Seeing as the government considers deflation to be not an option, the only practical fix to the crisis is a general wage gain across the entire workforce equivalent to the inflation we’ve been seeing the past couple of years. More, really, seeing as inequality had been growing prior to the pandemic as well. Prices are not going to go down. And if deflation is threatening to occur, the government will move heaven and earth to stop that from happening. Ergo, wages need to go up.
Or maybe we could move away from this irrational system, but one step at a time, I suppose.
In the US, the fed’s stated strategy is to keep wages down. It does not have a lot of tools to deal with inflation, so it raises interest rates to inhibit growth until inflation is under control- the “soft landing.” Legislation is needed in order to handle this problem, because wages will quickly be absorbed by increasing prices unless we can capture corporate profits with progressive taxation. I imagine the situation is similar in Canada but I’m not well aware. Remember to vote.
In the US, the fed’s stated strategy is to keep wages down.
It’s not their stated strategy but it’s probably safe to assume they subscribe to the baseless “wage price spiral.” The bottom line is that there is still a LOT of stimulus money circulating, keeping inflation high. Ideally this would be targeted with a tax on the wealthy, but in the absence of that, the Fed has to use their very blunt tools. I don’t see inflation improving until there’s a recession.
“By moderating demand, we could see vacancies come down, and as a result—and they could come down fairly significantly and I think put supply and demand at least closer together than they are, and that that would give us a chance to have lower—to get inflation—to get wages down and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that,”
Jerome Powell, chairman of the US Federal Reserve, May 4th, 2022
So minor correction on my part if we’re being very particular, and sometimes that’s important. ‘Get wages down’ could have different implications than ‘keep wages down’. Elsewhere, he mentions wage growth being a good thing, however it is (at the time of the press conference) growing much faster than their target inflation rate.
Seeing as the government considers deflation to be not an option, the only practical fix to the crisis is a general wage gain across the entire workforce equivalent to the inflation we’ve been seeing the past couple of years. More, really, seeing as inequality had been growing prior to the pandemic as well. Prices are not going to go down. And if deflation is threatening to occur, the government will move heaven and earth to stop that from happening. Ergo, wages need to go up.
Or maybe we could move away from this irrational system, but one step at a time, I suppose.
In the US, the fed’s stated strategy is to keep wages down. It does not have a lot of tools to deal with inflation, so it raises interest rates to inhibit growth until inflation is under control- the “soft landing.” Legislation is needed in order to handle this problem, because wages will quickly be absorbed by increasing prices unless we can capture corporate profits with progressive taxation. I imagine the situation is similar in Canada but I’m not well aware. Remember to vote.
It’s not their stated strategy but it’s probably safe to assume they subscribe to the baseless “wage price spiral.” The bottom line is that there is still a LOT of stimulus money circulating, keeping inflation high. Ideally this would be targeted with a tax on the wealthy, but in the absence of that, the Fed has to use their very blunt tools. I don’t see inflation improving until there’s a recession.
Jerome Powell, chairman of the US Federal Reserve, May 4th, 2022
https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220504.pdf
So minor correction on my part if we’re being very particular, and sometimes that’s important. ‘Get wages down’ could have different implications than ‘keep wages down’. Elsewhere, he mentions wage growth being a good thing, however it is (at the time of the press conference) growing much faster than their target inflation rate.
Thanks. Yeah he definitely subscribes to the Wall Street belief that wages are driving inflation.