Last Friday, the Bureau of Labor Statistics released its May Consumer Price Index (CPI) report, which showed inflation worsening. Yet the bigger story — and bigger worry — is not inflation. It’s the distinct possibility of recession. Or perhaps both (what’s termed “stagflation.”) Here are the questions I’m getting asked most often, and my answers.
1. Are we heading for a recession? Many signs point in that direction. New home construction slowed in April. Mortgage demand continues to decline. Some of the country’s largest and most influential retailers are reporting disappointing sales and profits. The stock market is in bear territory. Futures markets are signaling trouble ahead.
2. What exactly is a recession? “Recession” is a technical term, defined as two consecutive quarters of shrinking gross domestic product. The National Bureau of Economic Research is the authority that declares recessions in the U.S., and its own definition is “significant decline in economic activity that is spread across the economy and that lasts more than a few months.” As a practical matter, recessions mean fewer jobs and lower wages.
3. When is a recession likely to happen — and should I panic? Don’t panic! If it occurs, it won’t happen immediately. I’d guess some time over the next six months. It’s a possibility that you ought to be aware of.
4. Who gets hurt most by a recession? Lower-income Americans are especially vulnerable because they tend to be the first fired when the economy slows (and the last hired when it rebounds). Recessions also hurt younger people trying to get their footing in the job market. And they can be hard on retirees whose IRAs or 401(k) accounts get clobbered.
5. Why are we heading toward a recession? Partly because of continued uncertainty from the coronavirus pandemic and Russia’s invasion of Ukraine. But the main cause is interest-rate hikes by the Federal Reserve. The Fed has raised interest rates by 0.75 percentage points so far this year, and Fed officials are signaling more aggressive increases ahead. When it meets Wednesday it will discuss raising its benchmark rate by as much as another 0.75 percentage points. That would be the largest single interest rate increase since 1994.
6. What’s the connection between Fed rate hikes and a recession? Rate hikes increase the costs of borrowing to individuals and consumers — which causes them to cut back on purchases of everything, including homes. This, in turn, causes the economy to slow.
7. Do Fed rate hikes always lead to recession? No. It’s possible we could have a “soft landing” that lowers inflation without causing a recession. But Fed rate hikes often over-shoot, resulting in recession — especially when they’re on the scale the Fed is contemplating. In 1981, for example, the Fed under Paul Volcker raised interest rates so high (to reverse double-digit inflation) it plunged the economy into deep recession.
8. Why is the Fed doing this now? Because it believes it must slow the economy in order to slow inflation, which is at a 40-year high.
9. Is the Fed correct? Slowing the economy will reduce inflationary pressures somewhat, but the Fed is operating under an old model of the economy — at a time when inflation was driven largely by wage increases. The way to slow inflation then was to take the steam out of wage increases by reducing employment. Essentially, the Fed drafted a certain number of workers into the fight against inflation by pulling them out of the labor force. That was when American workers had strong unions and it was difficult for companies to increase capacity by outsourcing abroad. These conditions no longer apply. Workers now have very little bargaining power relative to what they had thirty or forty years ago. Just look at the data: although wages are rising, they aren’t rising nearly as fast as prices.
10. But if raising interest rates will reduce inflationary pressures somewhat, why shouldn’t the Fed at least try? Because raising rates as much as the Fed seems likely to do will cause more harm than good. Current inflationary forces are worldwide — coming from huge global pent-up demand following the worst of the pandemic, coupled with supply shortages around the world, which have been aggravated by Putin’s war. In fact, inflation in the U.S. isn’t nearly as bad as in most other advanced economies. Slowing the U.S. economy may put a dent in these forces, but not much of one. Yet the cost here — in terms of a recession or near recession, and loss of jobs and wages — is likely to be huge.
11. Are there unique factors driving inflation in the United States? Yes. One of the biggest is coming from hugely-profitable corporations with significant market power, that are using inflation as a cover for raising their prices. (See my analyses here, here, and here.) Oil and gas giants, for example, are raking in record profits. In the first quarter of 2022, Chevron’s profits more than quadrupled from the first quarter of 2021, and ExxonMobil’s profits more than doubled despite taking a $3.4 billion hit for exiting its business in Russia. ExxonMobil won’t be using its sky-high profits to ease the burden on consumers at the gas pump, but to increase its stock buybacks. The oil giant now plans to buy back $30 billion of its own stock, up from the $10 billion it announced earlier this year. Note: The Fed’s rate hikes won’t stop this price gouging.
12. What will stop them? Three things: (1) Vigorous antitrust enforcement that reduces their pricing power (even the threat of such enforcement will make them more reluctant to raise prices). (2) A windfall profits tax that takes away a portion of their recent profits (and redistributes them to consumers), as the Conservative government in Britain is doing. And (3) publicity: the government should shine light on highly-profitable corporations that are most flagrantly raising prices (such as Tyson Foods and ExxonMobil).
13. So why doesn’t the Biden administration pursue these? It seems to be embarking on stronger antitrust enforcement, but it’s doing so very quietly — too quietly to get big profitable corporations to pull back from raising prices. Biden has begun shining a light on profitable companies that are raising prices. Last Friday, he placed blame for rising prices on oil and shipping companies. In a speech at the Port of Los Angeles, when asked about Exxon-Mobil’s profits, Biden said “Exxon made more money than God this year.” On Tuesday, Biden sent a letter to the CEOs of major oil companies, in which he wrote:
“At a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable. There is no question that Vladimir Putin is principally responsible for the intense financial pain the American people and their families are bearing. But amid a war that has raised gasoline prices more than $1.70 per gallon, historically high refinery profit margins are worsening that pain.”
But he and his administration seem strangely unwilling to criticize big corporations any more extensively than this. And they have not embraced or advocated a windfall profits tax. I don’t know why. It makes enormous sense economically.
14. Speaking of politics, what’s the likely fallout if the nation succumbs to a recession? Bad news for Biden and the Democrats. Even though presidents and parties that control Congress don’t have much leverage over the economy, they get blamed for a bad one and get credit for a good one. Jimmy Carter and George H.W. Bush both lost reelection because of bad economies.
15. Ugh. Precisely. Which is another reason why it’s important for Biden and the Democrats to be seen taking all the actions I mentioned above — and calling out corporations and CEOs that are using inflation as a cover for hiking prices.
Unfortunately, Democrats seem always to be a few steps behind Republican messaging, so people have already heard what they think they need to hear by the time Republicans have pumped out their message. Democrats, then are seen as whining or making things up. Even though what Republicans have to say is usually not accurate or at least, not well thought out, it doesn't matter. The people have their set of explanations - that Democrats and Biden have caused whatever pain they are feeling. Thinking about it more deeply rarely happens for a variety of reasons, laziness being a prominent one. Also, economics is more complex than a 3-word slogan. I like Dr. Reich's suggestions for what we need to do. The question is will we start doing it and soon enough to beat the Republican super-messaging machine. R.Sheets
President Joe Biden accused Exxon Mobil Corp. and other oil companies of exploiting high gasoline prices after a report showed inflation soaring to a new 40-year record.
“We’re going to make sure everyone knows Exxon’s profits. Exxon made more money than God last year,” Biden said during an event at the port of Los Angeles.
That's just a "baby step"... Biden needs to take giant, meaningful strides to make these corporations pay for what they're doing to the rest of us. He needs to do what Professor Reich has indicated.
I like Biden, but I feel that he is too old for another term. He could really do the party a great service by accomplishing what he said he would, and go after the large corporations that are raking in record profits, then redirecting this wealth where it is needed most. By intentionally becoming a one term president, he could enhance his legacy, help those who are most in need, and set his party up for a successful 2024 campaign. The republicans are doing nothing to help the economy, and with his popularity in free fall, what does he have to lose? Bipartisan efforts are not working; it’s time for executive orders and FDR governance!
I am almost 73, so I am prejudiced, at least a little, but I do not think Biden is too old.
Biden is often compared to FDR, who was a chain-smoker and drank a pitcher of Martinis every afternoon.
And yet FDR survived over 3 terms of what may have been the most stressful Presidency ever.
If Biden runs again, he will have my vote. I can't say that much about any of his potential successors.
How he can do this when in order to pass any decent legislation he needs the congress? and the congress is 52% republican, if we count Joe Mansion and the idiotic Sinema.? you can blame him, but I'll blame the voters, the lousy democrat's voters who fail to get a real majority in the house and in the congress
The inability or refusal to vote among registered or leaning democrats most certainly remains a major factor in Washington's intransigence. It's always been maddening to me, hearing folks slough off their responsibility in setting the larger (better) future agenda.
I think--drum roll--our major unvoiced enemy is the American Myth, promulgated hugely by movies, which essentially is: We'll always prevail; God said so ..
I am just getting ready to read Mary Trump's second book, The Reckoning: Our Nation's Trauma and Finding a Way to Heal, in which she argues that America has PTSD.
I have a strong background in Culture, Psychology and History from a very interdisciplinary BA, and then an MA in History. So I am quite certain this is possible and I will be surprised if I do not agree with her.
Sodden thought: Could she run for an office? Then again, the rabid backlash or name=character confusion ..
Could she? I would be surprised if not. Would she? You would have to ask her.
She looks and sounds nothing like her uncle. And any attention he paid to her, would tend to help her rather than him, although I am sure most of his base supporters would accept Uncle Donald's characterization of her as a scheming troublemaker.
Uncle Donald. Now that has a nice ring to it, where have I heard that ... Oh, yeah, right, with Uncle Scrooge and the Beagle Boys.
The Beagle Boys wore sweatshirts with inmate numbers that were re-arrangements of the same number. I made one, but mine was blue and said 'R A I S I N', from the 70s cereal ad ..
I followed the Beagle Boys in the late 50s and early 60s. We did not have TV until 1962.
You are correct. We all need to try harder, not just Biden.
A few people cannot beat the tRumpists no matter how motivated they are. It is going to take a coordinated team effort, and we need all the help we can get. We even need Liz Cheney's help even if some of us do not want to admit that..
Gregory S ; We had millions more votes in the last election than the Rethugs and won the election. What are your talking about? makes no sense.
What? You haven't noticed that the tRumpists and their collaborators are trying harder?
Maybe you should read more:
https://www.theguardian.com/us-news/2022/jun/14/roger-stone-michael-flynn-distorting-christianity-reawaken-america
The tRumps are changing rules in their states to do as they please no matter how the Democrats vote.
I can agree with that. And I think this article is another good example of that:
https://www.theguardian.com/us-news/2022/jun/14/trump-big-lie-support-republican-primary-winners-gop
So what we don't need now is any suggestion that we did it last time, so we can certainly do it again, when there is nothing certain about it, yet.
I am afraid it is you who has stopped making much sense.
Huh? without the 'lousy Democrat's voters' we would have had the orange one again. the two democrat traitors are the 'lousy Dems".
Unfortunately, not enough...for example how do you explain that in Florida with only 32% of republicans registered to vote, we still have a very strong republican's control over the government, laws and economics, even our own "little Ceasar" playing the role of the orangutan in chief! Democrats are lousy, lazy and very demandant but not people with balls. Too soft, to wordily but not fighting hard. for what they called their principles. Logic makes no sense here.
The April 2022 statistics from the Florida Division of Elections shows those register to vote as follow: Republicans have 5,142,002, Democrats have 5,007,590, Minor Partys have 256,220, and No Party Affiliation have 3,872,352. When I compare these numbers to those for 2021, the Republican number increased by 18,203 the Democrats decrease by 73,107 and the No Party Affiliation increased by 42,980. You can see that the differences are not astronomical. Let me add some facts that you may not be aware of, since the Republicans took over in Florida, they raided the Sadowski Fund to balance their budget. The Sadowski Fund was established by prior Democratic Administrations for the sole purpose of providing affordable housing they foresaw the need for affordable housing; guess what, NOW we have a large shortage of affordable housing and this year they, the Republicans administration, agreed not to use it for anything other than housing. Too little too late. We are having an increase in homelessness; this is one reason of many other that we now have a shortage of teachers in public schools as well as in our universities. The main industry Florida has is tourism. An industry that does not pay well. There is not much to say about this state's infrastructure. The working class in this state struggles. Those retirees with a good pension, a good saving, and investments are the only residents living the life of Riley. The Democrats are not as lousy as you say, I am not impressed with Governor DeSantis. I am more impressed with the governor of Ohio, the state I lived all my youth, am now 76 years old. By the way that governor there is a Republican with a heart.
Rodrigo Vilches ; Broward county is a vote disappearing zone. Roger Stone has his dirty tricks along with other operatives. Corruption is rampant there. The 2000 election was definitely stolen with help from that state's Governor and Secretary of state. they want to do that again and copy the process in other Rethug states.
All's needed, then, is a credible winnable candidate ..
Thank you. Dr. Reich for this very informative essay. I really don't understand why the Biden Administration is not willing to A) condemn these corporations for their obscene profits, and B) pursue anti-trust legislation that already exists to reign in some of the profiteering. As for a windfall profits tax I know it has to originate in the House of Representatives, which is doable so long as we control the House. But the Senate will continue to prevent any legislation that will help ordinary citizens at the expense of their wealthy donors. Biden needs to say this and say it often.
People are smart. They watch "career politicians" that have made millions in office, call out executives that make millions running a corporation. Almost like "the pot calling the kettle black". Meaning the criticisms of a person is aiming at someone else could equally well apply to themselves. Going after corporations makes democrats look jealous of others wealth. This strategy will backfire. That happened with Elisabeth Warren when she went after Musk. She looked foolish.
Says a Republican.
Teddy Roosevelt, William Howard Taft, many others earned their spurs as "trust busters." FDR perfected it.
https://www.presidency.ucsb.edu/documents/message-congress-curbing-monopolies
Daniel. Thank you for great article. Before the federal government goes after big business they need to get their house in order first. They are spending our tax money like drunken sailors. The federal government is so big with so many departments it is presently stuck in mud.
"People are smart." Not in my world they aren't.
In my world, and my bubble I work and live around some amazing smart people. I feel bad for you if you do not.
No federal authority to limit price gouging without legislation.
However many states have statutes that apply.
Specifically to Manchin and Sinema. Why has Biden not stripped them of committee assignments? I guess we can't afford to 'lose' them? there oughtta be a law!
Fifty years ago Donella Meadows and a team called "the Club of Rome", really out of MIT, wrote a book called Limits to Growth. In it the claim, based on what we now think of as crude modelling programs, that humans were growing beyond the resource limits of the planet. William R. Catton called the "Overshoot" in his book by that name. William Rees and others, who do ecological footprint studies, basically confirm and expand on these subjects. We are in overshoot, which means we need to degrow. Our economy is based on a false belief in continuous growth. Medically that is known as cancer. Perhaps recession is simply a forced recognition of that need to degrow. We can do it less painfully if there is a much better and fairer distribution of resources (graduated income taxes as in the Eisenhower era anyone?), but overall we must use a lot less energy and fewer resources if we are going to adequately address the climate crisis. I would love to hear your comments on this.
I agree we need fair taxation. I am retired now but the last 18 years of employment I was making between $60,000/yr and $120,000 plus an additional $35,000 from two pensions and my payroll tax (including Federal. State, Social Security and FICA, but not property tax or sales tax)) was 42% of that gross income. I was 70 when I started in private industry and 87 at retirement. I was a widow so had very few deductions. During this same time period 2003 to 2021 many multi-millionaires and billionaires paid ZERO taxes because of all the tax breaks and loop holes they received starting in 1973. Ronald Reagan and the trumpster were among those who paid no taxes.
Wayne Teel: "Beyond the resources of the planet." Thus space exploration.
There is no doubt that conservation is less riskier and has a higher potential yield than "the random walk in the universe" economic theory that underlies libertarian and now Republican policy.
But that doesn't mean we need to cut off the nose to spite the face.
I think we have begun to access unlimited mostly untapped energy from alternative sources that reduce the carbon imprint but can produce growth.
Same with new materials. Nanotechnology. Plastic batteries.
https://www.asme.org/topics-resources/content/9-material-discoveries-that-could-transform-manufacturing
Thank you for reminding us that science is still at work! Pretty amazing discoveries.
Thank you Daniel. I do approve of the scientific exploration of Space, but considering the damage Homo sapiens have done to Planet Earth, our first and foremost duty is to mitigate and hopefully reverse global warning. Then enact regulations for the entire planet to reverse out of control greed on the part of a few of us (corporations, and super rich) That means working with the United Nations and/or other world encompassing Councils. Soon, (as Now)
Wow Fay! I must ask you to slow down, just a bit, after your 103rd birthday! 😄
You are spot on with the horrible inequity of the tax system for the ultra wealthy. The republicans keep helping the “poor darlings”. Their voters hurt themselves but are too embroiled in hatred of those they need to feel superior to.
Our own history shows us that taxing ultra wealth and corporate wealth is a winning situation for both individuals and the country.
The fact is, we’re under attack. Putin has been instrumental in this. Oh but Trumplicans look up to the man & the other dictators of the world.
Biden’s doing a lot but he must do everything!
Wayne, this is one of the most incisive comments I have seen in this forum. The economy is inextricably intertwined with the carrying capacity of the planet, which has its limitations. You don't have to be a physicist to understand the Second Law of Thermodynamics, which tells us that in the physical world with every energy exchange there is a slight loss (entropy). This is in direct contradistinction to the human artifice of financial expansion that presides over our development and consumption of physical resources. We don't need any reshuffling of a flawed system by shifting around the debt load. We need a real world economy which measures the world in its own terms and develops and distributes its resources accordingly. Fair or unfair, before the miracle of credit buying, differentials in income were assumed to guard against overshoot by limiting distribution. All that has changed now with buy now, pay later. The earth is the one that's paying now for the rampant consumption made possible by credit. See Captain Jacques Cousteau's address to the World Conference on Population and Development in Cairo in 1994. And see the REAL Technocracy Inc.'s design for an economy based on real things, not the fantasy world of finance. Any other course will only lead to disaster.
You nailed it!
Thanks, Paula. I've been working on this since I joined Technocracy Inc. thirty-five years ago. Its study course introduced me to the concept that the monetary economy is totally out of sync with physical reality. No wonder most people have no clue to what is really going on. They're too busy scrambling to keep the wolf of interminable debt from blowing down their houses of straw.
Thank you for educating me (and so many others), providing the changing context to today’s economy and politics and keeping me informed so I can make the decisions I need as we move forward as a republic and as a family, and everything in between. Your efforts are appreciated more than you will ever know.
It all goes back to not nominating and electing Bernie.
Bernie keeps on fighting the good fight. Admirable. Interesting article in today’s Guardian.
https://www.theguardian.com/us-news/2022/jun/13/bernie-sanders-lindsey-graham-republicans-fox-news-debate?CMP=Share_iOSApp_Other
Can we NOT in the USA find someone under the age of 70 to run for the presidency?
I like Cory Brooker
yes, and that was the fault of the Dem party who gave those super delegates to Clinton.
This is what just drives my crazy about Democrats: Their absolute insistence that they lose elections.
"So you're saying it would be good for the economy, deny the other party the main thing they're attacking me for, and help me win the next election? Yeah, that's not how I roll. I'll pass, thanks."
AAARRRGGHHHH!!!!!!
Thank you for this economics lesson.
I agree with your political analysis. I have been frustrated that Biden has failed to fully use his bully pulpit to communicate these messages to the public. He'll say something a few times here and there, which, in the mass of information with which the public is bombarded, doesn't get through. Bernie Sanders and Elizabeth Warren have been telling it like it is, but they are dismissed by the news media and even some Democrats as "far left extremists." Democrats should do what Republicans do: craft a message that resonates, and then have all of them repeat it, in tweets, on the Sunday talk shows, in impromptu interviews in the Capitol, in local news media, wherever they can, over and over.
Biden’s a disappointment plain and simple. As you pointed out there are several things that he should be doing. This is a political authoritarian inspired recession to blame democrats. A recession showing up just in time for midterms is no coincidence. Americans need to look beyond tough times as to who is responsible and why. Fascism plain and simple
I don’t call Biden a full disappointment yet, he can’t get votes past the senate due to idiots Sinema & Manchin. This never happens to republicans. They threaten their own and frankly, Biden needs to threaten, legally bribe (as they all do) or do anything and everything to get Republicans out of our way. The fact that a criminal seditionist is out and about holding rallies make me want to scream. Who else would terrorize the country then be allowed to galavant around to spread more deadly lies! ? But Biden can’t hold back one once.
It’s this kind of searching for excuses that is a hallmark of the Democratic Party and those that support them.
The Sinema/Manchin abhorrence may make getting things through Congress difficult but there is NOTHING stopping Biden (and other prominent Democrats) from speaking about what needs to be done. And perhaps, if they made a message that they just pounded and pushed then maybe there might be enough pressure brought to bear to actually get something through Congress.
The “There’s an obstacle in my way so clearly I shouldn’t talk about how to improve things. Sure, it might cause the obstacle to budge, but it’s easier to complain about it being there.” excuse is pathetic.
I think the states can take the lead and go after price fixing and price gouging. Stand up California!
https://www.ncsl.org/research/financial-services-and-commerce/price-gouging-state-statutes.aspx
David Gergen who I respect had some interesting comments about Biden the fact that he is probably too old he is not a teacher he does not communicate well with the American people
Absolutely. So far basically nothing from Biden
Bob,
The issue I’ve been struggling with is identifying the principal cause(s) of the current worldwide inflation. I do not understand how to separate the effects of supply-demand, ongoing infrastructure constraints, and price setting or “price gouging” by large corporations.
Help please!!
Tom J, Birmingham, AL, USA
Tom, you might find this report helpful: https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/#:~:text=In%20short%2C%20the%20rise%20in,margins%20and%20supply%2Dchain%20bottlenecks.
In the report it says that "Another reason is to look where this inflation started: the rapid run-up of prices in the goods sector (particularly durable goods). The pandemic directly shifted demand out of services and into goods (people quit their gym memberships and bought Pelotons, for example) just as it also caused a collapse of supply chains in durable goods (with rolling port shutdowns around the world)." Not that I disagree but that's an awful lot of very expensive gym memberships, and obviously it's only an example. But don't you think there should also be some discussion of the impact of the money the government provided to tide many of over through the pandemic? Many of those service sector employees not working during the pandemic were being helped by the Paycheck Protection Program and other programs.
Thank you so much, Bob! I recall the price of crude oil actually going negative a couple of years ago, so my struggle is HOW inflationary pricing happens in the marketplace and WHO is responsible for it.
I'm not Bob but greed is part of human nature. IMHO it started with oil prices and sellers added on unconscionable profits, using oil as an increased cost of doing business as a pretext.
The Saudis control OPEC, the "market maker" for the price of oil internationally by fixing output. In essence they fix the price of oil. The Saudis own the largest oil refineries in the US and control a number of US oil producers.
On April 12, 2020, under pressure from Trump, the world’s biggest oil-producing nations outside the United States agreed to the largest production cut ever negotiated.
OPEC, Russia and other allied producers slashed production by 9.7 million barrels per day (bpd), or about 10% of global output. Half that volume came from cuts of 2.5 million bpd each by Saudi Arabia and Russia, whose budgets depend on high oil-and-gas revenues.
This was done because the dramatic reduction in demand caused by the pandemic reduced gasoline prices to the point where it was hurting American oil company profits.
To protect those oil companies, Trump essentially extorted the Saudis to cut production. Less supply = higher prices.
In the meantime American oil companies have achieved record, multi-billion profits. While no president is responsible for the price of gasoline at the pump, largely a function of supply, demand and corporate greed, Trump went to enormous length to cut supply.
Once demand was restored, we were stuck with Trump’s short-sightedness.
Sellers continue to raise prices and reap excess profits.
Hope you have sent this to Biden and his economic team professor Reich.
I am concerned about the applicability of current economic theory to current issues.
In Italy there is already a tax on the additional profits of the oil companies, and in Germany this is currently being discussed as to whether it would be legally enforceable. The question is, of course, whether this would make sense. In Germany, there is currently a so-called tank rebate; taxes are waived by 30 cents when filling up, which has only resulted in prices remaining the same for the consumer. Legally, it is rather difficult, because during the Corono crisis, biotech companies would also have had to be taxed more heavily...Therefore, in Germany, for example, they are thinking about limiting the market monopoly of the oil companies.
Need senate.
Curious about the impact on the economy of the mass spending on political campaigns.
I have never understood how the economy works, and am not much better enlightened even after your excellent attempt to explain it. What I do understand is if this election is fought on the state of the economy, the Republicans will probably win the election, and that is the worst possible outcome this year! There are so many forces at play here, and the Republicans are America's WORST ENEMY. Social programs will suffer, minorities will lose their rights to vote, the abortion question will be answered in a way that HURTS EVERYONE, wealth inequity will not only continue to increase but will speed up the rate of inequity growth, and any gun control gains that are made in the next few months may very well be lost and turned around even worse. These consequences and more cannot be allowed to happen! SOCIETY IS BEING DESTROYED FROM THE TOP DOWN, and it is not just a trickle, but a tidal wave of destruction.
Democrats must act to overturn the economic panic attacks being sold to Americans by the Republicans, and emphasize the social ills that will result from a Republucan victory in either the House or the Senate. Instead Biden must be given given WORKING MAJORITIES IN BOTH CHAMBERS in order to stop the cancer of Repuglycanism. If American voters cannot see that, you might as well kiss your asses goodbye. MAGAtism will return in full force!
If we overwhelm the vote, it is far, far more difficult to cheat! They simply do not have the numbers of voters. WE DO! It has to be a landslide. We can do it, but Democrats need to be vocal about our expectations but stop doing things like calling Biden Sleepy Joe etc, the republicans mantras. We cannot help the seditionist, child-murder-supporting republiCon party AT ALL. And we must focus on Jan 6 committee facts! Ad nauseam!
Exactly, and I think we need to re-elect Biden because he is the only Democrat in sight with the experience to handle this, and he has the sense not to proceed too fast.
Plus, if he dies in office, we will get our first woman President, and her name will not be Clinton.
rawgod
Writes rawgod's rantingsjust now
You do have the numbers. If you can get the voters to the polls. This is the important part. Fighting the election on the economy is what the GOP want. Refuse to fight it on that front, other than to say with real majorities the Dems can do something about it. Fight the election on what the loss of minority rights and abortion rights will do to America. Fight the election on needing 60 Senators to make changes to gun control laws. Fight on the positives, not on perceived negatives. A VOTE FOR THE LEFT IS A VOTE FOR THE RIGHT AMERICA!
Beyond politics, there are some things people can do to make the economy more resilient and reduce inflationary pressures:
Reduce unnecessary consumption and car use (there are many ways to do this)
Buy food from local (organic, regenerative) smaller farms (farmers markets)
Cook food at home (it doesn't take recipes and special equipment, it's not that hard)
Acquire new skills in renewable energy, circular economy, etc. (Coursera.org and edx.org)
Other ideas?
Need Keynesian economics. BBB. Restore the $300/child/month tax credit.
I support a WPA, works progress administration.
The Eisenhower recession wiped out the middle class in most of the rust belt. Shopkeepers, store owners couldn't get loans to run their businesses. Passenger train service was reduced to a trickle, eliminated in W. Pa, Ohio a couple of years later. The biggest NYSE companies were Pennsylvania Railroad and the New York Central, and soon neither existed. Space program/Vietnam War spending lifted the national economy, but much of the rust belt remained in decline. Whereas petit bourgeois are usually the movers of growth, even flowers do not bloom on the graves of the lost businesses. Not mentioned in economics textbooks.
Aggravated by Reaganomics.
I see your point. These days, we may have to recall what we know from Keynesian economics and augment that knowledge with Kate Raworth's doughnut economics to address threats from climate change, biodiversity loss, poverty and racism, environmental degradation, water issues, etc....
https://www.kateraworth.com/doughnut/
16. (Saving the most obvious for last) What is the connection between Fed rate hikes and Democratic administrations? Are we more or less likely to see rate hikes when a Democrat is in the White House?
*Note: Everyone needs to shut up about Democrats being poor on messaging. 37 percent of Americans think the economy lost jobs over the last year, when it’s gained 7 million. (Just 28 percent of people know jobs were up.) The blame for that lies ONLY at the feet of the corporate media who refuse to report good news about a Democratic administration that, if allowed to gain a stronger majority and really govern, might do horrible things like enforce the existing tax code or even **gasp!!!*** raise taxes on the parasitic rich. Corporate America has decided that Democracy isn't necessary to keep selling us stuff.
THERE IS NO SUCH THING AS A LIBERAL MEDIA. They own it all.
pressrun.media
Two good pieces worth taking under advisement:
https://youtu.be/jEong6XEbN4
also:
https://www.youtube.com/watch?v=BOqOfDlwz_Q
Yes Robert, everything you talk about is fact and essential to expose. President Biden must take a stand AGAINST big companies and check inflation with the pen. Also he must speak out and let the nation know where he stands and his plan of attack, letting the Republicans blame him for everything will definitely put the Democrats in a loosing position in the coming election. The democrats have s history of dragging their feet, hoping fate will save them. We have little time to make a move and stand up or give up. Come on, “let’s roll”.
President Joe Biden accused Exxon Mobil Corp. and other oil companies of exploiting high gasoline prices after a report showed inflation soaring to a new 40-year record.
“We’re going to make sure everyone knows Exxon’s profits. Exxon made more money than God last year,” Biden said during an event at the port of Los Angeles.
The arrival of historically high inflation along with near record oil prices will turn out to be a good thing, if we let it. High prices are a "signal" to us that we should reduce purchases of high priced items and seek substitutes. We already have hybrid and all-electric vehicles, and Ford for one is betting its corporate future that we will buy them. Our transpacific supply of everything failed because it is not flexible, and now many goods are in short supply. This is a signal to us to seek alternatives, and at a most propitious moment. China is clearly turning away from us and toward Russia and SE Asia. We can transition in an orderly way from our addiction to Asian manufactures beginning now. The transition will be costly but worth it. We could even build production here and hire our own citizens once again. Or we can wait util China quits us and the ensuing crisis gives us no alternative. Either way our future is coming, and we still have the time and opportunity to control our fate.
Considering the global perspective, here's a clip that brings up something that gave me a bit of pause, just because the first time I ever heard of such a thing was in a Sci-Fi flick. (I know, I know, it was >exactly< what the Cold War involved, but I'd never heard it expressed in any terms but the Communists and the Free World.) Superficially, it's a discussion of why the Chinese can't sell their fighter jets. (It's also informative on said fighter jets in their arsenal.) But the deeper issue, that he mentions directly toward the end of the clip is the notion of "economic blocs."
https://youtu.be/4TFrYgg7_aU
I first came across the notion of economic blocks in the flick "Screamers." The flick is set within the midst of corporate warfare - which isn't unimageable. However in the clip at the link I've provided, if you pay attention to who the Chinese >do< sell to, you can see the bare-bones of the kind of thing the clip references. Notice, it doesn't include the US. I bring that up because it has me wondering what role the existence of economic blocs - as it were - might end up being involved in the current, global financial chaos.
I read in The NY Times this morning that giant corporations weren't really to blame for inflation. Why is the Times defending big corporations' greed for rising prices, other than the Times is a big corporation? We all know and understand how greedy business leaders are always using every opportunity to gouge the American people and make more money for stockholders so they can buy back stocks. I suppose the middle class still has all that unused money to spend that is chasing those yet to be produced goods that economists blame for inflation. I know damn well that I don't have any money left over. Why is it that economists are always blaming the working class for everything bad economically, and every attempt to help the middle class as causing things like inflation. I've never believed it, and I don't believe it now. Business leaders and the wealthy are always to blame.
Dr Reich has been beating loudly on the drum of monopoly, corporations, and profits. Monopoly creates something even worse than consolidating profits; it stifles creativity! Jared Diamond gives a great example of this in this book, Guns, Germs, & Steel.
"For much of this book I have emphasized the diffusion of technology that takes place in the absence of formidable barriers. But China's connectedness eventually became a disadvantage, because a decision by one despot could and repeat¬edly did halt innovation. In contrast, Europe's geographic balkanization resulted in dozens or hundreds of independent, competing statelets and centers of innovation. If one state did not pursue some particular innova¬tion, another did, forcing neighboring states to do likewise or else be con¬quered or left economically behind. Europe's barriers were sufficient to prevent political unification, but insufficient to halt the spread of technology and ideas. There has never been one despot who could turn off the tap for all of Europe, as of China."
You're right Dr Reich, more profits AND less innovation.
Republicans do all the wrong things, mostly boldly and in plain sight....while Dems seem to cower at doing the right things... and shouting it out loud..... When you're right, your're right. and WHERE IS THE BIDEN WEEKLY PODCAST.... IS HE TOO OLD TO DO SOMETHING MODERN? Our youngest voters are the key to our future.
Why hasn't Biden pursued a windfall tax? Because he us a corporate stooge.
So Robert, I'm wondering how you respond to your freind over at NYT, German Lopez, saying this analysis is "less than compelling" (my translation of his take)?
This makes more sense than any other explanation I’ve heard. I always thought the spike in demand was short-term because of supply issues. It always amazes me how corporations can be so short-sighted and greedy, especially oil. I also think they are cutting off their head, despite their face. Even those who could care less about the environment are considering electric vehicles.
Why do I get a bitter taste when magic words like 'economy' and 'business' pop up? Why do I equate growth with cancer? Why was I an art major? ..
This inflation is different from any other, is it not? It's GLOBAL, with 80 other nations experiencing inflation. How much control can the Fed have in that kind of environment? Why aren't people talking about this facet of the problem?
You cannot have a financial model with an embedded growth obligation - creating interest / debt with the creation of money, kicking the debt can down the road - tethered to a planet with finite resources. Our financial model requires exponential growth. We cannot grow our energy and materials consumption infinitely. Yes, raising interest rates is the exact wrong approach. But degrowth of the economy is inevitable. None of this rhetoric actually speaks to the real problem. Our financial system is a Ponzi scheme. We pay way less for energy that it actually costs - we pay for extraction of fossil fuels but not the cost to replenish this resource that took millions of years to organically store. Renewable energy takes energy and materials - technology - to capture and is not as efficient as fossil sources. As we grow our capacity to capture wind and solar energy, we also keep growing our consumption of energy to power gadgets, server farms and more technology - so we really are not getting off of fossils. Talking about inflation and democrats chances at the polls is like trying to figure out a way to keep a person’s hair from falling out when they are undergoing chemotherapy.
I'd like to know what Dr. Reich thinks about the idea of Biden--and many of the rest of the D's--taking a war-footing "rural/farm push" to these mid-terms. In other words, we know that inflation is hurting a lot of people, part of that is due to Putin's war in Ukraine. Part of that is the food shortage for much of the world due to the sanctions on Russia and the blockade of Ukraine's ports. What if the U.S. stepped up in a big way and became the bread basket for the world? Biden can message this as a war effort, of sorts. Can Biden instill pride and rally around our farmers while informing more people about the causes of inflation?
RR telling’ it like it is!
A snappy analysis of what has happened and an apt discussion of the likely future, unless the First Lady puts some speed in Joe’s morning brew.
Further, thanks to the Federal Reserve Board’s inept handling, what might have been merely painful will become catastrophic for many.
But remember this, for every account that gets clobbered there is an another account showing a profit. For every depleted 401(k) account there is a big institutional account showing a teeny but measurable profit.
Ready to cry? The Kleenex is right here - if you can afford it!
What can WE do about this? I need to sell my home, and a recession isn’t going to help; right? After listening to J6, we have GOT TO VOTE BLUE! I know Biden isn’t perfect, i know he’s too committed he can do something “bi-partisan’, but the Rs aren’t interested. Even Barr said he’d still vote for that liar. I respect your advice, and opinion about our financial situation. I also know, democrats are terrible about messaging Sec of Transportation, should be our spokesperson. He’s perfect for it. I feel helpless, all i hear is “we lose at the mid-terms”. We cannot lose! We have to stay in power and elect at least 2 more. What can a 70+ woman do?
I am a 70+ woman and I am on phone banks to get progressives elected every time I find the opportunity.
That brings up what puzzles me about Biden. It seems he must see that his refusal to address corporate greed and, therefore, inflation, could cost him the next election, maybe get Trump re-elected, and thereby, end democracy, so how can one not conclude that he, too, is so "bought" by corporate money that he doesn't care what happens to the country? Or is he not seeing the corporate problem and not presidential material? Or...?
President Joe Biden accused Exxon Mobil Corp. and other oil companies of exploiting high gasoline prices after a report showed inflation soaring to a new 40-year record.
“We’re going to make sure everyone knows Exxon’s profits. Exxon made more money than God last year,” Biden said during an event at the port of Los Angeles.
This is part of the problem! Even Dems start in on inaccurate accusations against our own! We are in a crisis and must stop doing this! Put all energy into criticizing the deadly insurrectionists! We can deal with Democrats AFTER the elections and AFTER we secure the win. Republicans don’t need help spreading incorrect info.
I agree, we don't know what's going on behind the scenes. I'm glad that President Biden is speaking out louder now.
I read an article about him saying that. The next sentence was, "but he isn't doing anything about it."
I noted that the Large Pharmaceuticals are never painted in a bad light by the Dem. party and that this country already pays way way way more than anyone else on the planet for their products.
Also, it appears that a consortium of oil, pharma, pesticide/chemical toxins companies are running the nation and controlling the economy.
good explanation. I'm not an economist! but won't higher interest rates help those with more fixed income assets (eg., CDs) in retirement or near retirement who's IRAs & 401ks have been crippled by near zero APRs for the past 2-4 years? and won't increasing mortgage rates slow corporations and investment owners from purchasing multiple properties - reducing demand and thereby reducing the astronomic rate of property price increases - leading to more housing on the market and maybe more affordable housing prices?
good explanation. I'm not an economist! but won't higher interest rates help those with more fixed income assets (eg., CDs) in retirement or near retirement who's IRAs & 401ks have been crippled by near zero APRs for the past 2-4 years? and won't increasing mortgage rates slow corporations and investment owners from purchasing multiple properties - reducing demand and thereby reducing the astronomic rate of property price increases - leading to more housing on the market and maybe more affordable housing prices?
It seems so obvious to me that raising Interest rates only hurts the AVERAGE American. The whole capitalist insistence that GROWTH is the endless goal of the "economy" is wrong-headed to start.
Dear Robert,
Shouldn't the Fed know what it's doing? Have you talked to the people there? Shouldn't Biden be straightening them out? What is wrong with these people? Is it all politics so no one steps up? Ugh. If you know the facts, why don't they? Maybe they want to cause problems? I don't get it. Maybe you can explain better why people don't do the best thing. Thanks.
It seems that Democrats need a kick in the pants to call out corporate greed! Midterms are looking pretty bleak for Dems as well… praying won’t help.
I truly think the J6 hearings will do damage. You’re right, people need to get to polls and importantly we must have mail in voting (my state does).
We need OUR messages repeated ad nauseam and yelled Bernie style.
Oh My God! Rebukicans are evil & Democrats are weak!
Yes the Dems could do more if we didn’t have wolfs in sheeps clothing blocking raising taxes on the energy company’s coal and gas, and many other thinks, Joe Manchin and Kyrsten Sinema come to mind. Biden and all the democrats are getting blamed for a economy that they didn’t create. But who out there thinks that the republicans would charge or come down hard on big businesses that are gouging the American people! And what if anything would they do to help those of the poorest among us who would be hurt the most! Think about it before we go to the polls again!
Do you want to know how to REALLY, TRULY end the woes of Americans? Moscowmitch being promoted to second in command in hell! HE is at the heart of ALL of America's problems for the past 40+ years. If he dies, so does the trumplican party, Bunkerboy be damned!
Robert, given your past focus on inequality/Inequality Media, I’m surprised you’re not also focusing on the relentlessly growing inequality as another driver of inflation. As you point out, worker wages have been largely flat for decades, accompanied by a shrinking Middle Class (which has always been the bedrock of the consumer economy). Producers see a shrinking market so produce less, therefore need to get more revenue from the little they do produce.
As you’ve also pointed out, Fed rate hikes are an inappropriate tool to address this. It is effectively a stealth austerity program that squeezes those at the bottom while leaving those at the top untouched. In fact, since the wealthy *lend* money more than borrow it, the rate hikes further exacerbate the inequity.
I don’t see any way around it — a progressive wealth tax seems the only way to rebalance the economy.
In fact, if we really want to help average citizens and enjoy a robust, vital economy, here’s a moon-shot proposal: over perhaps a 20-year period, phase out the income tax, replacing it with a phased-in progressive wealth tax — one that begins at perhaps twice the current poverty level.
The legitimacy of taxing income instead of wealth has never been clear. We prize hard work in this nation, so why do we “punish” it with a monetary fine? (The harder you work, there greater your fine.) Rather than burdening people still struggling to make a life for themselves, wouldn’t it make more sense to ask those who’ve attained some measure of success, to pay back in proportion to the system that enabled that success, in order to keep it flourishing?
To be clear, this is not about “soaking the rich”. It simply makes sense that people ought to contribute back to society in proportion to the benefits received.
I know it may sound like a moon-shot, yet were we not the first country to get to the Moon?
Do you have Biden's ear? If not Biden, any influential Democrats? This wisdom is crucial for our future, it seems. Thanks for your posts!
Mmm... like, appearing on The Simpsons or something...?
= )
What is the connection between inflation and recession and simple, unadulterated GREED on the part of corporations who keep raising prices while their profits continue to flow and who refuse to pay decent wages, no matter the economic climate??
Are you talking to Biden & Congress? Will they not listen to you?
You are really going to blame Putin? Come on man get real are you that afraid of Stupid Joe Biden who has caused this mess with his sanctions and he's to pompous to admit a mistake so entire countries are suffering losing jobs and food meaning starvation all because Biden can't say he's sorry and we're going to reverse the sanctions that have cost the Dems the election. Let's blame the right person.
Putin has gone out of his way to insure Ukraine wheat has safe passage out of the country. The only reason they don't have safe passage is they mined their own ports. Idiots.
You are really going to blame Putin? Come on man get real are you that afraid of Stupid Joe Biden who has caused this mess with his sanctions and he's to pompous to admit a mistake so entire countries are suffering losing jobs and food meaning starvation all because Biden can't say he's sorry and we're going to reverse the sanctions that have cost the Dems the election. Let's blame the right person.
Putin has gone out of his way to insure Ukraine wheat has safe passage out of the country. The only reason they don't have safe passage is they mined their own ports. Idiots.
Who's going to send this news to Biden??? Loud enough so that he'll hear and do what he needs to do???
Paula. I am so sorry your world does not have or include smart people. I work and live around amazing, dedicated and hard working citizens. I guess it is all about who we allow in to our bubble.
As a Democrat, I deplore the slow and late moves of President Biden. In this most difficult time, we still have ways to fight the inflation as you clearly showed in your thoughtful piece. The midterm elections will show the effect of what's going on now: Feeling the effects of the inflation, people will take it on the government. What else?
Yes! We need to prevent the big corporations from putting their profits above the welfare of the American People. The income taxes of the CEO’s, Executive Committee members and other very wealthy investors should increase when the American People are hurt due to the greed of the wealthy and powerful. Corporations are run by people and those people should be punished for their sins against humanity.
Unfortunately, we eliminated the Saudis only competitor Russia. The one who was able to go into an oil war on March of 2020, bringing the price of oil to the lowest ever. Now we don’t have Russia and Saudi Arabia (our ally) is charging whatever they want for gas … this is part of the Boomerang Effect to start another Proxy War (this time in Ukraine) … but it’s part of the culture of this country and the relationship with the Military Industrial Complex. At the end we, the taxpayers, are paying a big price.
Let’s find a better peaceful solution with Iran, Venezuela, Russia and even Brazil to get better prices in oil … we can’t depend on the Dictatorship of Saudi Arabia where women can’t even drive or go to school unless a man allows it.
I think it’s true . But what is a company suppose to do? Be American ?
I agree with your assessment of the economy. A HUGE light MUST be shined on those corporations that have been making outrageously high profits while using inflation as their cover. If the Democrats are serious about retaining or expanding their majorities in Congress, they MUST bring this to the people's attention AND pass laws to tax these excessive profits in the Congress and send them to the Senate with votes that show who is FOR and who is AGAINST these greedy corporations. This is what you get when "our" government does NOT and has NOT enforced Anti-Trust laws over the past 60 years!! Check out all of the companies Nestle owns yet keeps the brands alive in the marketplace giving the consumer the illusion of competition. When you own 90 percent of the supply chain you can charge whatever you like and, as illustrated, this is exactly what they are doing. There used to be laws against stock buy-backs, but I believe this was undone by the "republican light" Clinton. When Hillary said the TPP trade deal was the "gold standard", she said nothing about the companion piece of legislature that went with it for, I believe it was $100 million dollars, to RETRAIN U.S. workers who were expected to lose their jobs as a result of the outsourcing that would occur with its passage. The Republicans AND Democrats are nothing but corporatists doing the bidding of those who provide them HUGE financial "donations". And, be aware, these corporations have NO allegiance to this country as demonstrated by their ACTIONS. Even MORE shameful is that "our" representatives (republicans AND democrats) have not shown a spine in the last 60 years to protect their constituents from this fleecing of society for the wealthy few. They just continue to play their game called "red vs. blue" to keep the American population off of what is truly ruining their "quality of life". Albert Einstein wrote many years ago that if you continue to do the same thing over and over again and expect a different result, that is a sign of YOUR insanity. STOP VOTING FOR THE republicans and democrats that continue to demonstrate their priority is NOT you. This said, the most evil IS the republican side of the coin. Trump and the other republican pathological liars MUST lose. (How in the world can sane people vote for the likes of Jim Jordan, Kevin McCarthy, Lauren Boebert, Marjory Taylor Greene, Matt Gaetz, Marco Rubio, Abbott, Desantis, and on and on?) Once these extreme crazies are out and with clear majorities, either the democrats DO what they have been talking about, or they are next to be replaced. The ultimate goal is publicly funded elections which will make a HUGE impact on ridding the overwhelming corruption that exists in these two (?) parties. We need politicians who actually will represent the MAJORITY of U.S. citizens interests. Also, TERM LIMITS FOR ALL GOVERNMENT OFFICIALS INCLUDING THE "SUPREME" COURT.
Better listen to the wisdom of Mr Reich!! Why do we find the Dems in the same 'corner as withJimmie Carter' Wakeup!!
Once again greedy corporations and their CEOs and other (what I call) "muckety-mucks" are screwing the rest of us over as they rush with great enthusiasm to the their proverbial (offshore) banks and invest in more yachts—simplifying the issue, but, thank you, Professor Reich, that IS the issue. More hand-wringing... that seems to be all that we can do if Dems don't take action NOW.
Dear Mr. Reich, I hope you’ve made known these ideas of yours to the Biden administration. Have you?
A very interesting read for these days is Herbert Hoover's memoirs "Great Depression: 1929-1941" in which he reviews his efforts to stave off depression during his presidency, how he worked with big business, banks and local communities while Europe was financially exploding from Great War expenditure debts and massive military buildup. Things are very different today, but Hoover's concise accounts, his refusal to make Americans dependent on Federal assistance and promoting community programs instead give a good perspective. His coverage of banking reform is an eye-opener and commentary on Roosevelt's programs--which seemed to have been designed by Vincent Astor and other mega-rich in this country at the time who were paying for his presidential campaign--(Starting with deliberately allowing the public panic which caused banks to fail--if not creating it) have helped form a new opinion of Roosevelt's programs --which we were taught were so successful in school.
It certainly was eerie opening my email this morning to see your newsletter about the economy and the NY Times newsletter talking about "greedflation" right next to each other.
https://messaging-custom-newsletters.nytimes.com/template/oakv2?campaign_id=9&emc=edit_nn_20220614&instance_id=63989&nl=the-morning&productCode=NN®i_id=130169566&segment_id=95068&te=1&uri=nyt%3A%2F%2Fnewsletter%2Fadd9915b-25fc-56e1-98ad-507d4fca471d&user_id=53c9ef498c92fca04b1bd4dc3e254ed7
I don't subscribe to the NY Times, but I do get their newsletter to keep my finger on how MSM are framing these issues. Just the newsletter's title by itself told me that they were going to downplay the impact of lack of corporate competition on rising prices.
'Good morning. We look at whether “greedflation” is causing higher prices.'
Another thing working against President Biden's messaging is that his Treasury Secretary, Janet Yellen, appears not to have mentioned corporate concentration and record profits in last week's testimony before the Senate finance committee, at least not in the Guardian article I read. It can't just be President Biden talking about this if the message is going to get through.
https://www.theguardian.com/business/2022/jun/07/janet-yellen-inflation-congress?CMP=Share_iOSApp_Other
Also, when you discuss the unique factors driving inflation here in the US, don't the stimulus payments provided during the pandemic also play a part? While the child tax credits kept families and the economy afloat during the most dire parts of the pandemic, these companies now enjoying these record profits could not have raised prices like they did if people didn't have that additional money they needed to keep themselves afloat. Basically, these companies can't get blood from a turnip. It seems to me that they saw an opportunity and took full advantage of it, and used pandemic supply chain issues for one as political cover. Now if there was true competition as you've pointed out many times, these businesses could only raise their prices as truly needed in order to avoid losing customers to competing businesses. At least this helps to explain why these companies hadn't been tis extreme price gouging before the pandemic.
Just my thoughts here, thanks again for this forum.
I think Biden may be hesitant to crack down with anti-trust legislation because he is from Delaware. Delaware has long been like an American Bermuda, with tax breaks to be incorporated there. Corporate law is a big money-maker in the state of Delaware. One big anti-trust suit was the breakup of the DuPont Company, a long time ago (which was successful), maybe too long ago for Delaware politicians to recognize the need for anti-trust legislations.
Biden might refer to his California Vice President, but I wonder whether she is willing to threaten Amazon or other California companies with break-ups. Elon Musk recently has re-located to Texas, apparently frustrated with California state government. He seems to be having many economic problems at the moment.
What I can't understand is the refusal of the White House to do anything but a wallow in self pity. I hoped Biden should use whatever he had to try to fix the news he inherited.Mitch triple chin seems to be in charge. It looks like it's too late for Congress to do anything positive. The only hope is that Sleepy Joe wakes up now. Sadly that is unlikely.
All in all, I find two issues:
Biden and the Dems best chance of doing ANYTHING, including being re-elected at ANY age,
is: 1. if Dems, Independents, and Republicans, would pass a bill making military assault weapons illegal for US citizens to own, and illegal for US gun companies to sell to the public.
2. If the Supreme Court, followed Ginsbergs interpretation of the 14th amendment which gives women the right to choose. According to the US Constitution abortion is not illegal.
Until these issues are addressed, neither party holds a dominant place in the hearts of American voters, and Trust in US government is diminishing.
Thank you, Mr. Reich, for the clarity of your explanations, politics as well as the economy. Your skill as a teacher and your knowledge as an economist are a great combination.
The tax law must change as well, I am not sure if people remember this but credit card interests used to be part of the allowed itemized deductions, and that helped at the end of the year. With higher interest rates on credit card debt I am sure that adds to the strain in pockets.
Thank you for your very informative explanation of the pressures on the economy at the moment.
#12.
Joe Biden may not be a great President, but he appears to be the right President for this time. However, he needs more support from Democrats in Congress (Yes, you Chuck Schumer!) and in Democrat-controlled states to accomplish anything. It's long past time for these Democrats to "grow a pair" and take on the GOP, not just on "The Big Lie", but on the economy, gun control, education, health care, and every other issue the country is grappling with.
I shared a post from a Liberal page the other day about 4 bills that passed the House with little or no Republican votes. These bills covered Veteran's benefits, insulin prices, fuel costs and baby formula. All these are pressing issues that impact everyday Americans, but had weak support, if any, from the GOP Representatives. I asked my Republican friends why this was the case, but got NO response from any of them. That speaks volumes. Sadly, I doubt any of these bills will get through the Senate, no matter how urgent the needs may be.
Thank you for this helpful explanation. I need all the help I can get understanding economics!
The inflation we have now is just a continuation of the wage deflation and income/wealth redistribution we have had since the 1980s.
If the Republicans hadn't pushed through the 2017 tax cuts, there would have been much less excessive consumer spending by the investor class, and the federal deficit would be much lower. Fewer big corporations would have had the funds to buy their rivals and increase their market share.
The U.S. economy suffers from several major structural problems contributing to inflation. As you mentioned, one is the loss of competitive capitalism and its hijacking by huge non-competitive conglomerates. Severe anti-trust action is needed, but is not forthcoming.
Another are the intentionally absurd inflationary regulation that pervade our economy but are supported by existing firms because they keep competitors out. For example, the horrendous (billions) mandated costs to get a drug approved by the FDA.
Another, but largely hidden structural inflationary cost, is the approximately quarter of all businesses which are currently unprofitable zombie firms. These firms are unable to cover all their costs without constantly borrowing more and then only survive if the interest rates are trivial.
One very important function of a recession is to drive to bankruptcy the dead wood business so their labor and assets can be redeployed into efficient (profitable) enterprises. Yes, there will be a rise temporarily in unemployment and the associated hardships. But without the cleansing of recessions the economy decays into moribund firms, obsolete production and falling standards of living.
The FED has prevented the last two recessions from preforming this cleansing by artificially driving down interest rates to sustain the dead wood under the pretense of protecting employment. It has then had to maintain these “subsidized” rates through all sorts of dubious and inflationary injecting of “liquidity”.
The real interest rate should be about 2-3%, or a nominal rate of 10-12% if we wish to correct the massive dislocation the FED has caused in financial markets since 2007.
I thought the printing of so much money the past 2 years by the Fed was a major contributing factor to inflation.
I thought the printing of sooo much money the past 2 years by the Fed was a big contributor to inflation.
Thank you for your service.
I agree. Calling corporations out quietly is likely to help and enforcing antitrust laws is key! Ah! The very large elephant in the room…the midterms! Let’s hope history does not repeat itself! Let’s hope political opinion management has become more sophisticated! Let’s hope for a seminal moment to drop in favor of liberal democracy!
Free Market Capitalism was a one-way street. Free capital was the magic wand that would cure all ills. If the government can borrow money and pay it back with more borrowed money, why can't we all??? The "why" was explained in the first class I ever took in economics - INFLATION. Politicians, with the support of the American public, threw Eco 101 out the window forty years ago. Debt was thrown out the window with the rest. The Fed was created to herd cats. We are the cats! Politicians created the Fed in order to create a scapegoat, it seems. We need to start with the premise that cats cannot be herded. That would go a long way in solving the blame problem. Deferral of responsibility and blame are bedfellows, our Achillies heel.
We will have a hard time getting through this. The global just-in-time supply chain works its magic when conditions are just as expected, but it does not handle changes of circumstance well. The magic is just simple arbitrage: Source it where it is cheapest, sell it where it fetches the highest price. When the container shipping link could not expand to meet increased demand, though, the whole thing malfunctioned. And continues to malfunction. Meanwhile there is budding bromance between the two autocrats who run China and Russia, and I doubt that they intend to invite us to their party. We liked to mock socialist command-and-control economies for their lack of flexibility: 'they produced a million left shoes and no right shoes', we said. Now it appears that mega corporate command and control has its faults too.
Welp, what a way to wake up this morning! :/ Seriously, though, do any Dems in Congress read this?
Thank you for trying to educate on the economy. It is like a foreign language to me, and seems so convoluted and artificial. I will be sharing widely and then writing my congress people and I suppose holding on for the ride?!
Here is a link to an article today about greedflation. https://mail.google.com/mail/u/0/#inbox/FMfcgzGpGTHKLdrPXskXNWGBRdZBGqrQ
Citizens in the USA can see exactly what Democrats and Republicans are both doing with their messaging and sound bites. The biggest challenge is gas prices and 41 year high inflation. Once the price for gas climbs to $5.00, $6.00 and $7.00 a gallon you will see a emotional breakdown for our good citizens. This could have been prevented had we elected officials with a vision and understanding of true economics during and after a pandemic. We pay elected officials a LOT of money with our tax money to run the government. We should have the best. Instead we have excuses coming from every single department. In the corporate world they would have been fired for this mess they created.
Thank you for this article. A possible recession has been on my mind and this article was helpful.
I think all companies and businesses that have been given that designation by the government should have their records open to the public and actually displayed in the news. Then people could actually see how much profit they're making. They make a profit while we get poorer.
Capitalism without constraint leads to extreme inflation. Workers and the public and particularly those with low-income will suffer the most. Corporations have been given more protections by the government than the average American.
This sounds so sensible. I assume that Biden's current Secretary of Labor and other advisors are also echoing these statements? If there is something that the Biden administration can do to prevent a recession, I would certainly hope that he would do it!
Here is a link to an article in which I referred to about "greedflation". Most Americans can see right through what both the Republicans and Democrats are doing in the media. https://mail.google.com/mail/u/0/#inbox/FMfcgzGpGTHKLdrPXskXNWGBRdZBGqrQ
Democrats-DO something NOW!
robert, the dems are doing very little and saying very little. would you at least run for dem vice president to help the dems and to help our country ???? '13. So why doesn’t the Biden administration pursue these?'
Per point 14. Price gouging by the heavily GOP leaning oil industry contributes to inflation, thus inflation, and helps Republican chances in the mid terms. Democrats should exploit this and the mainstream media should report it.
I have never understood why Dems cant ALL message like the GOP. All DEMS should be accusing the War Profiteering oil and food companies. Stop reacting to GOP messaging and falling into their traps. Dems need to Claim the media and tell ALL the members to get on the message page. The Dems never learn this. Its exhausting to watch and is the main reason for low pole numbers. Dems are tired of screaming at the tv DO SOMETHING!! Fight! STOP APOLOGIZING TO NAZIS!!!
I was reading an article on other ways to reduce inflation. Nixon did a temporary wage/price freeze and FDR did ration stamps. Could these be used in todays environment?
You would think the Democrats Party would seize on this opposition to point to corporate consolidation as being the primary trigger of inflation and suggest the solutions you proposed.
The federal government is SO big and bloated it is stuck in mud. As Robert stated: "The Fed is operating under an old model of the economy". The biggest challenge is the Federal Reserve wants to curb inflation while at the same time the Federal government is unwilling to reduce spending. Ultimately, inflation is reduced by cutting the amount of broad money in the economy, and if government spending remains the same, the efforts to reduce inflation will only come from obliterating the private sector through higher cost of debt and a collapse in consumption. Once again, the little guy gets hurt the most in the USA. It is time we elect people that can make change happen rather than just talking about change. Citizens are sick of "career politicians" making promises while spending our tax money like a drunken sailor.
After all we’ve been through economically with Covid, it’s hard to think of weathering more economic bad news. And this is at a dangerous time. Democrats do many things we don’t hear about because of right wing control of the media. That’s something we have to remember. The danger is allowing Faux So-called News and the largest media to continue to spread dangerous lies. This is not free speech. If we don’t rein in the dangerous messaging (that is sometimes deadly) it will be harder to get some republicans to get a grip on what they’re supporting! The rest are beyond stupid cult members who live in an alternate universe but they don’t comprise more than about 30% of the electorate.
While the US is demolishing middle class, China has a growing middle class. Trump has left the international world watching us with their jaws in the floor! Not in a good way. We’re letting Republicans destroy us from within because of the onslaught of media lies.
Next to go might be the dollar used as an exchange rate. That will not be good. Are we getting to that point?
Biden cannot let one little detail slip away pretending it needs “bipartisan” support. I thought we didn’t negotiate with terrorists!
I am not an economist. Help me here. So when interest goes up, banks and financials make more profit on loans. Business passes on cost of borrowing to me in higher prices. Consumers via actual interest are encouraged to save not spend. How does this stop inflation?
I wonder how the Great Resignation will play into this? Haven’t companies who furloughed or laid off workers has a difficult time replacing them?
Continuing public pressure to support changes in our gun control laws seems to be making a difference, finally. The current proposed bipartisan bill, leaves much to be desired, for sure, but public pressure that has not dissipated this time, has made a difference. Would or could the same enduring public pressure make a difference in calling out big corporations and excessive profits? Robert, what do you think about this? Thanks.
Thank you for supplying such clear information. I guess it’s time to write the White House again.
The Situation So Joe puts on his Nixon disguise . .and gathers the relevant Big Fries .
"Guys we can do this together . . tho of course if you'd rather
There's a relevant power that applies #Tipping ship
THANK YOU for all your morning reports..they are most helpful..
In politics doing the right thing (ie antitrust actions) may best be done quietly. Republicans would use the issue as anti- American.
What would happen if the Fed did nothing? People would cut back on spending or purchasing homes. The poor, young, and many seniors would struggle more.
Would congress vote a progressive tax rate to help those at the bottom?
Yes, yes, yes says this economist/ financial analyst. Shout it out Biden/ Harris/ Yellen. Call out price gouging media.
Thanks. Good information
Doesn't have senate support.
Not true.
People like Bork argued that the antitrust laws were anticompetitive and the Republican congresses fell for it. Some concepts still apply and the FTC has jurisdiction to look into anticompetitive practices.
There are state statutes that probably apply. I posted a link elsewhere.
There is a House bill that might fix it. https://www.congress.gov/bill/117th-congress/house-bill/7688/text
I doubt if it can pass the senate.
I am an advocate for NOPEC. https://www.reuters.com/world/us/why-nopec-us-bill-crush-opec-cartel-matters-2022-05-05/
Tell it to the FTC.
IMHO it's easy to show that prices are marked up but first have to establish that we are in a national emergency. Should have been done in 2020 during the pandemic when commodities were arbitrarily withheld by speculators trying to corner the market.
Microsoft has several alleged monopolies.
Oil, auto companies are oligopolies.
Ken. You hit the nail on the head with "career politicians". Many are beholden to the money.