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.
Elaine, you are right about even the Fed out to get what they can for themselves. It's too bad we end up electing too many rich men to Congress, even to state legislatures because they think their vast wealth comes from their brilliance or something like that. In reality, we don't really have a "free market." We have a hybrid that decides which businesses are important and which are not, then makes sure the "good" ones stay afloat no matter what they do, how they screw their workers, and how much they charge for their products and services. Conservatives love to claim the market is really free and that they who are rich are doing the right things with no help from the government. They, of course, are lying to themselves and everyone else and a lot of folks, like Powell et al, believe them. Too bad for all of us.
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.
I have written my Senators about this. Next, when I'm done here, I will write Mr. Biden. I don't expect Mr. Powell will be replaced anytime soon, but still, I remind my representatives that I vote. And I let them know what I would like them to do for me, as one of their constituents.
Except. Biden kept Jerome Powell, so he, Biden, is partially responsible. Biden needs to replace this corporate loving lawyer with a real economist - preferably of the Keynesian stripe.
The Chairperson of the Federal Bank sets the interest rate on treasury loans. They are responsible for guiding the economy of the Country so we clear a path between inflation and depression. They also add counsel to the Administration on Economic policy. John Maynard Keynes is widely credited with helping Franklin Delano Roosevelt with his economic recovery policies during the Great Depression and assisted in setting up the "alphabet soup" of programs such as CCC, WPA, FDA and others to guard against some of the worst tendencies of capitalism (such as greed and gambling with other people's money) While I not an economist (I majored in science) I did take 2 undergraduate Economics courses and have a great respect for real economists, they aren't always right, but the best of them have the Country as a whole in mind, not just the wealthy. Jerome Powell is an attorney, and I believe he is more interested in preserving the wealth of the ultra wealthy corporations and the owners and shareholders, instead of the stakeholders and Dr. Reich so succinctly describes it.
Jen Baron: Inflation happens when there is more money in the economy than the current productive capacity can keep up with. The Fed’s solution is to then draw money out of the economy.
That being the case, would it not make sense to draw that money from those individuals and corps that have most of it? But there seems to be some unstated Law of Physics that the rich cannot be expected to give up ANY significant amount of their ever-increasing wealth. So the burden has to be borne by everyone else in the form of austerity.
A first-grader ought to be able to see that this cannot continue indefinitely without a return to some sort of neo-feudal society. Yet too many of our “leaders” seem to serve as temple prostitutes in the Church of Wealth.
Unfortunately, Bill, you are spot on. Maybe not a first grader, they are not that good at seeing the big picture, but certainly any discriminating adult should be able to see and understand your logic, The problem is that we don't teach children to think at all, just to be obedient little automatons, And it is not a law of physics, it is a Law of GREED. I wish what you say isn't true, but it is, if only the legislators could overcome their own greed for power and wealth, what a wonderful world this could be.
As to greed, I see that mainly as a symptom for those who don't really know what they need or want in order to be happy and fulfilled. So nothing is ever enough. I'd pity them, except they are causing so much damage to society and planet
Hi Bill, I understand All of that, my question is, what can THE FED do with the tools IT has (just raising interest rates seems kind of limited) to make Corporations pay more? I completely agree that asking the Big Money to pay their fair share and not nickel and dime the Middle Class makes sense. Robert pointed out that giving counsel and coming up with "programs" that would accomplish this task should be an arrow in the quiver. So unless Powell is turned loose and someone with a more economic based background is brought in, here we sit. I hope that now that Biden has gotten some pretty significant parts of his agenda met, he can focus on issues like this. Although after spending some time in Europe this summer, Inflation is not limited to the USA, and everyone around the world is complaining about many of the same economic issues.
Admittedly, I don’t know enough about the Fed’s charter to know what other tools (if any) they might utilize. It seems the truly effective long-term solution is a change in tax policy to make the burden proportional to wealth. However I think that is in the purview of Congress. And with the degree to which Congress has been compromised by Big Money, it may take an aggressive, almost revolutionary effort to make this happen.
That this inflationary episode also affects other countries only underscores the fact that the world-wide effort is really a fight against Big Money and the power it buys.
The sad/hopeful fact is that we now have the knowledge and resources to literally make a Heaven of Earth, if we could only get past this fever-dream of insane wealth for a few.
Hey Janet. You are right about Powell and his inability to look beyond what he thinks he already knows. When his interest raising screws things up, it will be Biden whose fault it is. In a way that will be true since Biden, in the glow of the recovery allowed Powell to stay in the position Trump[ appointed him to, in some warped sense of bipartisanship. When will Dems learn that Republicans have nothing to offer anyone, so there is no hope for bipartisanship as long as Trump and Kump are running the Republican party?
Agreed. I was in State Environmental Protection. If Jed Bush’s efforts in FL on behalf of his brother, GWBUSH, we may have had a chance to avoid a mass extinction. When I read in National Geographic about the time about the tundra melting and off gassing methane (CH4), a shorter lasting Green House gas than carbon dioxide (CO2), I said to myself, We have waited too late. I read a piece a week or two ago, in which a scientist was saying the same thing out loud in print and saying many of his colleges agree but are not speaking out. The fossil fuel industry will claim they did not know just like the tobacco companies! Yes, they did, consequently the rush to escape to space. News flash! You would be leaving one plant to try to survive on another with even worse living conditions. Inflation is the least of our worries!
Yes, it is. The 1000 point drop in the Dow today will fall in Biden's lap. As Fay notes, Biden kept Powell...why??? As for Jen's comment, the fed could do what Dr. Reich has suggested and not focus on interest rates, but corporate profits. I know they don't have direct influence there like they do with interest rates, but if, in his "keynote" speech to the fed folks living it up at Jackson Hole, he had said inflation is partly (if not mostly) due to corporate greed, not low interest rates, that might have had a different effect!
Many years ago, my grad-school finance professor said (to paraphrase) that attempting to manage inflation with monetary policy is like pushing on a rope. The Fed does not have the tools needed to deal with inflation that is caused, at least in significant part, by excessive corporate monopoly power that allows increasing prices more than costs for labor, materials, etc. are increasing.
Bob, my memory could be incorrect, but I believe that the "pushing on a rope" refers to using monetary policy to stimulate the economy. Reducing the money supply is like pulling on a rope and does constrain inflation, though potentially painfully. If people don't want to spend, expanding the money supply can simply increase savings. Here's an example article: https://www.chicagotribune.com/sdut-bernanke-gradual-taper-stimulus-2013dec18-story.html
Absolutely. As soon as Powell said "transitory inflation" I would have fired him. This, along with the terrible withdrawal from Afghanistan, are 2 things I can't forgive Biden for.
So true. I felt we should have stayed, with a limited number of troops, as we had been doing. Look what's happened since we left. No perfect answers to Afghanistan.
The troop draw down was already too low to stay and if Biden ramped up troops to stay in Afghanistan we would need a lot more to combat the 5000 Taliban criminals released by F-POTUS. Biden's hands were tied, so the only option was to pullout and he delayed that by a few months later than the deal F-P0TUS signed. The USA signed a contract under T45, we could not extend the deadline any further.
While I agree with most of what you have said, Powell has one tool for stopping inflation. One. And when large corporations are not effected by inflation because they can infla8 profits beyond what inflation may cost them, they are basically unaffected. Now if Powell had other tools to use, such as oversight on monopolies, SEC insight and influence, laws restricting stock buy backs, etc; then maybe he could have some real affect on inflation.
Who does have oversight on monopolies? the Congress? By ending Glass Steagall and (I think) Dobbs Frank, Congress seems to have opened the door for absolute greed and accompanying corruption.
If we give Biden the House and more seats in the Senate, then Congress can and will pass laws that will reign in the corporate profits because the Republican contingent will no longer be a factor.
I have often wished that there was a "rational MAGA", an association of dedicated liberals being as visible and ouspoken as Trumpers working for "good change," not fascism. I marched against the Viet Nam war and believe it had some effect.
And may I also suggest, on a far less serious note, Randy Rainbow's parody of the song "Tradition" from Fiddler on the Roof: "Sedition," (on You Tube).
A million thanks for that reminder, LeslieE. I haven't laughed that hard in a long time, probably since the last time I watched it. It still resonates!
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.
Yo Jim. I think Powell and his crew have been warning us that unemployment would have to rise if inflation were to be slowed to prepare us for what he hopes will happen. I think that is a bunch of crap designed to let corporations know it is OK to lay off/fire workers or lower salaries in the name of "protecting workers." That logic wouldn't pass the smell test of a 4th-grader, yet we educated adults let it slip by nearly unquestioned except by people like Dr. Reich and the many voices on this thread. When you, like Chairman Powell are a one-trick pony, you can't be expected to suggest anything else. We need someone with some creativity and a Congress that can be willing to try something different, like actually prioritizing our workforce and making sure they earn a living wage and have the respect they deserve. Right now, it's the Trumps that are heard and they are the last people who should have a say. They have no clue and care nothing for anyone but themselves. I think of them as the selfish elites. We should be able to do better.
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.
Another thing we can do is push for term limit as well as political financial reform. We point our figures at third world countries and say how high corruption is in these countries, yet we have failed to take notice that we also have corruption within our elected officials. The difference being that we are a little more sophisticated.
The fly in the ointment here is that term limits and financial reform depend on the votes of those whose power would be diminished by these actions. The only solution I see to this is a popular upwelling of support to vote in senators and representatives who are pledged to these goals -- and then hold their feet to the fire. But our chances are slim as long as the media see politics as a set of horse races dominated by attack ads. And of course those media are owned by others who don't want to give up power,
David, it seems to me that if the only tool Powell has is to raise or lower interest rates, we don't need him at all. The Fed could just have a set of guidelines to let them know when to raise and lower interest rates and by how much. We are paying a big salary and paying travel expenses to an out-of-the-way spot like Jackson Hole for a man who has no new ideas, so is pretty much irrelevant. I would like to see people voting their interests and Congress working for the people rather than for their donors, but that is hard since the ones with all the money don't want anything to change that could make life harder/less lucrative for themselves. We need some new ideas pushed by some new leaders that will capture the attention of a lot of ordinary voters. Unfortunately, if it isn't loud and flashy, it won't get past the media guardians who are among those wealthy white men who seem to be in charge of everything. It's going to be difficult to make the changes we need, but we have to try.
I mostly agree, but I don't think the Fed or its chair are irrelevant -- their function is important, and I don't think it can be boiled down to a set of guidelines. Economics in the real world is more complicated than that. That said, you're right about the difficulty of changing anything in the political realm, but you're also right that we have to try and keep on trying. A well-known quote from Margaret Meade comes to mind.
Oooo JAB, I love your use of gaslighting to describe what Powell and the rest are doing to ordinary Americans. I am not sure though it is that they are less intelligent, just busier and more stressed. Also your name for the Republican Party's fearful leader "Tangerine Terrorist" is great!
Derek, it still amazes me how easily the rich white guys who have all the bucks, a lot of which they got from using and abusing their workers, can claim with a straight face that they are for the working people. And what is even more amazing, so many of the working people believe it against all logic.
Remember, you are giving half of the population credit of having a higher IQ than they actually possess. Ask most teachers. They can tell you that an average IQ is 100. 49.99...% of the general population’s IQ is 100 and below. The mirror image of the of a bell curve is the 49.99...% and above. Don’t you just love statistics!
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.
Victor, you are correct in pointing out that more equality in wealth would solve a lot of the economic stress. How do we get that to happen? Consider the kind of men who have most of the wealth. They are not going to give it up easily no matter what they say. Money and power are an addiction as powerful or more so than any drug. It seems to me, we the people need to do an intervention for those rich white (and other) folks who want to rule, not actually be part of this nation. I am not sure what that intervention should look like, though.
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.
Kelly, I am with you, now if we could only get some of the money that needs to be in circulation out of the hands of the very rich who are hoarders and addicted to money and the power it brings them, we could avoid the raised interest rates and probable recession. Sometimes learning from the past works, but as in this case, sometimes it doesn't.
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.
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
Doug, you are really right about the "supply issues." We are going to need a lot of good economics-based ideas for managing that and with conservatives/Republicans having so much power, that will continue to be ignored.
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.
Elaine, you are right about even the Fed out to get what they can for themselves. It's too bad we end up electing too many rich men to Congress, even to state legislatures because they think their vast wealth comes from their brilliance or something like that. In reality, we don't really have a "free market." We have a hybrid that decides which businesses are important and which are not, then makes sure the "good" ones stay afloat no matter what they do, how they screw their workers, and how much they charge for their products and services. Conservatives love to claim the market is really free and that they who are rich are doing the right things with no help from the government. They, of course, are lying to themselves and everyone else and a lot of folks, like Powell et al, believe them. Too bad for all of us.
In other words, crony capitalism
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.
I have written my Senators about this. Next, when I'm done here, I will write Mr. Biden. I don't expect Mr. Powell will be replaced anytime soon, but still, I remind my representatives that I vote. And I let them know what I would like them to do for me, as one of their constituents.
I’m going to do the same!
Except. Biden kept Jerome Powell, so he, Biden, is partially responsible. Biden needs to replace this corporate loving lawyer with a real economist - preferably of the Keynesian stripe.
And what would that person do? I'm not disagreeing, I'm just ignorant as to the options any Fed Chair has.
The Chairperson of the Federal Bank sets the interest rate on treasury loans. They are responsible for guiding the economy of the Country so we clear a path between inflation and depression. They also add counsel to the Administration on Economic policy. John Maynard Keynes is widely credited with helping Franklin Delano Roosevelt with his economic recovery policies during the Great Depression and assisted in setting up the "alphabet soup" of programs such as CCC, WPA, FDA and others to guard against some of the worst tendencies of capitalism (such as greed and gambling with other people's money) While I not an economist (I majored in science) I did take 2 undergraduate Economics courses and have a great respect for real economists, they aren't always right, but the best of them have the Country as a whole in mind, not just the wealthy. Jerome Powell is an attorney, and I believe he is more interested in preserving the wealth of the ultra wealthy corporations and the owners and shareholders, instead of the stakeholders and Dr. Reich so succinctly describes it.
Jen Baron: Inflation happens when there is more money in the economy than the current productive capacity can keep up with. The Fed’s solution is to then draw money out of the economy.
That being the case, would it not make sense to draw that money from those individuals and corps that have most of it? But there seems to be some unstated Law of Physics that the rich cannot be expected to give up ANY significant amount of their ever-increasing wealth. So the burden has to be borne by everyone else in the form of austerity.
A first-grader ought to be able to see that this cannot continue indefinitely without a return to some sort of neo-feudal society. Yet too many of our “leaders” seem to serve as temple prostitutes in the Church of Wealth.
Unfortunately, Bill, you are spot on. Maybe not a first grader, they are not that good at seeing the big picture, but certainly any discriminating adult should be able to see and understand your logic, The problem is that we don't teach children to think at all, just to be obedient little automatons, And it is not a law of physics, it is a Law of GREED. I wish what you say isn't true, but it is, if only the legislators could overcome their own greed for power and wealth, what a wonderful world this could be.
Thanks Fay! You're spot-on as well. Interesting article in The Intercept about a Reagan official worrying about the "threat" of an educated populace: https://theintercept.com/2022/08/25/student-loans-debt-reagan
As to greed, I see that mainly as a symptom for those who don't really know what they need or want in order to be happy and fulfilled. So nothing is ever enough. I'd pity them, except they are causing so much damage to society and planet
Completely agree.
Hi Bill, I understand All of that, my question is, what can THE FED do with the tools IT has (just raising interest rates seems kind of limited) to make Corporations pay more? I completely agree that asking the Big Money to pay their fair share and not nickel and dime the Middle Class makes sense. Robert pointed out that giving counsel and coming up with "programs" that would accomplish this task should be an arrow in the quiver. So unless Powell is turned loose and someone with a more economic based background is brought in, here we sit. I hope that now that Biden has gotten some pretty significant parts of his agenda met, he can focus on issues like this. Although after spending some time in Europe this summer, Inflation is not limited to the USA, and everyone around the world is complaining about many of the same economic issues.
Admittedly, I don’t know enough about the Fed’s charter to know what other tools (if any) they might utilize. It seems the truly effective long-term solution is a change in tax policy to make the burden proportional to wealth. However I think that is in the purview of Congress. And with the degree to which Congress has been compromised by Big Money, it may take an aggressive, almost revolutionary effort to make this happen.
That this inflationary episode also affects other countries only underscores the fact that the world-wide effort is really a fight against Big Money and the power it buys.
The sad/hopeful fact is that we now have the knowledge and resources to literally make a Heaven of Earth, if we could only get past this fever-dream of insane wealth for a few.
Yes!
Hey Janet. You are right about Powell and his inability to look beyond what he thinks he already knows. When his interest raising screws things up, it will be Biden whose fault it is. In a way that will be true since Biden, in the glow of the recovery allowed Powell to stay in the position Trump[ appointed him to, in some warped sense of bipartisanship. When will Dems learn that Republicans have nothing to offer anyone, so there is no hope for bipartisanship as long as Trump and Kump are running the Republican party?
Agreed. I was in State Environmental Protection. If Jed Bush’s efforts in FL on behalf of his brother, GWBUSH, we may have had a chance to avoid a mass extinction. When I read in National Geographic about the time about the tundra melting and off gassing methane (CH4), a shorter lasting Green House gas than carbon dioxide (CO2), I said to myself, We have waited too late. I read a piece a week or two ago, in which a scientist was saying the same thing out loud in print and saying many of his colleges agree but are not speaking out. The fossil fuel industry will claim they did not know just like the tobacco companies! Yes, they did, consequently the rush to escape to space. News flash! You would be leaving one plant to try to survive on another with even worse living conditions. Inflation is the least of our worries!
Yes, it is. The 1000 point drop in the Dow today will fall in Biden's lap. As Fay notes, Biden kept Powell...why??? As for Jen's comment, the fed could do what Dr. Reich has suggested and not focus on interest rates, but corporate profits. I know they don't have direct influence there like they do with interest rates, but if, in his "keynote" speech to the fed folks living it up at Jackson Hole, he had said inflation is partly (if not mostly) due to corporate greed, not low interest rates, that might have had a different effect!
Many years ago, my grad-school finance professor said (to paraphrase) that attempting to manage inflation with monetary policy is like pushing on a rope. The Fed does not have the tools needed to deal with inflation that is caused, at least in significant part, by excessive corporate monopoly power that allows increasing prices more than costs for labor, materials, etc. are increasing.
and your professor was correct!
And I was given same analogy!
Bob, my memory could be incorrect, but I believe that the "pushing on a rope" refers to using monetary policy to stimulate the economy. Reducing the money supply is like pulling on a rope and does constrain inflation, though potentially painfully. If people don't want to spend, expanding the money supply can simply increase savings. Here's an example article: https://www.chicagotribune.com/sdut-bernanke-gradual-taper-stimulus-2013dec18-story.html
Would he ever?
Absolutely. As soon as Powell said "transitory inflation" I would have fired him. This, along with the terrible withdrawal from Afghanistan, are 2 things I can't forgive Biden for.
The withdrawal from Afghanistan was ALWAYS going to be terrible. The deals Dick A'la Orange put in place made that unavoidable.
So true. I felt we should have stayed, with a limited number of troops, as we had been doing. Look what's happened since we left. No perfect answers to Afghanistan.
The troop draw down was already too low to stay and if Biden ramped up troops to stay in Afghanistan we would need a lot more to combat the 5000 Taliban criminals released by F-POTUS. Biden's hands were tied, so the only option was to pullout and he delayed that by a few months later than the deal F-P0TUS signed. The USA signed a contract under T45, we could not extend the deadline any further.
While I agree with most of what you have said, Powell has one tool for stopping inflation. One. And when large corporations are not effected by inflation because they can infla8 profits beyond what inflation may cost them, they are basically unaffected. Now if Powell had other tools to use, such as oversight on monopolies, SEC insight and influence, laws restricting stock buy backs, etc; then maybe he could have some real affect on inflation.
Who does have oversight on monopolies? the Congress? By ending Glass Steagall and (I think) Dobbs Frank, Congress seems to have opened the door for absolute greed and accompanying corruption.
If we give Biden the House and more seats in the Senate, then Congress can and will pass laws that will reign in the corporate profits because the Republican contingent will no longer be a factor.
I have often wished that there was a "rational MAGA", an association of dedicated liberals being as visible and ouspoken as Trumpers working for "good change," not fascism. I marched against the Viet Nam war and believe it had some effect.
A MAGA you can support. I was delighted to discover this one, hope you are too.
https://mothersagainstgregabbott.com/
And may I also suggest, on a far less serious note, Randy Rainbow's parody of the song "Tradition" from Fiddler on the Roof: "Sedition," (on You Tube).
A million thanks for that reminder, LeslieE. I haven't laughed that hard in a long time, probably since the last time I watched it. It still resonates!
YES! I've seen this. Brilliant!
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.
Yo Jim. I think Powell and his crew have been warning us that unemployment would have to rise if inflation were to be slowed to prepare us for what he hopes will happen. I think that is a bunch of crap designed to let corporations know it is OK to lay off/fire workers or lower salaries in the name of "protecting workers." That logic wouldn't pass the smell test of a 4th-grader, yet we educated adults let it slip by nearly unquestioned except by people like Dr. Reich and the many voices on this thread. When you, like Chairman Powell are a one-trick pony, you can't be expected to suggest anything else. We need someone with some creativity and a Congress that can be willing to try something different, like actually prioritizing our workforce and making sure they earn a living wage and have the respect they deserve. Right now, it's the Trumps that are heard and they are the last people who should have a say. They have no clue and care nothing for anyone but themselves. I think of them as the selfish elites. We should be able to do better.
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.
Another thing we can do is push for term limit as well as political financial reform. We point our figures at third world countries and say how high corruption is in these countries, yet we have failed to take notice that we also have corruption within our elected officials. The difference being that we are a little more sophisticated.
The fly in the ointment here is that term limits and financial reform depend on the votes of those whose power would be diminished by these actions. The only solution I see to this is a popular upwelling of support to vote in senators and representatives who are pledged to these goals -- and then hold their feet to the fire. But our chances are slim as long as the media see politics as a set of horse races dominated by attack ads. And of course those media are owned by others who don't want to give up power,
David, it seems to me that if the only tool Powell has is to raise or lower interest rates, we don't need him at all. The Fed could just have a set of guidelines to let them know when to raise and lower interest rates and by how much. We are paying a big salary and paying travel expenses to an out-of-the-way spot like Jackson Hole for a man who has no new ideas, so is pretty much irrelevant. I would like to see people voting their interests and Congress working for the people rather than for their donors, but that is hard since the ones with all the money don't want anything to change that could make life harder/less lucrative for themselves. We need some new ideas pushed by some new leaders that will capture the attention of a lot of ordinary voters. Unfortunately, if it isn't loud and flashy, it won't get past the media guardians who are among those wealthy white men who seem to be in charge of everything. It's going to be difficult to make the changes we need, but we have to try.
I mostly agree, but I don't think the Fed or its chair are irrelevant -- their function is important, and I don't think it can be boiled down to a set of guidelines. Economics in the real world is more complicated than that. That said, you're right about the difficulty of changing anything in the political realm, but you're also right that we have to try and keep on trying. A well-known quote from Margaret Meade comes to mind.
There will be no taking on the elites from anyone that considers themselves to be an "elite"...
Agreed, which is what Trump and the Republicans are. Even though they claim to be for the working class.
Right. They always were good at gaslighting the less intelligent, which is even more obvious since the Tangerine Terrorist came along.
Oooo JAB, I love your use of gaslighting to describe what Powell and the rest are doing to ordinary Americans. I am not sure though it is that they are less intelligent, just busier and more stressed. Also your name for the Republican Party's fearful leader "Tangerine Terrorist" is great!
Derek, it still amazes me how easily the rich white guys who have all the bucks, a lot of which they got from using and abusing their workers, can claim with a straight face that they are for the working people. And what is even more amazing, so many of the working people believe it against all logic.
Remember, you are giving half of the population credit of having a higher IQ than they actually possess. Ask most teachers. They can tell you that an average IQ is 100. 49.99...% of the general population’s IQ is 100 and below. The mirror image of the of a bell curve is the 49.99...% and above. Don’t you just love statistics!
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.
Totally agree with you Paul.
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.
Victor, you are correct in pointing out that more equality in wealth would solve a lot of the economic stress. How do we get that to happen? Consider the kind of men who have most of the wealth. They are not going to give it up easily no matter what they say. Money and power are an addiction as powerful or more so than any drug. It seems to me, we the people need to do an intervention for those rich white (and other) folks who want to rule, not actually be part of this nation. I am not sure what that intervention should look like, though.
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.
Kelly, I am with you, now if we could only get some of the money that needs to be in circulation out of the hands of the very rich who are hoarders and addicted to money and the power it brings them, we could avoid the raised interest rates and probable recession. Sometimes learning from the past works, but as in this case, sometimes it doesn't.
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.
BINGO!!!
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.
Oh David, I know that hurting the working person is easier than the rich guy, but there must be a way to change that.
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
Doug, you are really right about the "supply issues." We are going to need a lot of good economics-based ideas for managing that and with conservatives/Republicans having so much power, that will continue to be ignored.