensation packages direct money, meant to be in circulation (that is, after all, what money is: a medium of exchange!) into the hands of very few.
The balance must be adjusted and we won't do that by acting based on the assumptions of the past.
I beg to differ Mr Reich. Your comment...”Not even a Democratic president and “Democrats in control of both houses of Congress could overcome vested corporate interests.” Surely, you can’t believe Democrats are truly in control of the US Senate. With the obstructionist Republican mind set, the politicization of SCOTUS and the constant spinning of actual occurrences by the media I think it’s fair to say Pres. Biden has been dealt a bad (I struggled with the right adjectives) hand. I also think he has played it as well as possible. I submit that if President Biden had a Congress behind him similar to FDR, who would take their oath of office seriously, work for the common good and have the numbers and conviction to vote their actions with thoughtful concern for the country...corporations would fall in line. Somehow, like religion, money must be removed and kept out of politics. Of course, this is just my opinion.
I thought of everything I learned about inflation from Dr Reich as I listened to Powell today. Lost all faith in the guy when he said inflation would be "transitory." I am so tired of the burdens falling on the lower middle class and poor who are struggling so much already, while Bezos takes on space travel as a hobby. There is a homeless encampment where I live where about 20 men have been living in tents for over a year. Through the Colorado winter! I cannot image the suffering! I absolutely believe in universal basic income because people should never suffer like this. If I was Bezos I couldn't sleep at night!
I couldn't agree more! During COVID Americans received COVID relief checks and enhanced UI benefits to survive. When people went back to work they fought for well-deserved higher wages.
Corporations saw that extra money in consumers’ pockets as an excuse to raise prices on everything even though it was contributing to inflation. They made record profits.
Because of higher prices, inflation rose, so the Feds raised interest rate, knowing that it would cost jobs and economic opportunity for working families - claiming it’s a pain Americans must face.
Corporations say, oops, consumers don’t have as much money anymore so we’ll lower prices and celebrate that we made billions off consumers already. Then we’ll lay off workers and cut wages to protect our profits.
All this happened because working Americans finally got a bigger piece of the pie.
It is a lot easier to take a dollar from a thousand people than 1,000 from one corporation.
And that's the way the world goes round. . .If you gotta hurt, hurt the little guy. He can't scream as loud as the big guy.
I agree with your point. But I keep thinking no one is paying enough attention to the supply issues that are longer term and harder to solve. Immigration policies which restrict labor supply, the cost of higher education which drives up labor costs, the lack of affordable housing, over dependence on fossil fuels, no decent child care or paid family leave . It just seems like these supply issues have much to do with current inflation and it doesn’t seem like economists have enough to say about how to solve for them