...and here we go (again!) in the U.S., with Powell's latest hike, amidst banks continuing to fall like dominoes... and getting fire-sale deals on the victims (the failing banks, that is; they are not yet buying up humans -- well, not directly, anyway...).
Why should controlling inflation be used to transfer wealth from individuals to a for profit third party (banks)? And it doesn’t target the entire population - surely there is a fairer way?
I am not an economist, so apologies if I am asking incredibly stupid things. I have various questions based on my understanding here and elsewhere that ultimately money is produced/guaranteed by government. Doesn’t that mean that inflation can only be the result of there being too much money in the economy, somewhere, couple with a resource shortage somewhere because otherwise how and why would society pay more for something? If we follow the logic of the wage-price spiral that we constantly hear – that wages can’t increase above inflation - then how does the value of wages ever increase? And as real wages have fallen on average over the last decade, then the excess money must be with someone else and in non-wages. Is that right? So, if we want to reduce inflation in the current climate, the solution should be to reduce rents / wealth whether through taxes, direct controls or debt/interest cancellation?
Similarly, I understand government ‘borrowing’ is essentially the government printing money and pushing it into the system through bonds on which they pay interest. Why do they pay interest on something that the government is producing? Aren’t the interest payments either a redistribution of existing money through tax to the (already) wealthy or the printing of new money paid directly to them like a basic income for doing nothing!). If money has to printed, wouldn’t it be better just to fund, for example day-care, by giving it directly to workers without interest payments.
The regulators are on horseback while the speculators are playing fast and furious at the speed of the internet. One trader gets impatient sells out then yells fire and everyone else on the internet rushes in and then the government comes in to bail out a bunch of speculative software ventures, meanwhile real manufacturers in the USA cannot get a credit break at the bank. We should only bailout USA manufacturers of real products, starting with food and fuel and manufacturing plants with workers not robots.
The medicine doesn't work. By driving up the highest cost for most people - housing - they have caused inflation. They have given a huge spur to unions to wake up and demand a better deal. The collateral damage is across the economy - particularly the already poor. Only accountants and asset strippers will gain.
What we have seen suggests that banking and the banking system in which they are embedded are fundamentally flawed.
- Too big to fail
- Too big to manage - their own managers do not understand them
- Too big to regulate
- Too big to deal with - they have lost interest in the bulk of their retail and commercial customers
They serve only themselves and their interests.
I see no other good option other than to break them back down into their component parts, as per pre-deregulation in the 80s, or Glass-Steagal. Otherwise we are doomed to see regular crashes, bailed out by governments at massive costs to the wider economy and society, whilst they fail to serve that wider economy and society. Thats before we consider their more malign activities such as money laundering and tax evasion.
If ludicrous corporate profiteering is driving a bulk of the inflation in both USA and the UK, wouldn't it make more sense to set marginal rates of corporation tax or dare I say a windfall tax for the big winners, like big oil and gas? That way workers salaries have a better chance of rising in line with inflation and maybe it keeps inflation itself from spiralling out of control? (I'm a complete beginner in this so idea if that makes sense or not.)
It seemed like when Larry Summers was on Jon Stewart (as you mentioned), he was just working through a standard process: "prices rising? -> ok, then put burden on workers, thats what I wrote in a textbook so it has to be true". A boiler plate defence. At a certain point it kind of sunk in that it's peoples live's that he's talking about but then he buried that thought deep deep down.
2). It is rich for Larry Summers and other to call for real wages to fall when the majority of non-elite Americans have had their wages destroyed over the last forty years. The share of national income going to labor is historically low. But workers should pay the cost of inflation that is rooted in bad investment decisions by companies. Companies went off shore for cheap labor rather than investing in the human capital of workers and raising their productivity. Rising wages has more to do with changes in the labor force, including demographics and push back by workers at the crazy demands bosses made of them pre-Covid. Lower wages certainly not going to attract more people into the labor force, which has been a problem for years.
Sorry,, Summers and Rogoff are talking to pander to the elites who have unfairly garnered a huge portion of the income and wealth of America since 2000. And they sure as hell are going to fight giving up one penny - as they deserve it - BULLSHIT!
Two things. The FED is the bank of the bankers and it aligned with their interests,,which why in 2009, the big banks did not go bankrupt and their assets sold to high quality others. Nope,,they were rescued, the culture of Wall Street never changed and the banks,,by refusing to lend to all but high credit score business and consumers essentially kept the economy growing at mediocre rates up until 2017 when growth ticked only slightly higher. Of course, the banks made huge amounts of money, much of which they end up paying in fines for other bad behaviors.
Don't I remember that prices adjusting creates more supply? And more supply brings down prices? Choking off the means to expand production seems to be a good way to cement prices at high levels, since new producers have higher entry costs.
You are right that ideology seems to come first for central bankers. The recommendations in Recovery Plans for Ukraine from the IMF, World Bank, EC all begin with dropping in Neoliberal rules and setting up a competitive market structure where the conditions for a competitive market do not exist. It reminds me of the privatization "shock therapy" that worked so well at the end of the Soviet Union.
How do you assess the recent evidence that corporate profits in US and UK (c58% of inflation) are the major cause of inflation not labour costs (c8%) see for example the EPI
...and here we go (again!) in the U.S., with Powell's latest hike, amidst banks continuing to fall like dominoes... and getting fire-sale deals on the victims (the failing banks, that is; they are not yet buying up humans -- well, not directly, anyway...).
You need to read up on the long term debt cycle as explained by Ray Dalio.
Why should controlling inflation be used to transfer wealth from individuals to a for profit third party (banks)? And it doesn’t target the entire population - surely there is a fairer way?
I found this a throught provoking starting place: https://podcasts.apple.com/ca/podcast/abc-news-daily/id1349523628?i=1000599795942
Thank you for the interesting article.
I am not an economist, so apologies if I am asking incredibly stupid things. I have various questions based on my understanding here and elsewhere that ultimately money is produced/guaranteed by government. Doesn’t that mean that inflation can only be the result of there being too much money in the economy, somewhere, couple with a resource shortage somewhere because otherwise how and why would society pay more for something? If we follow the logic of the wage-price spiral that we constantly hear – that wages can’t increase above inflation - then how does the value of wages ever increase? And as real wages have fallen on average over the last decade, then the excess money must be with someone else and in non-wages. Is that right? So, if we want to reduce inflation in the current climate, the solution should be to reduce rents / wealth whether through taxes, direct controls or debt/interest cancellation?
Similarly, I understand government ‘borrowing’ is essentially the government printing money and pushing it into the system through bonds on which they pay interest. Why do they pay interest on something that the government is producing? Aren’t the interest payments either a redistribution of existing money through tax to the (already) wealthy or the printing of new money paid directly to them like a basic income for doing nothing!). If money has to printed, wouldn’t it be better just to fund, for example day-care, by giving it directly to workers without interest payments.
The regulators are on horseback while the speculators are playing fast and furious at the speed of the internet. One trader gets impatient sells out then yells fire and everyone else on the internet rushes in and then the government comes in to bail out a bunch of speculative software ventures, meanwhile real manufacturers in the USA cannot get a credit break at the bank. We should only bailout USA manufacturers of real products, starting with food and fuel and manufacturing plants with workers not robots.
The medicine doesn't work. By driving up the highest cost for most people - housing - they have caused inflation. They have given a huge spur to unions to wake up and demand a better deal. The collateral damage is across the economy - particularly the already poor. Only accountants and asset strippers will gain.
What we have seen suggests that banking and the banking system in which they are embedded are fundamentally flawed.
- Too big to fail
- Too big to manage - their own managers do not understand them
- Too big to regulate
- Too big to deal with - they have lost interest in the bulk of their retail and commercial customers
They serve only themselves and their interests.
I see no other good option other than to break them back down into their component parts, as per pre-deregulation in the 80s, or Glass-Steagal. Otherwise we are doomed to see regular crashes, bailed out by governments at massive costs to the wider economy and society, whilst they fail to serve that wider economy and society. Thats before we consider their more malign activities such as money laundering and tax evasion.
Trying to think of how to scrutinise ‘commodity market speculation’ (mysterious words for the uninitiated) in terms of what we buy every week, bread or similar. This has been explored before, but I’ve never seen it in a nutshell (long read from 2011 - https://www.theguardian.com/business/2011/jun/02/global-food-cricis-commodities-speculation )
Is there a really accessible way to keep tabs on it?
Where is Michael Hudson? We need him up front here.
If ludicrous corporate profiteering is driving a bulk of the inflation in both USA and the UK, wouldn't it make more sense to set marginal rates of corporation tax or dare I say a windfall tax for the big winners, like big oil and gas? That way workers salaries have a better chance of rising in line with inflation and maybe it keeps inflation itself from spiralling out of control? (I'm a complete beginner in this so idea if that makes sense or not.)
It seemed like when Larry Summers was on Jon Stewart (as you mentioned), he was just working through a standard process: "prices rising? -> ok, then put burden on workers, thats what I wrote in a textbook so it has to be true". A boiler plate defence. At a certain point it kind of sunk in that it's peoples live's that he's talking about but then he buried that thought deep deep down.
2). It is rich for Larry Summers and other to call for real wages to fall when the majority of non-elite Americans have had their wages destroyed over the last forty years. The share of national income going to labor is historically low. But workers should pay the cost of inflation that is rooted in bad investment decisions by companies. Companies went off shore for cheap labor rather than investing in the human capital of workers and raising their productivity. Rising wages has more to do with changes in the labor force, including demographics and push back by workers at the crazy demands bosses made of them pre-Covid. Lower wages certainly not going to attract more people into the labor force, which has been a problem for years.
Sorry,, Summers and Rogoff are talking to pander to the elites who have unfairly garnered a huge portion of the income and wealth of America since 2000. And they sure as hell are going to fight giving up one penny - as they deserve it - BULLSHIT!
Two things. The FED is the bank of the bankers and it aligned with their interests,,which why in 2009, the big banks did not go bankrupt and their assets sold to high quality others. Nope,,they were rescued, the culture of Wall Street never changed and the banks,,by refusing to lend to all but high credit score business and consumers essentially kept the economy growing at mediocre rates up until 2017 when growth ticked only slightly higher. Of course, the banks made huge amounts of money, much of which they end up paying in fines for other bad behaviors.
Don't I remember that prices adjusting creates more supply? And more supply brings down prices? Choking off the means to expand production seems to be a good way to cement prices at high levels, since new producers have higher entry costs.
You are right that ideology seems to come first for central bankers. The recommendations in Recovery Plans for Ukraine from the IMF, World Bank, EC all begin with dropping in Neoliberal rules and setting up a competitive market structure where the conditions for a competitive market do not exist. It reminds me of the privatization "shock therapy" that worked so well at the end of the Soviet Union.
How do you assess the recent evidence that corporate profits in US and UK (c58% of inflation) are the major cause of inflation not labour costs (c8%) see for example the EPI