US Federal Reserve says its goal is ‘to get wages down’
multipolarista.com
multipolarista.com
- put up interest rates. This raises the cost of business credit, and at the margin, puts people out of work, until employment reaches the "non-accelerating rate" (NAIRU)
- break labour power by legislating against unions, breaking up state-owned businesses into the private sector, and promoting the Uber-style "independent contractor" model where people aren't employees
The public may be exposed to rising food and fuel costs, but if they can't demand higher wages that can't feed forward into higher prices and a wage-price spiral.
Yes, this involves a lot of worsening of living conditions.
I think it's important to consider though that what we have right now isn't a demand crisis but a supply shortage. There are, thanks to all sorts of reasons (the fallout of COVID lockdowns from 2020-2021, supply chains, war in Ukraine between an oil exporter and a grain exporter, COVID zero in China) not enough things available for everyone to buy.
The amount of money folks have and are being paid - and are demanding at new jobs - cannot turn into the same quantity of goods now as it would have two years ago. Hence rising prices.
One of two things can happen:
- We can increase supply of goods, fix supply chains, infrastructure, bring in more labor, etc.
- We can decrease demand by reducing the amount of money in the system (increase interest rates, reduce wages).
But like, one or both of these things have to continue to happen until the demand for goods and services matches the available supply of goods and services.
Yes, this may lead to worsening conditions but that's because we don't have enough stuff for everyone to get what they want right now.
[0]: https://www.bridgewater.com/its-mostly-a-demand-shock-not-a-...
The big question is if the fed can tighten monetary policy without crashing the economy.
People are getting paid more because there's a glut of jobs / shortage of workers.
To achieve its policy goals at containing inflation and avoiding a wage-price spiral the Fed needs to break the back of the wage market, which means it needs to destroy jobs.
> put up interest rates. This raises the cost of business credit, and at the margin, puts people out of work, until employment reaches the "non-accelerating rate" (NAIRU)
Instead, keep interest rates now. Then wages will go up, but prices of goods also go up, and prices are less stable. This seems strictly worse for everyone.
> break labour power by legislating against unions, breaking up state-owned businesses into the private sector, and promoting the Uber-style "independent contractor" model where people aren't employees
This is not really within the purview of Fed policy, but the various legislatures. If you had the opposite, probably real wages will go up. In the socialist ideal case, more of GDP will go to labor, and laborers will get more equal salaries, which is great.
The other side's argument is that with strong unionization you would a lot of stagnation: jobs that have low economic output but are still there because the unions keep it in place. General Motors is a classic example of a company beholden to it's labor so that capital doesn't want to invest in the company at all, and it ends up having relatively low productivity.
FWIW I disagree with this. Prices will go up, which will incentivize adding new supply, and prices will eventually stabilize at a new (albeit higher) rate. This will eventually be compensated for through the wage-price cycle.
Rising prices are a function of supply exceeding demand right. There's simply not enough gas right now for everyone. So you can either reduce demand, or you can increase supply. Reducing demand, IMO, isn't the right way forward.
Biden can increase fuel supply by approving pipelines or allowing more drilling on federal land. This would help the poor and laborer class. But he won't.
[1] https://www.npr.org/2022/03/19/1086925726/gas-prices-oil-cru...
Agree that prices will eventually stabilize even if the Fed doesn't tighten (as long as they don't keep expanding). The government only printed so much money, so that when nominal GDP grows it'll have to hit a ceiling.
I think you're missing the point. Employees are desperately trying to increase supply right now. They need people to do so, but there aren't enough of them. That's why the labor market is so tight right now.
Rising prices aren't going to goad the economy into adding supply that it's already trying and failing to add. They're just going to destabilize the economy.
We can have an economy with structural issues, or we can have an economy with structural issues AND high inflation. We might ask Argentinians what they'd prefer.
thus the prices go down and inflation goes down
If you want to help the poor in the long run, you can't just pay them more money for the same work, you have to find ways to make their labor worth more.
"we'll have to take away your pay bump and any hopes for better pay, because the market decided you're not actually worth it"
"our billion dollar/year company can't afford to pay more without increasing prices for end-consumers"
A thing's value is the what two people agree to transact for.
A thing's value isn't dome statistical hand wave. It's a statement of fact. A dependent variable with a huge multiplicity of inputs.
If a laborer is not will ing to sell their time, which arguably, a great deal of American laborers probably shouldn't be right now given the rates many employers are offering and exploitive business models in use, Then the value is not defined.
Businesses can essentially name their price because there is a capital management complex that overall colludes to create an emergent that as a happy side effect for the actors within, leads to members being generously enriched.
The glorious absurdity to it all though, is that group is in part primarily empowered by us The enemy here, is us.
You can't escape basic economics. The supply of low skill labor is vastly greater than the demand, ergo real wages are low. The supply of housing is vastly smaller than demand, ergo real rents are high.
Raising billions from the rich on the other hand might
I'm not sure what metric you're using, but most of them don't work that way (percentiles, etc generally have an equal number in the top and bottom. I wouldn't call the bottom 80% the bottom - and that's not where the impact is. The outsized impact I'm talking about is in the bottom 25%. Those are the people seeing the brunt of it. Me being in the 80% as a software dev isn't nearly the same.
$15/hr is a problem? Let's be honest, McDonalds isn't scheduling full time. They would make maybe $22k per year at 30 hours a week. Now subtract taxes, gas, car insurance, etc. Look back at real wages and see where that falls.
The American government exists as a tool to protect the capital owning class and the capital they own. Foreign policy is never about "spreading democracy". It's about extending US interests.
We have a system that demands exxponential growth for the capital owning class. The workers that make that system possible do not get to share in the proceeds of their labour because that comes at the cost of the growth the system demands, which is why for 40 years we had basically no real increase in wages despite massive increases in productivitiy.
For anyone confused about what the Fed can do here is to raise interest rates to increase unemployment to destroy the negotiating power of working people.
Your existence has a budget shortfall built into it. Housing is expensive by design. Crippling student debt is by design. Medical debt is by design. This budget shortfall keeps you working and compliant.
The only counter to this is labor organization.
This system is unsustainable. Just like an algal bloom eventually starves itself and dies out, squeezing out every limited dollar you can from people ultimately robs them of the purchasing power to become a customer.
Wrong. Just totally false. The USGOV exists to persist if you want to be cynical. Persisting in that context means avoiding social unrest that prevents electoral defeat and subsequent legislations that eliminates good paying bureaucratic jobs, and that reduces government spending (thereby reducing income of businesses that rely on USGOV spending).
In sum, the USGOV is not shy about cutting the nuts off the "capital owning class" and its doing that right now with higher interest rates, higher taxes, more regulation & declining asset prices.
When did Federal income tax go up? REALLY rich people don't have income - they have capital gains - that's not going up at all.
Asset prices are down 15% from being up 50% - they're still up higher than average from the beginning of Covid.
I imagine they will still go lower - but my crystal ball rarely works.
Either way, the wealthy are doing just fine.
Financial leadership and investors have long known this, and actively plan for it[1]:
> Citigroup analysts have also used the word plutonomy to describe economies "where economic growth is powered by and largely consumed by the wealthy few."
Here's a link to the plutonomy paper from Citigroup[2].
It has long been orthodox policy that wages should not rise faster than productivity. We are seeing the reason for this right now: when they do, then inflation rises faster than wages (or profits).
If, as the article asserts, inflation were caused by "corporate monopolies", then we would see the least inflation in markets like housing, or equities, or grain, where there are many producers to choose from. Instead, these are three of the highest-inflation sectors lately.
None of this is meant to suggest that the Fed is doing everything correctly or well, but there are good and valid reasons to be concerned when wages rise faster than productivity, or when there are many job openings for each applicant, because neither of those situations actually results in us (the non-corporations) being better off.
If it's good that wages raise slower than productivity - that means it's good that workers always get a smaller share of the pie.
This, I do not think, is a universally agreed upon opinion.
Now, it is also true that if wages rise slower than productivity, that should also concern the Fed, and they haven't been as concerned as they should have. However, given that they switched to a positive (2%) rate of inflation for their target a few years back, they are at least acknowledging the problem. But I agree that wages rising slower than productivity ought to be acted on as well.
It can be. But too much it auto-fuels the inflation which is the feared scenario: inflation a-la-seventies.
The linked article is a histrionic, loaded write up.
https://www.wsj.com/articles/transcript-fed-chief-powells-po...
Contrary to this wonderfully editorialized piece, Powell is talking about wage growth not wages themselves.
Let me explain his remarks a bit more (views not my own, but let me try and more accurate reflect his remarks).
Hiring and wages are increasing sharply/rapidly because the economy is running too hot. Everyone is trying to hire, but there are few/no people to hire. Everyone is trying to hire more because money is flowing and demand is high.
The idea Powell has is: you need to temper demand. Reduced demand means you need less supply, which means fewer vacant jobs. You can still do this at full employment. Fewer jobs means that employers do not need to "overbid" (objection! subjective!) for labour. You'll still pay a bit of a premium, but not as much because your labour shortage isn't so urgent.
Without blowing out the labour budget so badly, prices won't increase so quickly, and so inflation tempers.
Powell's of the opinion that the lowest earners need stability more than they need rapidly increased wages. Not because they shouldn't make more, but because low-income households are more sensitive to price variability (prefer stability), and he doesn't want to see those increase wages simply feed into increased prices.
in fact, Powell talks about how he wants long, expansionary runs and not short-run inflationary runs. Expansion of the economy is good. Inflation is not. It diminishes purchasing power of everyday people, especially those not heavily into inflation-riding securities.
that being said, I think it's a fair criticism that worker wages are not the only component here, as the economist points out. Corporate America is pining for maximum ROI, for both executives and shareholders.
In Europe inflation seems to be primarily been driven by supply shortages, and the rise of food and fuel prices later on. We don´t discuss China often, but they are shutting of complete cities at this moment, driven by the zero-covid policy from Xi (who has committed himself politically to it). This really results in huge production/shipping delays. This comes on top of all the other disruption of supply chains we had in the past covid years.
Normally you rise the interest rate to tamper demand. But one could argue that we have a very special case here at hand, where the problem is on the supply side of things rather than the demand side.
The US might be a bit different here compared to Europe, as the former did inject more money directly into the economy than the latter. But it would be good to investigate what part of the current inflation is driven by too much demand vs which by a shortage of supply.
> Not because they shouldn't make more, but because low-income households are more sensitive to price variability (prefer stability),
Indeed, a Central Bank's main purpose is to provide price stability, and to allow for just a little bit of inflation to keep things going.
That is an excellent way to say that the Fed is looking out for workers by keeping their wages lower when for one of the few times in over three decades, the workers have gained some traction in real terms.
The Fed can do only three things: (1) raise or lower the short term interest rates it charges financial institutions when they borrow from the Fed, (2) raise or lower the short term interest rates it pays financial institutions when they park money with the Fed, and (3) buy and sell US treasury and mortgage agency bonds in the open market. And the Fed does these things to ensure financial and monetary stability.
The OP strikes me as an ideologically driven piece that takes a few quotes from Powell completely out of context and manipulates them to fit a narrative that makes no sense whatsoever given what the Fed is (a central bank) and what it can do (change some rates it pays/charges and trade some government and agency bonds).
To the mods: consider removing the OP. I doubt it fits the HN guidelines.
As anyone can easily confirm, US treasury bonds and agency-backed bonds constitute the vast majority of the ~$9T owned by the Fed today.
During the global financial crisis, I believe the Fed was given permission (by the executive and legislative branches) to purchase other kinds of bonds, so it coulld maintain financial and monetary stability.
Common misconception. The 2008 bail-outs weren't run by the Fed but by Treasury, and they weren't grants, they were loans that have been repaid yielding a $110B profit so far, with more to come. [1]
> Not sure where that fits in your 3 options, but it’s definitely something they’ve been doing, to the tune of trillions of dollars.
As you can see from the composition, 'toxic assets' amounted to a grand total of just 2.9% of the bail-out package ($18.6B). It was a one-off, it wasn't 'trillions of dollars' and it wasn't the Fed.
[0] https://www.federalreserve.gov/releases/h41/current/h41.htm#...
The blog (which dresses itself to look like a news site) is the one-man work an editor of Grayzone, a known mouthpiece of the Kremlin and CCP.
https://en.wikipedia.org/wiki/The_Grayzone
I'm not entirely up to date on my slang but I believe Norton probably fits the term "Tankie", given Grayzone (and by extension, its editors, including Norton) are Uyghur genocide denialists.
Can't they buy corporate debt now, too?
"We can't allow a wage price spiral to happen."
So if you have counter arguments, it would really brighten my day and allow me to see the future a little less dark. Thanks.
What he's actually doing by increasing interest rates is reducing agregate demand, price action goes down, labor demand and vacancies drop and consequently businesses can pay lower wages without fear of losing employees.
So the interest hike is a direct action against inflation while the wage drop is a side effect, not the intended mechanism of action. Inflation can be controlled via interest rates even if, say for contractual or legal reasons, wages stay up. Unlike the case of a recession - that is prolonged by inflexible wages on the way down.
As soon as they stop egregiously manipulating the price of debt - those businesses will fall like dominoes.
Maybe they will push to create a national health system. The poor would go from getting 10-25% of their yearly income from the Feds via various tax give awaysa to actually paying 10-15% of their income. That would cool the economy as you pass higher taxes further up the progressive tax chain. Most middle class members would probably end up paying $10k per year in new taxes.
They could also pass a carbon tax. Energy costs would double or triple. Suddenly the average home would pay $1800 per month to keep their food from spoiling.
Essentially lock large amounts of money into required bills.
Edit: even if 1800 is on the high end, the cost shock of taking an apartment with $250 per month to 500-700 will still put a huge cooling effect on inflation. And yes, large portions of the United States need A/C and more will to cope with climate change. Also think of the cost to businesses of all sizes. Keeping offices, showrooms, and other such buildings will limit hiring and pay raises.
I got a fridge, a freezer, a giant screen a phone, a dyson, an electrical water heater and a computer and various electrical cooking appliances.
I pay $60 a month. Who pays $600? Is that a common price in the US?
in my current 1BR, with great insulation and neighbors above, below, and on both sides, I too pay about $60 for utilities.
Also, that's still far from $600, that's not anymore "preventing your food to spoil", and that's only a few months a year. A/C as well, you don't usually use it in december in most parts of the US.
So yeah, I find this number surprising for a very rich country that should have great infrastructures.
Federal Reserve's FOMC claims to set short term interest rates.
https://www.federalreserve.gov/monetarypolicy/openmarket.htm
What's surprising is that they believe their lever is precise enough to get the number of jobs openings lower without increasing the unemployment rate. He is outlining a best case scenario that would be difficult to achieve under normal situation, let alone that we are just coming out of negative demand shock straight into a negative supply shock, with inflation running above target already.
The central bank let inflation ran a little too hot during the negative demand shock, and inflation expectation has gotten unanchored, and I am not sure if the goldilocks pathway even exist today.
And do they want to give the entire working class a haircut, or is this targeted at certain industries or levels, such as low-skill manufacturing, or are they also talking about doctors and lawyers?
Hold on to the value-holding assets (property), get rid of the immediate costly thing (primarily wages).
More people looking for work means people willing to work for less.
It's imprecise
Likely people who are "easy to replace" get the axe first, but that doesn't mean others don't get affected as well.
Not to attack his credentials, but I think the website picked him to comment on things for a reason. Clicking around the website has a bunch of other questionable material, at least from a neutrality perspective. It is an interesting perspective nevertheless, but not without bias.
That said, i think they removed some important context from the fed's position.
What the chair of the fed is saying is that they want to moderate demand. Less demand means fewer open positions at companies. Fewer open positions means the labour market is not so tight, and so not such an (increasingly) high premium needs to be paid for labour.
Without having to blow out the budget to hire people because you're so desperate, you don't have as raise prices so much to compensate.
He's not talking about getting companies to cut wages. He wants to cut wage growth because it feeds into (in his opinion, mind you) spiraling wages.
You can read the original transcription here: https://www.wsj.com/articles/transcript-fed-chief-powells-po...
To tangentially answer your question: they want to do this because high inflation impacts the working class the most. They need price stability. I don't necessarily disagree mind you that corporate greed is fueling inflation more than minimum wage, but it's probably a both thing versus one or the other.
Only by Nov/Dec 2021 fed realised it had no option but to raise the rates and began messaging its intent. Fed delayed this by at least 2 quarters IMO. Now we are seeing the full impact of it.
Edit: I'm not advocating for or against such a strategy.
If a Fed agency clearly does not satisfy its mandate that it was set out for, then what is the process of ending it? Can the public bring a Supreme Court case against the validity and thus force congress to dissolve? I mean we can't surely expect our incompetent representatives of congress to force any action when there is a revolving door between their sponsors like Citadel/Goldman/Pimco and Fed officials they advise and appoint.
The employment mandate of the Fed wasn’t added until much, much later
You should want high wages and productive workers, domestic production to help ensure fewer supply shocks from an unstable international environment, etc
1. As a Democrat, I frankly don't have faith in the seemingly nonsensical rationale behind much of this administration's fiscal and monetary policy with respect to stagflation (calling for increased taxation on corporations [2]).
2. In reference to Hudson's comments that oil companies are refusing to pump more oil to retain profits, perhaps I can provide some insight: I made some money off WTI oil, and followed the issue for a bit. In short, there's no economic incentive in pumping more oil when domestic production has significantly decreased in recent years due to legislation and declining oil prices. So why restart drilling at closed facilities that'll likely close again due a shift towards more environmentally sustainable energy? Even were they to do so, the period from decision-to-drill to oil-in-a-bucket is at least 6 months [3].
P.S. Amusingly, Biden argues he __wouldn't__ work to depress wages to fight inflation, contrary to the Fed [4].
[1] - https://www.axios.com/2022/05/05/world-not-united-ukraine-re...
[2] - https://www.cnn.com/2022/05/14/business/jeff-bezos-joe-biden...
[3] - https://oilprice.com/Latest-Energy-News/World-News/Shale-CEO...
[4] - https://www.npr.org/2022/05/10/1097891180/biden-names-combat...
The Ukraine-Russia war is an western-imperialism "proxy war"? Putin is trying to reunify, and has before and is now again engaged in ethnic cleansing and wide-scale war atrocities to do so.
Not surprisingly, most of the world takes an extremely dim view of this. The only countries not behind economic sanctions against Russia are almost exclusively countries which are heavily reliant upon Russia's wheat, oil, and/or fertilizer lest they face rioting, starving citizenry within months.
I don't particularly blame those leaders for prioritizing keeping their citizens from starving - but pointing to people who will starve if they piss off Putin and saying "see, the world isn't unified in this proxy war" is either extremely naive or very disingenuous.
https://www.marketplace.org/shows/marketplace/exclusive-jero...
Multipolarista is the new one-man show of Benjamin Norton, who used to be an editor of Grayzone until barely a few months ago. Grayzone was essentially a mouthpiece for Kremlin and CCP talking points and conspiracies, and has apologized for China's ethnic cleansing: https://en.wikipedia.org/wiki/The_Grayzone
It is left as an exercise to the reader why he would leave Grayzone right as economic sanctions kicked in against Russia.
If you want actual informative takes on the situation, I suggest reputable outlets with journalistic standards and editorial review. The Economist, the NY Times, the WaPo, etc...and a friendly reminder that there is a difference between reporting, analysis, and opinion - even on the same site. I found pieces in the Economist both for and against rate hikes, for example.
Accessing these outlets, even if they're paywalled, is likely easy even digitally, from your public library.
Relevant section:
Q: Your level of confidence that you can slow hiring without pushing the economy into a downturn.
MR. POWELL: So I guess I would say it this way. It’s—there’s a path. There’s a path by which we would be able to have demand moderate in the labor market and have—therefore have vacancies come down without unemployment going up, because vacancies are at such an extraordinarily high level. There are 1.9 vacancies for every unemployed person; 11½ million vacancies, 6 million unemployed people. So—and we haven’t been in that place on the vacancy—you know, through the vacancy/unemployed curve, the Beveridge curve. We haven’t been at that sort of level of a ratio in the modern era.
So in principle, it seems as though, by moderating demand, we could see vacancies come down, and as a result—and they could come down fairly significantly and I think put supply and demand at least closer together than they are, and that that would give us a chance to have lower—to get inflation—to get wages down and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that.
Now, I would say I think we have a good chance to have a soft or softish landing, or outcome, if you will. And I’ll give you a couple of reasons for that. One is, households and businesses are in very strong financial shape. You’re looking at, you know, excess savings on balance sheets; excess in the sense that they’re substantially larger than the prior trend. Businesses are in good financial shape. The labor market is, as I mentioned, very, very strong. And so it doesn’t seem to be anywhere close to a downturn.
Therefore, the economy is strong and is well positioned to handle tighter monetary policy. So—but I’ll say I do expect that this will be very challenging. It’s not going to be easy. And it may well depend, of course, on events that are not under our control. But our job is to use our tools to try to achieve that outcome, and that’s what we’re going to do.
Seriously, fuck you Powell.
gotta think about the billionaires first before you respond. the audacity.
All of this QE policy started with Bernanke in the wake of the '08 GFC.
Right now the Fed has to choose between raising rates high enough to stop inflation (probably double digits) and in the process cause a depression in all asset markets or tepidly walk back the tightening and embrace stagflation (in which case, asset markets will go down in real terms, but not in nominal terms).
Either way, I believe we are near the end (<10 years) of the line for the USD reserve fiat regime.
401k/retirees, yes. Homeowners, no. As long as people can afford their mortgages (i.e. employment stays high) I couldn’t care less.
Raising interest rates is literally what Powell is proposing, and has already started carrying out.
Higher interest rates have other effects too. It reduces access to, and increases the cost of, working capital for businesses. This reduces growth and cuts into how much they can spend on employees and will reduce salaries.
> ... and don't want to pay more interest at the government level or on the $8T borrowed in the last decade ...
This is also backwards. High inflation allows the government to get out of paying off the national debt. The national debt has in real-dollar terms gone down significantly in the last two years. [edit] (Debt-to-GDP ratio is down 10% since 2020.)
> Yeah, that's what's best for America.
[edit] In my opinion leaving interest rates low and letting the market set prices of goods where supply meets demand, and incentivizing adding new supply, is the right thing to do. But hey, I'm not on the Fed board, so what do I know.
If that were true there never would have been growth when rates were over 5%. This is all about the wealthy rigging the system to maximize their returns. They're running out of financial instruments to game after decades of lopsided policy designed to shift money into their sphere of control so now they're squirming.
Aren't stock repurchases funded by cash on hand, like Apple does?
0 - https://www.nasdaq.com/articles/apple-shores-up-%2414b-in-de...
1 - https://www.news.com.au/technology/online/security/double-ir...
2 - https://money.cnn.com/2011/02/16/news/companies/repatriation...
3 - https://marketrealist.com/2018/02/cisco-bringing-67-billion-...
https://fortune.com/2019/08/20/stock-buybacks-debt-financed/
https://www.bloomberg.com/news/articles/2019-01-27/debt-fina...
The connection you could make is that by creating generally easy financial conditions like a strong market and low rates, they enabled the atmosphere which promoted the buybacks. But this is far from a direct connection
Sorry to jump on your frustration, but this has always been the point of fed inflation policy <astronaut gun meme>
https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
> It goes like this: even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts.
Fed inflation policy is, and always has been a substitute for pay cuts for laborers.
No, that's Congress' fault, not the Fed. The Fed only controls the denominator. Congress controls the numerator. Inflation-adjusted minimum wage and support for unions would significantly alter the landscape.
Inflation has benefits, too, and it is generally accepted that a low, fixed, predictable inflation rate is the optimal outcome. Generally all the worst periods in history have been deflationary, not inflationary.
“The growth of the Internet will slow drastically… By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.”
In 2002:
"To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."
I wouldn't put too much stock in anything Krugman says.
1. Interest rates are rising and asset prices are starting to decline. Higher rates and decreasing liquidity (where we are at and headed) makes it tough for the rich to generate capital gains & fixed income. Watch how this impacts California in the coming years.
2. Inflation, particularly wage inflation, crushes small businesses. It destroys job creation. This isn't about the Fortune 500, its about main street.
3. We have to compete globally. Inflation at home means our exports are more expensive AND it also means the US Dollar has less buying power for the imports we rely on.
4. 2 of the 8 trillion you're complaining about went to main street businesses and individuals in need. Another 2 or so went to foreign banks to keep the global economic system from collapsing. About 2 trillion more just sits on the Fed balance sheet. The balance went places it shouldn't have... welcome to politics.
What's best for America is to remain competitive with Europe, BRIC nations and other developing countries. The inflation & supply chain stories used to be about the US - but rapidly growing middle classes in other countries demand the same goods you enjoy, have a closer proximity to the source (in supply chain terms), and if you want your standard of living to continue then you're going to have to compete.
Wage cost spirals hurt the poor more than the rich although it hurts everbody.
We already made the mistake. We already printed 4+ Trillion dollars and handed it out in a year. And we did it to mostly cheers from all sides. The time to stop this was then. Now they are going to do what they can to stop the inflation. It's their mandate to do so. So yell at congress not Powell if you don't like it.
This is a very incomplete model. First, the fiscal stimulus and low interest rates created the fastest exit from a depression-level event in modern history. It took about two years to get back to the point of near-complete employment. Historically this would have taken a decade. The Fed and Congress deserve credit for this.
We would be so much worse off right now, facing a massive deflationary spiral and huge unemployment without that stimulus.
The issue isn't that there's a ton of money floating around, although it's not helping. The issue is that there's supply chain issues, fuel, grain and neon shortages due to a land war in Europe. Everything shortages due to COVID zero lockdowns in Shanghai. And the knock-on effects from a hasty and poorly managed exit from lockdowns. The Austin airport literally ran out of avgas a few weeks ago. [1] None of that has anything to do with stimulus and everything to do with high prices.
[1] https://www.aerotime.aero/articles/30609-austin-internationa...
Yelling at the void isn't going to change that.
Then some other stuff nobody could have foreseen (for real who had land war in Europe on their 2022 bingo card) caused a separate and in many ways unrelated crisis. The mistake is blending them together into one just because they happened back to back.
Further, dealing with a massive deflationary spiral and everyone being out of work is fundamentally significantly harder than tackling supply-driven inflation. Inflation rates are already coming down significantly. The last monthly CPI print came in at 3.6% annualized, and month-over-month PPI came in at 0% for services and 1.3% for goods (driven by commodities of course).
You are treating the $4T as a 'liability' without considering what it purchased. You're reading half a balance sheet. Spending can be inflationary or deflationary depending on what it's used for - and so many other factors.
Japan has printed huge quantities of new money since 1990 and their CPI has been ~0% for the last 30 years. [1]