OVERVIEW
MANAGEMENT
PERFORMANCE
POSSIBILITIES
CAPITALS
ACTIVITIES
ACTORS
BURGESS
|
FEDERAL RESERVE
POLICY OPTIONS Robert Reich ... The Federal Reserve Is About to Give US Workers the Shaft 
Federal Reserve Building in Washington, D.C. (Photo: Getty/stock photo) Original article: https://www.commondreams.org/views/2022/02/05/federal-reserve-about-give-us-workers-shaft Burgess COMMENTARY I agree with Robert Reich almost all the time ... and today is no exception. I would perhaps be a little more harsh in my critique of the policies of the Federal Reserve than Professor Reich perhaps because I find the role of excessive financialization in the modern economy a very dangerous problem. The banking and finance sector of the modern global economy has had huge benefit from increased financialization over the past 40 years and it is only the financial metrics of the global socio-enviro-economic system that get reported on by the general mainstream media. Most of the well known business schools like Harvard Business School, the Wharton School at University of Pennsylvania and others have been massive enablers of financialization but have done little to address the collateral damage to society and the environment caused by this singular focus on financial performance and benefit to owners. I have been very careful during my career to avoid conflating correlation and causation. The origin of this goes back to my engineering education and the experiments we had to do in the engineering laboratory. In this arena it was all about causation. When I got to study economics I was appalled at the use of statistics which had zero clarity about the difference between cauisation and correlation. I worry that the US Federal Reserve is in a serious bind. I believe Jerome Powell is more lawyer than economist which means he will be able to make a case for whatever the Fed chooses to do, but whether it will hold up in the reality of the modern economic system is another matter. In fact ... along with Robert Reich I think ... that almost all the media's hyperventilating about inflation will turn out to be more than anything another profit opportunity for the business community and its wealthy investors. Modern productivity is amazing, but for the past 40+ years all of this has been converted into investor wealth with NOTHING going to the workers who produce the goods and deliver services. The deafening silence from the 'Captains of Industry' and prosperous banks says something about their comfort level around the status quo, and their intention to do absolutely nothing to address the growing social crisis nor the growing environmental (including climate) crisis. The annual 'talking points' from Larry Fink about investing with purpose in the last couple of years would be funny, if it was not so serious. As a professionally trained Chartered Accountant, I consider modern conventional financial accounting to be no longer 'fit for purpose' in the modern global socio-enviro-economic system. However, I do think that its basic construct is very solid. Accordingly I want to enhance the double entry framework used for financial and economic accountability in such a way that both social impact and environmental impact can be accounted for ... and like double entry accounting for money, the change in the state of society and the state of nature can be accounted for just as the change of state for an economic or business entity is accounted for. Peter Burgess | ||
|
The Federal Reserve Is About to Give US Workers the Shaft
The last thing average working people need is for the Fed to raise interest rates and slow the economy further. The problem most people face isn't inflation. It's a lack of good jobs. ROBERT REICH ... RobertReich.org February 5, 2022 The January jobs report from the Labor Department is heightening fears that a so-called 'tight' labor market is fueling inflation, and therefore the Fed must put on the brakes by raising interest rates. This line of reasoning is totally wrong. Higher interest rates will harm millions of workers who will be involuntarily drafted into the inflation fight by losing jobs or long-overdue pay raises. Among the biggest job gains in January were workers who are normally temporary and paid low wages (leisure and hospitality, retail, transport and warehousing). This January employers cut fewer of these low-wage temp workers than in most years, because of rising customer demand and the difficulties of hiring during Omicron. Due to the Bureau of Labor Statistics's 'seasonal adjustment,' cutting fewer workers than usual for this time of year appears as 'adding lots of jobs.' Fed policymakers are poised to raise interest rates at their March meeting and then continue raising them, in order to slow the economy. They fear that a labor shortage is pushing up wages, which in turn are pushing up prices—and that this wage-price spiral could get out of control. It's a huge mistake. Higher interest rates will harm millions of workers who will be involuntarily drafted into the inflation fight by losing jobs or long-overdue pay raises. There's no 'labor shortage' pushing up wages. There's a shortage of good jobs paying adequate wages to support working families. Raising interest rates will worsen this shortage. There's no 'wage-price spiral,' either (even though Fed chief Jerome Powell has expressed concern about wage hikes pushing up prices). To the contrary, workers' real wages have dropped because of inflation. Even though overall wages have climbed, they've failed to keep up with price increases – making most workers worse off in terms of the purchasing power of their dollars. Wage-price spirals used to be a problem. Remember when John F. Kennedy 'jawboned' steel executives and the United Steel Workers to keep a lid on wages and prices? But such spirals are no longer a problem. That's because the typical worker today has little or no bargaining power. Only 6 percent of private-sector workers are now unionized. A half-century ago, more than a third were. Today, corporations can increase output by outsourcing just about anything anywhere because capital is global. A half-century ago, corporations needing more output had to bargain with their own workers to get it. These changes have shifted power from labor to capital—increasing the share of the economic pie going to profits and shrinking the share going to wages. This power shift ended wage-price spirals. Slowing the economy won't remedy either of the two real causes of today's inflation – continuing worldwide bottlenecks in the supply of goods, and the ease with which big corporations (with record profits) are passing these costs to customers in higher prices. Supply bottlenecks are all around us. (Just take a look at all the ships with billions of dollars of cargo idling outside the Ports of Los Angeles and Long Beach, through which 40 percent of all U.S. seaborne imports flow.) Big corporations have no incentive to absorb the rising costs of such supplies—even with profit margins at their highest level in 70 years. They have enough market power to pass these costs on to consumers, sometimes using inflation to justify even bigger price hikes. 'A little bit of inflation is always good in our business,' the CEO of Kroger said last June. 'What we are very good at is pricing,' the CEO of Colgate-Palmolive added in October. In fact, the Fed's plan to slow the economy is the opposite of what's needed now or in the foreseeable future. COVID is still with us. Even in its wake, we'll be dealing with its damaging consequences for years—everything from long-term COVID, to school children months or years behind. The January jobs report shows that the U.S. economy is still 2.9 million jobs below what it had in February 2020. Given the growth of the US population, it's 4.5 million short of what it would have by now had there been no pandemic. Consumers are almost tapped out. Not only are real (inflation-adjusted) incomes down, but pandemic assistance has ended. Extra jobless benefits are gone. Child tax credits have expired. Rent moratoriums are over. Small wonder consumer spending fell 0.6 percent in December, the first decrease since last February. Many people are understandably gloomy about the future. The University of Michigan consumer sentiment survey plummeted in January to its lowest level since late 2011, back when the economy was trying to recover from the global financial crisis. The Conference Board's index of confidence also dropped in January. Given all this, the last thing average working people need is for the Fed to raise interest rates and slow the economy further. The problem most people face isn't inflation. It's a lack of good jobs. This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License. --------------------------------------------------- We've had enough. The 1% own and operate the corporate media. They are doing everything they can to defend the status quo, squash dissent and protect the wealthy and the powerful. The Common Dreams media model is different. We cover the news that matters to the 99%. Our mission? To inform. To inspire. To ignite change for the common good. How? Nonprofit. Independent. Reader-supported. Free to read. Free to republish. Free to share. With no advertising. No paywalls. No selling of your data. Thousands of small donations fund our newsroom and allow us to continue publishing. Can you chip in? We can't do it without you. Thank you.
| The text being discussed is available at | https://www.commondreams.org/views/2022/02/05/federal-reserve-about-give-us-workers-shaft and |