Today’s inflation is not a repeat of the 1970s

That pandemic saw a huge reversion in trends towards wage earners away from corporate power due to labor changes from millions of people dying or leaving the workforce due to illness.

In the current era, policy makers seem to be making a characteristic silence on labor force shifts. (And immigration is seeing pushes to diminish supply of labor.)

Also the current era sees historically high levels of market power concentration at the corporate level. Simply, if market power is ceded to an entity then changes in that market are likely caused by those power brokers and they’ll be the ones with the power to make whatever change - all else staying the same.

If I’m wrong then Powell increasing rates will have the desired effects with minimal side effects. Side effects being a sign that “the lever pulled did work but only through secondary effects managing to affect the right underlying factors.” This would signify that interest rates weren’t the best way to address inflation.

If I’m right, then market concentration needs to be directly addressed through regulation and oversight. Empower the workers - the people.

  1 Not enough Housing (where people want and NEED it)
  2 Global politics exacerbating energy shortages
  3 Insufficient supply (generally) for demand

2 & 1 Regulatory changes to make it easier to build within approved project profiles would really help. The US should adopt Japan's style of area zoning and require that nation-wide (though States and more local areas should still decide which areas are zoned what). As would changes that make ALL types of energy production easier to finance and build in PRE-approved configurations. Electric trains, trucks, and cars would really help with insane energy prices caused by unfriendly global oil interests.

1 Housing hasn't kept up with job growth locations of the US, and probably internationally as well, for at least 50 years. This needs market _correction_ level directives and instead of rent-protection skyscraper, middle-sized multi-levels, townhouses, and even some single family sized houses, where they make sense, need to be built.

For example, imagine I were to say, "the US economy is so strong today consumers can afford 7% mortgage rates". This is obviously laughable. The underlying economy isn't strong enough to support anything even close to those kinds of rates, but because of excessive fiscal and monetary stimulus over the last couple of years the consumer has high savings, low debts and extremely low 30-year fixed rate mortgages - the Fed could raise rates to 50% and for a large percentage of US consumers today it would make practically no difference.

Similarly with the US being a consumer economy so long as the consumer is strong businesses are generally going to be fine. Some overleveraged companies might go under, but those with healthy balance sheets will likely do better than ever, keeping the labour market robust.

The problem we have today is that rates are now way too high relative to underlying economic strength, yet are doing close nothing to address the supply / demand imbalances we're seeing. In fact they're at levels so high it wouldn't just slow demand but kill it dead were anyone actually forced borrow at them.

And yes, eventually some people will have unexpected expenses which they'll need to put on credit cards, and from time to time people will need move and be forced to try to afford a mortgage at a much higher rate, but that's going to take quite some time given robust levels of savings and otherwise historically low mortgage servicing costs. https://fred.stlouisfed.org/series/MDSP

I guess what I'm saying is that the Fed has no effective tools to address this. The US consumer is almost completely insensitive to interest rates moves right now. What I'd argue we actually need is fiscal measures such as tax increases and spending cuts to force down economic demand.

Should rates keep rising though (which is likely given the Fed never seems to have any idea what they're doing) then eventually someone's risk model will blow up because these are unprecedented moves we're seeing in the treasury and FX market today. Expect people in developing countries to starve and expect a series of financial crises in developed economies. Of course I hope that doesn't happen and I hope eventually the Fed sees sense, but this does seem to be the path we're on today.

There are no mistakes to be made because the Fed is a talking organization only. It stopped trying to regulate money decades ago. Bank reserves are the only thing it can control, and they have very little effect on the real economy. The Fed raises and lowers interest rates, begins and ends QE, to exactly the opposite effect of what's purported and nobody comments on it.

Here's the real reason this isn't the 1970s: the bond market is telling all of us so. The bond market is telling us that inflation is about to fall and fall hard. The yield curve is inverted all the way up to the 3 month. Inversion has been the norm for months now. Inflation will roll over and the Fed will have had nothing to do with it.

The white collar workers are persisting inflation because they can afford to keep paying whatever it costs to get whatever they need. They can get wage increases commensurate with inflation. Meanwhile, the lower income, ie. The Poors, have no control and just have to endure and suffer with inflation.

The only way we cut inflation is by having mass layoffs of white collar workers. We won't see a recession at all until white collar workers stop spending. Until we see that, we're going to get very sticky 5%+ inflation, and then once layoffs start happening, then a recession will be quick and sharp.

This will be an extremely hard landing for all of us.