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Americans have such a hatred of inflation they'd rather have a recession
- obvustroweh 2y agoMy employer’s algorithm for 2020-2024 was, I kid you not, “published rate - 2%” for our cost of living raises. I’m willing to gamble they will not lower my wage during a recession, and we’re a small, profitable, fiscally conservative firm. Why not roll the die?
- vasilipupkin 2y agoIt’s not that surprising. Inflation destroys your savings
- consumer451 2y agoAlso, as we have recently seen, a larger than normal inflation rate apparently gives corporations PR cover for raising profit margins across the board.
- tedunangst 2y agoUnemployment can be rough on the savings too.
- bwestergard 2y agoOnly 21% of Americans have more than $5000 in savings. So their employment prospects should matter much more to them on any reasonable analysis. https://www.cnbc.com/2024/01/24/how-much-money-americans-have-in-savings.html https://www.cnbc.com/2024/01/24/how-much-money-americans-hav...
- vasilipupkin 2y agoThe Americans that don’t have any savings don’t necessarily have wages that keep up with inflation either. But also https://www.usatoday.com/story/money/2024/01/14/average-net-worth-1-million-50-year-olds/72177890007/ https://www.usatoday.com/story/money/2024/01/14/average-net-...
- janalsncm 2y agoNote that this statement about Americans’ preferences is not based on any measurement of Americans’ preferences, but is just the opinion of the president of a federal bank.
- bamboozled 2y agoI think the causes are misunderstood, people understand inflation less than the general concept behind a recession? So naturally inflation seems bad because it’s less understood and it makes prices of nearly everything go up.
- jameslk 2y agoThey will have to cut rates, because they can’t keep paying the high interest on the government’s debt[0][1]. There’s no political will to raise taxes and cut government spending (one or the other may happen, but not both)[2]. Keeping rates high on the government’s debt may increase inflation[3]. It’s also part of the Fed’s mandate to maintain employment[4]. Between these factors, it’s more likely rates will be cut. EDIT: Sources 0. https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S 1. https://www.cbo.gov/publication/59014 https://www.cbo.gov/publication/59014 2. This is part of the conjecture that MMT makes, but never pans out in real life. See http://www.thomaspalley.com/docs/articles/macro_theory/mmt_response_to_wray.pdf http://www.thomaspalley.com/docs/articles/macro_theory/mmt_r... 3. https://www.lynalden.com/inflation-vs-interest-rates/ https://www.lynalden.com/inflation-vs-interest-rates/ 4. https://www.investopedia.com/articles/investing/100715/breaking-down-federal-reserves-dual-mandate.asp https://www.investopedia.com/articles/investing/100715/break...
- JumpCrisscross 2y ago> will have to cut rates, because they can’t keep paying the high interest on the government’s debt Not how the Fed works. (And given recent deficits, the Congress isn’t worried.) > Keeping rates high on the government’s debt may increase inflation Nope. This is Erdoganomics. The multiplier effect from credit contraction more than outweighs the new money of marginally-higher rates. > it’s more likely rates will be cut This has been Silicon Valley’s hot take since rates rose. Like yes, eventually they’ll have to come down. (There isn’t much room for them to go up.) But the Fed is far from constrained.
- jameslk 2y ago> Not how the Fed works. (And given recent deficits, the Congress isn’t worried.) Yes I’m aware. It’s the battle between monetary and fiscal policy. So far fiscal policy is winning. > The multiplier effect from credit contraction more than outweighs the new money of marginally-higher rates. Feel free to back that up with a source. I’ve updated my comment with mine.
- labcomputer 2y ago
- GenerocUsername 2y agoInflation feels disconnected from daily choices and even regulation to such a high degree t feels engineered to do so. Of course the commoners with no say in its implementation would reject it.
- lxgr 2y agoI'm pretty sure it's actually a hatred of a decrease in real purchasing power, and... why would anyone not hate that? Personally I'd rather not get a raise at 2% inflation than a 3% raise at 6% inflation, and I don't think that's unreasonably irrational?
- toomuchtodo 2y agoThe problem is current price levels from recent rapid inflation. What would it take to deflate prices without a recession? Without deflation, it will be hard for the electorate to regain the purchasing power they lost. And there will be no recession due to structural demographics in the labor market (10k Boomers retiring per day, ~3.6M per year), regardless of how hard the Fed beats on the economy with the benchmark rate.
- JumpCrisscross 2y ago> problem is price levels. What would it take to deflate prices without a recession? In an economy with borrowing, nothing. Deflation increases the real debt burden. More pointedly: price levels are imaginary. The focus should be on real wages.
- toomuchtodo 2y agoCorporations keep cutting labor costs to attempt to maintain profit levels obtained during ZIRP. Only through organizing will workers have enough collective power to obtain material real wage gains, unless their is a macro lever I am missing (which is entirely possible).
- lxgr 2y ago> In an economy with borrowing, nothing. As long as you're a net borrower, sure. For net savers, it's a bit less pleasant.
- credit_guy 2y agoWell, Kashkari should know better, given he's the president of the Minneapolis Fed. The Fed has a dual mandate (low inflation and low unemployment). Recession avoidance is not part of that mandate.
- fuzzfactor 2y agoI know I would.