122 Comments

Unfortunately, the head of the Fed is a conservative Republican who has no vision. He understands every challenge in our economy as either lowering or raising interest rates. There seems to be no effort to find out what is actually causing the inflation in the current case. Like all Republicans in power, he can only seem to blame workers for whatever is going on. I am still so sad Biden chose to keep Powell on. Until he is gone, there will be no improvement in the Fed's ability to correctly manage its part of our economy. If we enter recession, I suppose it will be the fault of the workers, or women, or whatever group Republicans have in their sights at that moment.

Expand full comment

President Biden should have listened to Joseph Stiglitz, Nobel laureate in economics, Columbia University professor & former World Bank Chief Economist, who urged Biden not to reappoint staunch Republican Party supporter Jerome Powell as Fed Reserve Board Chair. Writing in The Guardian in Nov. 2021, Stieglitz stated:

“Joe Biden needs someone at the top who shares his values – so step forward then please … Lael Brainard.

“Powell is not the man for the moment. For starters, he supported former president Donald Trump’s deregulatory agenda, risking the world’s financial health. And even now, he is reluctant to address climate risk, even though other central bankers around the world are declaring it the defining issue of the coming decades.”

“The Fed is also responsible for approving mergers in the financial sector, and Powell’s record suggests that he has never seen a bad one. Such laxity is the last thing the economy needs right now. A glaring lack of competition and the absence of adequate regulation are already allowing for outsize profits, diminishing the supply of finance for small businesses, and providing the dominant players greater scope for taking advantage of others.”

“As Simon Johnson of MIT has argued, Powell does not have a deep commitment to full employment. On the contrary, as a member of the Fed board of governors for the past decade, Powell has a history of misjudgments in tightening monetary policy dating back to the “taper tantrum” of 2013.”

“The Fed, too, is supposed to be independent, but Powell and Greenspan, as they followed their party’s deregulatory agenda, made clear that that also was not the case.”

“Finally, the recent ethics scandal involving market trades by top Fed officials has undermined confidence in the institution’s leadership. Powell’s seeming insensitivity to conflicts of interest has long worried me.”

“We need neither an ideologue like Greenspan nor a Wall Street-minded lawyer such as Powell. Rather, we need someone who has a deep understanding of economics, and who shares Biden’s values and concerns about both inflation and employment.”

https://www.theguardian.com/business/2021/nov/10/why-the-federal-reserve-chair-jerome-powell-must-go

Expand full comment

I don't know too much about Powell, but does he really not understand the numbers that Reich shows here? It seems he's knowingly sabotaging the economy and Biden's presidency, either on his own or under pressure from far-right Republicans.

Expand full comment

I was thinking that too. That Powell, a staunch Republican, is in on the derailing of the Biden presidency. Biden tried to have a bi-partisan Cabinet and administration to his own peril and that of the Democratic party. Think Merrick Garland. It makes me anxious that this presidency could go down in flames as the hot button topics-gas prices, inflation- are going to be used in the mid-terms to bring the putrid Republican party back into power and then we are all sunk.

Expand full comment

This is the main reason the Jan 6 committee needs to thoroughly expose the crimes of Trump and his fellow Republican insurrectionists, and put as much pressure as possible on Garland to prosecute and soon! This could prevent Republicans taking over in the next 2 elections, or at least increase the chances the ones elected are not the very worst.

Expand full comment

Congress needs to start helping individuals with low and fixed income,such as SSI and social security instead of just helping big corporations.

Expand full comment

Ending tax on Social Security would help. (Thanks again Ronald Reagan).

Expand full comment

To do all that need to win the midterms.

Expand full comment

You’re right, Congress needs to do more to help those with low and fixed incomes, and dems in Congress are willing to do that. But it won’t happen unless democrats have a clear majority in both the House and Senate in 2023.

Expand full comment

This hike will only contribute to a recession. We need bold action such as a corporate windfall tax and enforcing existing anti trust legislation.

Expand full comment

President Biden needs to order a 90 day price freeze to help people through the summer months too.

Expand full comment

I agree a temporary price freeze could work. It would be hard for the little guys but it would halt the big guy insanity. It is definitely worth a try, but I can't see anyone in this government doing it.

Expand full comment

It has been a long time since we tried wage/price freezes. They did not work well. Gathering data and setting prices and wages in real time was impossible. And there was noncompliance, ie a black market, that went uncontrolled.

As I recall though the biggest defect of wage price controls was simply Econ 101: prices and the law of supply and demand. For example if we arbitrarily set a price below the price that would balance supply with demand, supply will not be great enough to satisfy demand. And then we have a market "fail": Would-be buyers cannot get enough of the thing they need, and suppliers cannot get the money they need to produce the item(s). So buyers and sellers transact secretly at a price agreeable to both parties.

Expand full comment

I think you are one of the smartest men in politics and finance. I am 91 and terminal . That is why a monthly only subscription paid by PayPal.

Expand full comment

Could it be that "the Fed" is in cahoots with big biz to set the stage for an overwhelming rejection of the Biden Administration by the voters in the next election?

Expand full comment

The same folks who supported tRump's big triilions in tax breaks for the filthy rich! that is why they contributed to his campaigns, no doubt.

Expand full comment

I was thinking the same thing.

Expand full comment

Methinks you may have something there.

Expand full comment

Robert, The Biden Administration should consult with you on these matters, since you have both tremendous experience and knowledge.

Expand full comment

We need to go back to something we had long time ago … price control.

Expand full comment

As an elderly, disabled woman who lives on a fixed income of Social Security, and who was on the verge of FINALLY GETTING DENTAL IMPLANTS after losing all my upper teeth -- but now won't be able to afford the monthly payments -- INSERT LOUD, ANGUISHED, ANGRY SCREAM HERE! What. Are. They. Thinking.???

Expand full comment
founding

Sorry about it Paula Dean (here's to hoping the increase in payments is slow if extant)...

Expand full comment

How I wish you were still in Federal office Robert. This is what happens when an elected Democratic Administration retains the leftover retrumplican dregs. Are there no decent pro-people economists?

Where or where is Keynes when we need him. (Yes, I know he's dead)

Expand full comment
founding

Let’s have a seance! (I’m joking.)

Expand full comment
Jun 15, 2022·edited Jun 15, 2022

Mr. Reich, I believe you are entirely correct in this analysis. I think that if corporations loosened their stranglehold on profit/prices/our economy, we would all benefit. We Americans have been spoiled by low food and gas prices, compared to Europe, but we also enjoy less in terms of salaries and benefits than do Europeans. Admittedly most European countries tax their populace highly, but the residents also enjoy health care and other benefits at fairly low cost, so their cost of living is much lower. In other words, vital services like medical care are not prohibitively expensive, and as far as I can tell, no one goes bankrupt over medical care in most European countries, unlike what can happen in these United States of America. I could be wrong, but I don't think so.

Expand full comment

Robert this chart is amazing! Why is the Fed on this path if it’s pushing us towards a recession? Is this some corporate cabal pulling strings. These are real peoples lives we’re talking about. There are so many bad things happening in the world right now and more issues ready to spring forth that it’s hard to stay positive.

Expand full comment

Huge mistake. The Feds have now opened the door to lower wages, lost jobs, higher unemployment rates, housing and retail meltdowns. Watch for it, it's just around the corner. They never learn.

Expand full comment

You're making an assumption that the Fed isn't trying to send the Country into a recession - reinforcing the GOP's misperception, that "Democrats are bad for business."

Expand full comment

Too bad a) Federal Reserve Board members are not elected like Congress, Senate, President etc. And b) too bad there is no way to influence board members in the case where a policy may be ill-conceived. Many others besides you and Janet Yellen know the Fed is leading us into a dark world.

Expand full comment

Why Biden keeps Republican appointments is a mystery to me. This rate increase, if it causes recession will make Biden look bad. Possibly, that is the plan.

Expand full comment