from Robert Reich: 'Relying on the Fed to bring down prices

[elleng]

is like treating someone's fever by putting them in a freezer. It doesn't treat the underlying disease, and could make things far worse. . . The Fed is making a huge mistake.

Huge pent-up world-wide demand due to pandemic, war, corporations with pricing power.'

[PoliticAverse]

1. A few trillion dollars created out of thin air... n/t

[stuffmatters]

2. I agree with Reich

[lapfog_1]

3. when all you have is a big hammer

everything starts to look like a big nail.

The Fed only really has interest rates to control the economy.

Here is the catch... we had a big crash due to pandemic. Only it wasn't a crash because the government printed more money than anyone thought possible to prevent it.

Now the pandemic is "over" (well, at least we are ignoring it).

So we had a huge "recovery" as everyone went back to work.

The Fed is looking at the year over year economic output, the tight labor market, etc and saying "oh fuck".

Meanwhile, workers got nice wage increases because of the tight labor market and a general feeling that the economy was screwing the low wage workers (remember the marches and protests for $15 minimum wage??? don't hear about that anymore).

Production of oil based products slacked off during the pandemic... and will be slow to recover. Add in a war and resulting sanctions on a major oil exporter.. plus the general unwillingness of places like Saudi Arabia to ramp up production and our unwillingness to deal with Venezuela and you get the perfect recipe for a oil/gasoline shortage.

The world eats oil... almost all food products depend on oil from fertilizer, tractors to plant, weed, harvest the plants, transport to processing and finally to market... everything in the supply chain is driven by the cost of oil. Oil shortage... inflation.

And the Fed reacts by raising interest rates. This will curtail business activity, and lead to layoffs (so much for the tight labor market and those higher wages). The middle to lower class, reducing debt by huge amounts in the last year or so... will now be poor again. The rich PTB will end up winning (as they always do in our capitalist system).

We middle class and near poor got our ONE inning in (late 2021 to mid 2022) and now the big oil and big agra are soaking us... followed very soon by big banks and the finance. Housing never quit ripping us off.

but the raise in interest rates also killed our 401Ks and modest stock investments.

And lets not even talk about crypto.

[elleng]

4. Thanks for your thoughtful response.

[modrepub]

6. Fed And Too Big To Fail

The Fed (and politicians) are also there to bail out the big fish who've managed to work themselves into situations where they've made such poor investment decisions that they've bankrupted an entity that is big enough to "blow up" the whole system. Like the financial crisis back in 2008. We basically fed money into the system without permanently removing the players who broke it in the first place; big financial companies that put themselves in financial ruin were allowed to live another day (and potentially do the same thing again). At least during the savings and loan crisis, the bad actors were liquidated and charged with crimes. Not so in 2008.

Ultimately, the Fed and Federal Government are more interested in protecting the rich and powerful (from their own doing).

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