Comment by metacritic12 | Hacker News Reader

Comment by metacritic12 | Hacker News Reader

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Easy: just consider the opposite:

> 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.

> 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.

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.

>> There's simply not enough gas right now for everyone. So you can either reduce demand, or you can increase supply.

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.

Pipelines don't add supply, and it is my understanding that oil companies have a lot of unused leases, but that simply drilling is easier said than done. [1]

[1] https://www.npr.org/2022/03/19/1086925726/gas-prices-oil-cru...

Pipelines get production to consumers. A well with non-existent transport is not useful to lowering fuel prices because it needs to get to consumers.

What domestic wells currently have non-existent transport? What pipelines has the Biden administration not approved other than the Keystone XL (which TC Energy abandoned plans for nearly a year ago)?

Without pipelines being planned and built, there will not be new wells. As you said, pipelines are being cancelled.

The government encouraging investment in producing new supplies (either through state-owned firms, or oil investment incentives like what the UK gov't is trying to do) probably is a good thing to do, independently of interest rates. Those targeted policies seem like the right thing to do versus super low interest rates, which sometimes fuel speculative bubbles.

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.

> Prices will go up, which will incentivize adding new supply, and prices will eventually stabilize at a new (albeit higher) rate.

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.

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