Fed signals higher unemployment rate might be necessary to tame inflation | Hacker News Reader

Fed signals higher unemployment rate might be necessary to tame inflation

wsj.com

21 pointsdonsupreme39 comments

Instead of making poor people poorer, why not tackle some structural issues.

Like, why does a poor person have to go into debt by 15K USD at 15% interest rate to buy a car just to work a job that pays 15-20USD/hr? This is financial lunacy.

How can cities afford to service such spread out metro areas? The police have to burn fuel to cover everywhere. Why force stores in denser areas to have so much empty, ugly parking spaces? Why not let stores pick how much parking they want to have?

We need a fleet of school buses to shuttle kids to schools. Why can't kids just ride a bicycle, walk, or talk a public bus? This is insane, especially in cities as dense as Miami.

China has much better ROI on their people, infrastructure than the US. Density or no density, I don't see how the US stays competitive wasting so much money on fluff like gigantic SUVs and huge green lawns that serve no purpose other than some e-peen contest.

I think more than anything, I am seeing a kind of defeatism in people defending this car-centric status quo. "This is the way it is, so it has to stay that way by force of law." Just let go...

You do not need to go to China. Most of Europe (if not all) is totally different in that sense to the US. There are possibly some exceptions but not so many.

One answer is that a poor person should not being buying a 15k USD car.

$15k gets you a reasonable quality used car that you (hopefully) won't have to get serviced every month.

The next argument I usually see is: "Do your own service"

For the poor, they don't have the time to spend on servicing their car on a regular basis. They've already traded all the time they have towards making money to live.

It's a trap, being poor.

And how do poor people get to work? Most poor people cannot generate cash flow without a car, no? Cities de-prioritized non-car commuters decades ago.

Shall the US re-prioritize non-car commuters?

A $5k car?

Bad title on HN. The article and it's title don't say anything like that.

Current title on HN is 'Fed signals high unemployment rate is now “necessary” to tame inflation'.

The first sentence sentence of the article: "Federal Reserve officials are beginning to signal that higher unemployment rates might be a necessary consequence of their efforts to damp inflation by raising interest rates."

Actual article title is: "Higher Unemployment Rate Looms as the Fed Fights Inflation"

Higher != High

If people having money is driving up costs, why not just go after the 600 billionaires rather than the millions of others?

Because when you try to increase taxes on income and capital for the rich, the very rich always manage to loophole their way out of it and the middle class gets screwed over. Guess who votes?

Plus the very rich, the ones meant here, don't represent a decent part of the total. What you will effectivly destroy, going after "income and capital for the rich", first and foremost, are pensions.

That's where the majority of FANG (and other) profits go to: paying people's pensions.

I'm not sure I follow. Even if what you say is true, government with sovereign currencies can tax the capital and still pay out just as generous pensions. They just have to tax capital even harder to keep inflation at bay. No?

Basically if you look at taxation as a way to destroy money, and then you focus taxation on things you want to discourage (too high concentration of capital, unhealthy habits, environmental impact, etc.) you can incentivise and disincentivise whatever you want.

That is a shamefully edited headline. The word used is "higher" not "high". Unemployment is near all-time lows. Having it creep to something in the 4-5% range is a completely acceptable price for lower inflation.

Wait - so unemployment is bad. Unless enough people have jobs, then it's good?

I'm not going to claim I understand economics, what sort of voodoo nonsense is this?

It's a simply consequence of their need to raise interest rates to control inflation. If you make it harder to get loans, businesses will reduce expansion plans which in turn causes an increase in unemployment. The goal is to balance the two and tame inflation without unemploying millions.

I'm not sure how much of this was avoidable but it is the current state of the US economy.

From what I can understand, it seems that this is only true if you consider increased wealth concentration the primary purpose of the economy.

They're not saying it's good as much as it's acceptable given the inflationary pressures attributable to cheap money and the labor shortage. Right now employment is bumping up against a hard boundary and it's creating stress on businesses. Higher rates will slow investment, reduce hiring and reduce prices. The Fed is aiming for a middle ground where they can slow inflation knowing that will unemployment will tick up, but ideally just a smidge.

We're probably pushing over the edge of "full employment" right now and backing off a little bit will be a net win for the country with a small amount of losers. https://en.wikipedia.org/wiki/Full_employment

> Wait - so unemployment is bad. Unless enough people have jobs, then it's good?

Yes.

The ideal amount of unemployment isn't zero. People quit jobs and move to new cities (sometimes following their spouse who gets a new job) and then look for work there. People upgrade their skills. There are a lot of reasons people might temporarily be unemployed. If they don't have the freedom to do those things, that's bad.

If the unemployment rate is zero, that also means that there are jobs that literally cannot be filled and are not being done. That's bad too.

Obviously, an unemployment rate of 20% is also bad.

Zero unemployment causes wages to go up fast as employers must constantly outbid each other for workers. This is bad in a theoretically efficient market because each employer is already running at maximum efficiency and every job is necessary, so there's no slack in the system. In the real world with super high executive pay, massive inefficiency, and massive employment of exploited, underpaid immigrant labor, it's less of a problem.

> If the unemployment rate is zero, that also means that there are jobs that literally cannot be filled and are not being done. That's bad too.

Well... I'd argue that depends on which jobs it is that goes unfilled. I'm sure many people here have worked jobs that would be better off not done.

If there are too many jobs that need doing, do you think the undone jobs are janitorial at minimum wage or shuffling papers in an office for substantially more?

This is overly reductionist. Economics, like life, is complex and situational.

Lack of water can kill, too much water can kill. This isn't voodoo nonsense.

> Wait - so unemployment is bad. Unless enough people have jobs, then it's good?

Is that surprising? eg.

"Wait - so under-eating is bad. Unless you're overweight, then it's good?"

I guess I'm trying to understand why we need some people to not have jobs, and also why the same people who say this fight so hard against helping folks in bad spots. If having unemployment is so important, why does everyone treat the unemployed as morally inferior - it's clearly a vital economic function.

edit: to put it another way - (extending your metaphor) who is doing the eating of us normal workers? Why am I someone's food?

So the rest work harder, which means less dollars for more work, which makes prices go down (or rather: not rise quite as quickly). Banks can't fix things, they can just cause more pain on poor people, so they fix things.

That inflation is mostly caused by oil prices, and no amount of extra work by people will make oil prices drop ... This is why we've had recessions before, this is why it's happening now ... is something the central banks or government cannot influence, and therefore this "cannot" be the cause (granted, this is true but doesn't provide a solution, so from a utilitarian perspective one might agree with this).

The FED is making things worse, but hasn't yet been sufficiently scared into turning things around. The stock market is only ~20% down, and they usually turn things around at about a 35% drop. So we're already past the halfway point, and FANGs (except FB/META) are holding out quite well, so they seem to be safe harbors.

Nobody is excited about increasing unemployment, and you don't always need more unemployment to tame inflation.

The idea is that in the specific current situation of inflation disaster, measures required to tame inflation maybe required.

Like a infection, first line of defense is antibiotics, but if you wind up in a bad situation, you may need to take a more harmful response like amputation.

So who is going to be the ones who have to suffer for it?

I'm guessing its not the folks who could afford a stint unemployed that will be asked to do vital economic functions. I wonder how many people y'all are going to kill for your inflation woes.

I get it though, all these people who just got jobs and who just moved to better jobs are way too uppity and need to be put down. Heaven forbid they do anything that isn't worry about paying for a slightly comfortable life. Good for you, helping to put those hard working folks in their place - they don't need anything other than stress and worry and work.

Who do you think is hurt by inflation? Largely the same people hurt by unemployment.

Someone with a million dollar mortgage and inflation proof investments is probably cheering on inflation.

A family struggling to buy food and shoes for their children suffers from inflation.

A family is going to struggle a lot more when they can't get a fucking job.

I agree, it is just a question of balancing numbers. Is it better for a 100 families to struggle with costs, 1,000, ect

I dont think anyone is trying to argue that unemployment is a good thing in an absolute sense.

Unemployment is linked with mortality: https://www.weforum.org/agenda/2015/02/the-link-between-unem...

What they're really signaling is that they think people need to die.

Real income is also linked with mortality, so there is obviously a tradeoff here.

If prices go up, people will die. If unemployment goes up people will die.

Economic wellbeing matters.

HN: right about two of the last twelve rece… three of the last thirteen recessions…

This rhetoric is crazy from the Fed; unemployment rate needs to go up, wages need to go down, but never a mention of all the unnecessarily printed money or obscene wealth inequality...

How exactly are we in a position where the highest chairs of an ostensibly democratic society can just condemn the vast majority of the populace to a stressful, slave-like existence? It truly feels to me like the end game of the elite is being played out, and capitalism has become a caste system. Socioeconomic mobility is dead, and the flogging of those at the bottom isn't even disguised anymore.

"The plebs think high prices are bad?! High prices?! Let's see how they like high prices and no job!"

The end goal, of course, is serfdom under a government benefits system.

Have you ever considered that the FED just really doesn't know what it's doing? Their track record clearly shows they are shooting in the dark on every policy decision they make. The economy is an extremely volatile, unpredictable, and sensitive system.

I doubt the grand conspiracy theories about the FED. As they say, "never attribute to malice what can be attributed to..."

On the other hand, one might just as easily say "Never attribute to incompetence that which can be explained by corruption." In eastern europe this worldview is taken for granted, and is largely accurate. While the west seems less corrupt on many fronts, to a large degree people are just better at hiding it—instead of doing it out in the open, things are revealed years after the fact by whistleblowers.

Sure but thats not much better! Like either there is grand conspiratorial malice, total incompetence, or the classic 'actually, this is how its supposed to work'.

Honestly a toss up to me which of these three is the worst. And I don't think my criticisms or diagnoses would change that much for any of them. I feel in fact that they are all probably true and connected. One person's incompetence probably stems from another's malice, which itself stems from the possible actions and consequences a given system provides and authorizes.

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