Despite inflation, Fed will not pull back on present monetary policies

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    • #435122
      Ohio Barbarian
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      • Total Posts: 21,304

      (WSWS) Fed chair Jerome Powell has again reassured financial markets that, despite the significant rise in US inflation, the central bank is not going to pull back its ultra-loose monetary policies that have seen Wall Street reach record highs.

      Powell’s assurances came in his testimony to the House Financial Services Committee yesterday in the wake of inflation data which showed that prices had jumped at an annual rate of 5.4 percent in the year to June. The rise of 0.9 percent for last month was the highest since 2008.

      Powell insisted that, while inflation had “increased notably” and the price rises were higher and more persistent than the Fed had anticipated, the rises were “transitory” and inflation would begin to decline.

      However, he said, the Fed was prepared to “adjust monetary policy as appropriate if we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal.”

      Full story here

      It is better to vote for what you want and not get it than to vote for what you don't want and get it.--Eugene Debs

      You can jail a revolutionary, but you can't jail the revolution.--Fred Hampton

    • #435342
      soryang
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      • Total Posts: 1,406

      any attempt to raise interest rates will result in a market collapse.

      • #435345
        Ohio Barbarian
        Moderator
        • Total Posts: 21,304

        It’s bound to collapse sometime no matter what they do–capitalism has cycles that its adherents have never been able to prevent–but I am constantly surprised by how long they can keep it up.

        All I know for certain is that food and housing prices are certainly going up, and no one in the establishment seems to care at all.

        It is better to vote for what you want and not get it than to vote for what you don't want and get it.--Eugene Debs

        You can jail a revolutionary, but you can't jail the revolution.--Fred Hampton

        • #435353
          soryang
          Participant
          • Total Posts: 1,406

          Except for a small stumble associated with Trump’s election in 2016, the market has just gone up and up and up since the recovery from 2008. Consistently declining interest rates fueling speculation. How long can it go? I’m always on the wrong side on economics. Isn’t that how its designed to work? the little people are on the wrong side of every move.

          Debt to GDP Ratio by Country 2021
          What countries have the largest debt in the world? Here is a list of the top ten countries with the most national debt:

          Japan (National Debt: ¥1,028 trillion ($9.087 trillion USD))
          Greece (National Debt: €332.6 billion ($379 billion US))
          Portugal (National Debt: €232 billion ($264 billion US))
          Italy (National Debt: €2.17 trillion ($2.48 trillion US))
          Bhutan (National Debt: $2.33 billion (USD))
          Cyprus (National Debt: €18.95 billion ($21.64 billion USD))
          Belgium (National Debt: €399.5 billion ($456.18 billion USD))
          United States of America (National Debt: $19.23 trillion (USD))
          Spain (National Debt: €1.09 trillion ($1.24 USD))
          Singapore (National Debt: $350 billion ($254 billion US))

          https://worldpopulationreview.com/countries/countries-by-national-debt

          I think this list above is out of date. Another source I looked at said US debt was above 24 trillion. Russia was the least indebted country. China doesn’t have that much debt relative to its GDP either. Germany looks particularly strong as well.

          What I fear as a retired person, is that we’ll get the Greek treatment where SS and other government benefit programs (like medicare, medicaid, pensions, etc.) are slashed indirectly by uncorrected inflation trends rather than by gross overt cuts. Government, corporations, banks, etc., can just keep borrowing money and never pay it back. There is simply no incentive to do so. One way leadership and elites seek to compensate is to somehow take control over other countries’ markets with economic sanctions, military threats, regime change, and other methods.

          I’m not a Paul Peterson debt nut, maybe an “infrastructure” policy addressing systemic problems could work. If climate, environmental, public health, financial sector corruption and exploitation and social injustice problems aren’t addressed I don’t think it will work alone.

          I won’t hold my breath.

    • #435441
      eridani
      Participant
      • Total Posts: 9,653

      https://www.theguardian.com/commentisfree/2021/jul/15/why-does-inflation-worry-the-right-so-much

      Whenever inflation threatens, two versions of the perversity thesis are deployed. The first, usually opined by members of the investor class, argues that inflation mainly hits those on fixed incomes, older and poorer people, thereby proving their concern is born from a sense of care for society’s weakest. Oddly, that same class of folks seem utterly indifferent to older and poorer people until inflation threatens to either reduce their expected investment returns, or impact their leveraged financial strategies, as interest rates rise.

      The second rhetorical deployment, found mainly in mainstream media and amplified from there, reaches back to that “terrible time” called the 1970s (Labour voters will know this one well) to warn about wage increases causing price increases causing inflation – the classic wage-price spiral argument. You might think giving poorer people more money helps, but it doesn’t. It only makes things worse by pushing up prices.

      Given all this, the only way workers can get sustainable wage rises is if we increase productivity. Governments should therefore not try to spend their way to prosperity by pushing up wages, as Joe Biden is trying to do now. They should instead liberalise their labour and product markets to capture the efficiency gains that would make wage increases sustainable.

      The problem with this argument was that not only did the so-called “natural rate” jump around a lot (the UK has had everything from 10% unemployment to 4% unemployment over the past three decades with an inflation rate of 2%) but wages also stubbornly refused to rise for most wage earners despite decades of such reforms and long periods of full employment. Add to this the fact of inflation being “too low” rather than “too high” for many countries since at least 2008, and you must conclude that this model has probably passed its sell-by date.

      Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

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