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james galbraith
The Fed's War on Inflation Is Really an Attack on Workers
The takeaway for American workers: The Fed is not your friend.
Feb 02, 2022
US Federal Reserve Chair Jerome Powell has now committed to putting US monetary policy on a course of rising interest rates, which could boost the short-term rate (on federal funds and treasury bills) by at least 200 basis points by the end of 2024. Thus, Powell yielded to pressure from economists and financiers, resurrecting a playbook that the Fed has followed for 50 years--and that should have remained in its vault.
The stated reason for tightening monetary policy is to "fight inflation." But interest-rate hikes will do nothing to counteract inflation in the short run and will work against price increases in the long run only by bringing on yet another economic crash. Behind the policy is a mysterious theory linking interest rates to the money supply, and the money supply to the price level. This "monetarist" theory goes unstated these days for good reason: it was largely abandoned 40 years ago after it contributed to a financial debacle.
In the late 1970s, monetarists promised that if the Fed would focus only on controlling the supply of money, inflation could be tamed without increasing unemployment. In 1981, Fed Chair Paul Volcker gave it a try. Short-term interest rates soared to 20%, unemployment reached 10%, and Latin America spiraled into a debt crisis that nearly took down all the large New York banks. By the end of 1982, the Fed had backed off.
Since then, there has been almost no inflation to fight, owing to low global commodity prices and the rise of China. But the Fed has periodically shadowboxed with "inflation expectations"--raising rates over time to "preempt" the invisible demons, and then congratulating itself when none appeared.
The shadowboxing also ends badly. Once borrowers know that rates are going up over time, they tend to load up on cheap debt, fueling speculative booms in real assets (like land) and fake assets (like 1990s internet start-ups, 2000s subprime mortgages, and now cryptocurrencies). Meanwhile, long-term interest rates remain unmoved, so the yield curve flattens or even becomes inverted, eventually causing credit markets and the economy to fail. We now will likely see this feedback loop once again.
Of course, this time is different in one respect. For the first time in more than 40 years, prices are rising. This new phase was kicked off a year ago by a surge in world oil prices, followed by rising used-car prices as the semiconductor supply chain snarled automobile production. Now, we are also seeing rising land prices (among other things), which feeds into (somewhat artificial) estimates of housing costs.
Inflation rates are reported on a 12-month basis, so once any shock hits, it is guaranteed to generate headlines about "inflation" for 11 more months--a boon for the inflation hawks. But since oil prices in December were about the same as they were in July, the initial shock will be out of the data in a few months and the inflation reports will change.
True, the effect of more expensive energy will continue to percolate through the system. That's unavoidable. Whenever there is a structural change like an increase in energy costs or a reshoring of parts of the supply chain, "inflation" is inevitable and necessary. To hold average price increases to the previous target, some other prices would have to fall, and that generally doesn't happen. The economy always adjusts through an increase in average prices, and this process must continue until the adjustment is finished.
By reacting now, the Fed is saying that it would like (if it could) to force down some prices in order to offset rising energy and supply-chain costs, thereby pushing the average inflation rate back down to its 2% target as quickly as possible. Assuming the Fed understands that this is what it is doing, what prices does it have in mind? Wages, of course. What else is there?
Powell himself declared that the United States has a "tremendously strong labor market." Citing the ratio of job openings against "quits," he thinks there are too few workers chasing too many jobs. But why would that be? Considering that the US economy is still several million jobs below the actual employment levels of late 2019, it seems that many workers are refusing to go back to crummy jobs at lousy pay. As long as they have some reserves and can hold out for better terms, they will.
As wages rise to bring back workers, and because most jobs nowadays are in services, higher-income people (who buy more services) will have to pay more to lower-income people (who provide them). This is the essence of "inflation" in a services economy. Energy and most goods prices are set worldwide, so service wages are the only part of the price structure that the Fed's new policy can affect directly. And the only way the policy can work--eventually--is by making working Americans desperate. Obviously, logically, inevitably, and despite all the crocodile tears about inflation harming ordinary Americans, the Fed is determined to stop rising wages.
The takeaway for American workers: The Fed is not your friend. Nor is any politician who declares--as US President Joe Biden did this month--that "inflation is the Fed's job." And I write that as a Democrat.
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To Stop Far-Reaching Threat of Bolsonaro, 300+ Economists Sign Joint Declaration to Defend Brazil's Democracy
"We believe that democracy, search for peace, individual freedoms, plurality of opinions, tackling prejudice and inequalities (of income, race, regional and gender) are non-negotiable and essential values."
Oct 22, 2018
Faced with the looming threat that right-wing candidate Jair Bolsonaro could soon win the second-round of elections and become the next president of Brazil, hundreds of economists from across the country and around the globe have joined forces to declare their support for Fernando Haddad, the Workers' Party candidate, in order to save the nation's democracy and protect "essential values" like social inclusion, peace, and equal protection under the law.
"We believe that democracy, search for peace, individual freedoms, plurality of opinions, tackling prejudice and inequalities (of income, race, regional and gender) are non-negotiable and essential values." --Declaration of Economists in Support of Brazilian Democracy While not all signers of the declaration against Bolsonaro necessarily agree with every bit of Haddad's economic plan, they warn that a victory by the nation's regressive and far-right forces puts "Brazilian democracy and the institutions of the rule of Law" at stake.
According to Brazilian-American social scientist Luisa Abbott Galvao in a piece posted to Common Dreams Monday, the Bolsonaro campaign was built on his "disdain for democracy and glorification of authoritarianism."
The candidate, Galvao explained, has "gained infamy worldwide for past comments praising torturers and for asserting during a 1999 televised appearance that the Brazilian dictatorship should have executed 'at least 30,000' people. As a presidential candidate, Bolsonaro has called for political opponents to be shot, promised to deny the legitimacy of any election results that don't declare him the winner, and refused to partake in debates ahead of the general elections."
Additionally worrying, she added, is the manner in which the preferred candidate of the nation's wealthy and powerful elite "has capitalized on Brazil's deep economic and social inequality to push for an agenda that will undoubtedly drive even bigger rifts into the Brazilian socioeconomic fabric and further disenfranchise the country's most vulnerable people."
Posted in Portuguese here and in English below, the declaration signed by the hundreds of economists states: "We believe that democracy, search for peace, individual freedoms, plurality of opinions, tackling prejudice and inequalities (of income, race, regional and gender) are non-negotiable and essential values."
Read the full declaration and list of signatories below.
Declaration of Economists in Support of Brazilian Democracy
The signatories of this declaration have varying positions on economics; some, in fact, are outright critics of the economic policy adopted by the Workers' Party (PT) administrations. That said, what is at stake now is Brazilian democracy and the institutions of the Rule of Law.
We believe that democracy, search for peace, individual freedoms, plurality of opinions, tackling prejudice and inequalities (of income, race, regional and gender) are non-negotiable and essential values.
Therefore, it is imperative to have a position regarding the choice of the next Brazilian President. Fernando Haddad is, in this second round, the best alternative to ensure respect for these values.
We accordingly sign this declaration in support of his candidacy for political and economic stability, environmentally-sustainable development, social inclusion, and the fight against corruption. To ensure these democratic ends, we will maintain a critical and vigilant stance towards the elected government of Brazil in 2018.
Economistas que atuam no Brasil - Adesoes iniciais
Andre M. Cunha
Andre Nassif
Adriana Amado
Andre Chagas
Andre Roncaglia
Antonio Correa de Lacerda
Arthur Amorim Braganca
Bernard Appy
Carlos Eduardo Carvalho
Carmen Feijo
Cristina Froes de Borja Reis
Daniel Cerqueira
Daniela Magalhaes Prates
Dante Aldrighi
Darlene Dias
David Kupfer
Eduardo Correia de Souza
Eliane Cristina Araujo
Esther Dweck
Eustaquio Reis
Fernanda G. Cardoso
Frederico Gonzaga Jayme Jr.
Geraldo Biasoto Jr.
Gilberto Tadeu Lima
Hedibert Freitas Lopes
Joaquim P. Andrade
Joao Sayad
Jose Heleno Faro
Jose Luis Oreiro
Jose Roberto Afonso
Julio Sergio Gomes de Almeida
Laura Carvalho
Leda Maria Paulani
Lena Lavinas
Leonardo Weller
Lucia Helena Salgado
Luciano Coutinho
Luiz Carlos Bresser Pereira
Luiz Gonzaga de Mello Belluzzo
Luiz Fernando de Paula
Manoel Carlos de Castro Pires
Marcia Bezerra
Marcio Favilla Lucca de Paula
Maria Luiza Falcao
Maria Sylvia Saes
Marta Castilho
Mauro Boianovsky
Monica Viegas
Naercio Aquino Menezes Filho
Nelson Marconi
Nelson Henrique Barbosa Filho
Paulo Furquim de Azevedo
Paulo Nogueira Batista Jr.
Ramon Garcia Fernandez
Reynaldo Fernandes
Ricardo Carneiro
Rudinei Toneto Jr
Sergio Gobetti
Thiago Fonseca Morello
Economistas que atuam no Brasil
Aderbal Oliveira Damasceno
Adhemar Mineiro
Adriana Nunes Ferreira
Adroaldo Quintela
Afranio Garcia Jr.
Alberto Di Sabbato
Alain Herscovici
Alexis Toribio Dantas
Aline Souza Magalhaes
Amanda de Albuquerque
Ana Celia Castro
AnaCecilia Milagres
Ana Flavia Machado
Ana Maria Hermeto C. de Oliveira
Ana Urraca Ruiz
Andre Martins Biancarelli
Andre de Melo Modenesi
Andre Mourthe de Oliveira
Andre Nassif
Andrea Simone Rente Leao
Andres Ferrari Haines
Anna Mortara
Beatriz Macchione Saes
Bernardo P. Campolina Diniz
Betty Nogueira Rocha
Biancca Castro
Bruno M. de Conti
Camila Kimie Ugino
Carolina T. Baltar
Carlos A. Medeiros
Carlos Gadelha
Carlos Henrique Lopes Rodrigues
Carlos Mielitz
Cassio Garcia Ribeiro
Clelio Campolina Diniz
Cristiane Garcez
Cristina Lemos
Daniele da Rocha Faria
Debora Freire
Denis Maracci Gimenez
Denise Gentil
Ebenezer Pereira Couto
Edison Rodrigues Barreto Jr
Eduardo Costa Pinto
Elena Soihet
Eliana Ribeiro da Silva
Eneas G. de Carvalho
Ernani Torres
Fabio Sa Earp
Fabio Terra
Fabricio Missio
Flavio Azevedo Marques de Saes
Fernando Amorim Teixeira
Francisco de Assis Costa
Francisco Luiz C. Lopreato
Frederico Mazzucchelli
Gabriela Freitas da Cruz
George Flexor
Gilberto de Assis Libanio
Guilherme Delgado
Guilherme Grandi
Gustavo Britto
Helena Lastres
Henrique Tahan Novaes
Hugo Eduardo A. da G. Cerqueira
Igor Briguiet
Ilmar Ferreira Silva
Isabela Nogueira
Jennifer Hermann
Joao Hallak Neto
Joao Romero
Joao Saboia
Jose Carlos Braga
Jose Celso Cardoso Jr
Jose Eduardo Cassiolato
Jose Gabriel Porcile Meirelles
Jose Jorge Gebara
Jose Sergio Leite Lopes
Kaio Vital da Costa
Karina Kato
Laura Schiavon
Lauro Mattei
Leon Santiago Mendes Suhett
Leonardo Marco Muls
Lilian Nogueira Rolim
Lourival Batista de Oliveira Junior
Luiz Antonio Elias
Luiz Martins de Melo
Mauro Boianovsky
Marcos Antonio Macedo Cintra
Marcelo Miterhof
Marcio Wohlers
Margarita Silvia Olivera
Margarida Batista
Maria Antonieta Del Tedesco Lins
Maria Carolina Capistrano
Maria Cristina Penido de Freitas
Maria de Lourdes Rollemberg Mollo
Maria Luiza Falcao Silva
Maria Luiza Levi
Mariana Ribeiro Jansen Ferreira
Marina Sequetto Pereira
Mario Marcos Sampaio Rodarte
Maryse Farhi
Mateus Girafa Lachtermacher
Mauricio Borges Lemos
Mauricio Muniz
Mauro Arruda
Mauro Osorio
Miguel Bruno
Milena Fernandes de Oliveira
Nathalia Crissia Posena
Niemeyer Almeida Filho
Nilson Maciel de Paula
Nina Quintanilha Araujo
Norberto Montani Martins
Paula Alexandra Nazareth
Paulo Baltar
Paulo Guimaraes
Paulo Sergio Fracalanza
Pedro Amaral
Peter May
Raquel A. Ramos
Renata Lebre La Rovere
Renata Lins
Rene de Carvalho
Ricardo Henriques
Ricardo Machado Ruiz
Ricardo Meilman Cohn
Ricardo Schaeffer
Roberto Vermulm
Rogerio Gomes
Sandro Augusto Viegas Leao
Simone Deos
Thiago Mandarino
Ulisses Pereira dos Santos
Vitor Pereira
Walter Tadahiro Shima
Wilnes Henrique
Zina Angelica Caceres Benavides
Economistas que atuam no exterior
George Akerlof, USA - Premio Nobel em Economia, 2001
Adam Aboobaker , USA
Agnes Labrousse, Franca
Ajit Zacharias, USA
Alan Cibils, Argentina
Alberto Botta, UK
Alessandro Caiani, Italia
Alexander Guschanski, UK
Alfredo Saad Filho, UK
Amit Bhaduri, India
Amitava Krishna Dutt, USA
Andrea Califano , Italia
Andrea Roventini, Italia
Angel Vilarino Sanz, Espanha
Anne Eydoux, Franca
Annina Kaltenbunner, UK
Antoine Mandel, Franca
Antonella Stirati, Italia
Avinash Persaud, UK
Barbara Fritz , Alemanha
Bernhard Leubolt, Belgica
Bhola Khan, Nigeria
Bill Black, USA
Brittany Nicole McGhee, Alemanha
Bruno Bonizzi, UK
Bruno Theret, Franca
Byasdeb Dasgupta, India
C.P. Chandrasekhar, India
Carlo D'Ippoliti, Italia
Carlos A. Carrasco, Mexico
Carlos Mielitz, Italia
Carmen Diana Deere, USA
Christian Gehrke, Austria
Claire Pignol, Franca
Dani Rodrik, USA
Daria Pignalosa, Italia
Dominique Plihon
Edwin Le Heron, Franca
Eileen Appelbaum, USA
Eric Berr, Franca
Eugenio Caverzasi, Italia
Federico Tamagni, Italia
Fiona Tregenna, Africa do Sul
Francisco Louca, Portugal
Fred Mosseley, UK
Frido Wenten, UK
Gary Dymski, UK
Gennaro Zezza, Italia
Gerald Epstein, USA
Giorgio Fagiolo, Italia
Giovanni Villavicencio, Mexico
Ha-Joon Chang, UK
Hee-Young Shin, USA
Hulya Dagdeviren, UK
Heinz D. Kurz, Austria
Ilhan Dogus, Alemanha
Ilias Alami, Holanda
Imko Meyenburg, UK
Ingo Schmidt, Canada
Isabel Ortiz, USA
Ivan Velasquez, USA
Jaime Marques Pereira
Jaime Ros, Mexico
James Galbraith, USA
Jan Kregel, USA
Jan Priewe, Alemanha
Jayati Ghosh, India
Jean-Francois Ponsot, Franca
Jeff Madrick, USA
Jessica Sklair, UK
John Hall, USA
John Williamson, USA
John Willoughby, USA
Jonathan Marie, Franca
Jorge Buzaglo, Suecia
Jorge Garcia-Arias, Espanha
Jorim Gerrard, Franca
Jose Gabriel Palma, UK
Juan Grigera, Argentina
Julimar Bichara, Espanha
Kevin Costa, Franca
Lance Taylor, USA
Leonardo E. Stanley, Argentina
Leslie Carnoye, Franca
Lionello Franco Punzo, Italia
Louison Cahen-Fourot, Austria
Luana Ladu, Alemanha
Luca Zamparelli, Italia
Luis Bertola, Uruguay
Machiko Nissanke, UK
Manfred Max-Nee, Chile
Marco Mazzoli, Italia
Marco Missaglia, Italia
Marco Valente, Italia
Margarida Antunes, Portugal
Maria Cristina Barbieri Goes, Italia
Maria Cristina Marcuzzo, Italia
Maria Savona, UK
Marianna Mazzucato, UK
Mario Cassetti, Italia
Mario Tonveronachi, Italia
Mark Setterfield, USA
Mark Weisbrot, USA
Mary C. King, USA
Martha Carro Fernandez, Espanha
Mathieu Beraud, Franca
Matias Vernengo, USA
Matteo Deleidi, Italia
Matthieu Montalban, Franca
Maurin Masselin, Franca
Mauro gallegati, Italia
Mauro Napoletano, Franca
Mauro Virgino de Sena e Silva, Inglaterra
Megan Ward, Alemanha
Michel Heinrich, Alemanha
Michael Lipton, UK
Michael Meeropol, USA
Michael Roberts, UK
Mogens Ove Madsen, Dinamarca
Monika Meireles, Mexico
Mritiunjoy Mohanty, India
Murat Yildizoglu, Franca
Natalya Naqvi, UK
Nathalie Coutinet, Franca
Nicolas Piluso, Franca
Nicolette Cattaneo, Africa do Sul
Nikolaos Karagiannis, USA
Noemi Levy Orlik, Mexico
Oscar Ugarteche, Mexico
Ozlem Onaran, UK
Patricia E. Perkins, Canada
Patrick Bond, Africa do Sul
Paul Hudson, USA
Paul Mason, UK
Peter Dorman, USA
Philip Arestis, UK
Philippe Lege, Franca
Pierre Salama, Franca
Stephany Griffith-Jones, UK
Richard Parker, USA
Robert A. Blecker, USA
Roberto Frenkel, Argentina
Robert Guttmann, Franca
Roberto Veneziani, UK
Robin Hahnel, USA
Robin King , USA
Rodrigo Adao, USA
Sebastian Gechert, Alemanha
Sergio Cesaratto, Italia
Steven Fazzari , USA
Sunanda Sen, India
Susanne Soederberg, Canada
Terry McKinley, UK
Thierry Kirat, Franca
Thomas Palley, USA
Thorvaldur Gylfason, Islandia
Torsten Niechoj, Alemanha
Valpy FitzGerald, UK
Venkatesh Athreya, India
Victor Manuel Isidro Luna, Mexico
Yanis Varoufakis, Grecia
Yilmaz Akyuz, Suica
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What Do Those People Want?
It's simple: progress.
Jun 20, 2018
Where is the Democratic Party? The Party of the People is stuck in the status quo--- the still reigning, old-line hierarchy of the Democratic party is unwilling to just be dedicated to well, to the democratic interests of its own political base. People know from real-life experience that the economy has been rigged against them for the benefit of the uber-rich and the political system has been totally corrupted by the bipartisan pay-to-play ethic that protects the status quo from interference by us commoners. While Republicans are a wholly-owned corporate subsidiary, unabashedly dedicated the narrow interests of the moneyed elites, the Dems' congressional elders, key party officials, entrenched consultants and corporate funders continue to push bland, business-as-usual candidates running on a pusillanimous policy agenda of vague "reforms" that don't actually change anything. Then the party establishment wonders why such people stray or stay home in November!
What do those people want?
Progress! Meaning a national commitment to advance the economic, political and social circumstances of the American majority of workday families and poor people. Yes, that requires major change, and that will definitely make powerful enemies among wealthy elites plotting to impose Koch-style plutocratic rule over our society. Nonetheless, most voters want BIG populist changes in government policy that will lift up average Americans and hold down corporate greed and abuse.
One major proposal to do just that is an 11-point Economic Agenda for America's Future, initiated by a broad coalition of some 80 progressive thinkers and doers. Coordinated by Roger Hickey of the Campaign for America's Future and Larry Cohen, a renowned labor agitator who chairs the board of Our Revolution, this document is both a to-do list for restoring economic democracy and a rallying cry to move today's burgeoning democratic movement from mere resistance to insistence on a new percolate-up alternative to Republican/Democratic trickle-down economics.
As Hickey notes, "If Trump and the GOP majority in Congress were to disappear tomorrow, our society would still face the challenge of restructuring our economy -- after many decades of leaders allowing inequality to spread and letting our public infrastructure fall apart." The agenda draws from the solid analyses of America's widening inequality by such esteemed economists as Joseph Stiglitz, Thea Lee, James Galbraith, Robert Pollin and Dedrick Asante-Muhammed.
The document builds on the remarkably progressive 2016 Democratic Party Platform, which was largely hammered out between Bernie Sanders delegates and progressives in Hillary Clinton's camp. Their good work quickly got lost in the general election debate, because the Democratic establishment's campaign strategists didn't like the platform's powerful message of populist change. So, they ignored it, choosing instead the negative message that Clinton was "Not Trump."
The drafters of the economic agenda, however, saw the enormous political value of much of that discarded platform, both in its populist appeal and in the fact that it had been produced as a progressive unity document. ("We are not interested in re-fighting the 2016 election," says Hickey). So, they used it to enlist former backers of Sanders and Clinton to help resurrect, refine and expand it into a manifesto we can carry anywhere as a clean summary of our goals.
Process aside, what we have here is a worthy and timely program of economic renewal for our democratic movement. Rather than a flashy wish list of grand schemes, the agenda is a concise presentation of bread-and-butter ideas and basic rights that various progressive activists have long supported, and several of the items have even been implemented by some cities and a few states. Also, its drafters and initial co-signers do not pretend that this is the ultimate populist program, but a starting point for others to consider and improve, creating a well-marked political map that will show the larger public a way to put our nation back on the path to good middle-class jobs, economic justice and sustainable prosperity for all. You can read and sign on to this progressive "people's" agenda at CampaignForAmericasFuture.org.
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