Article 43


Friday, September 23, 2022

The Next Depression Part 66 - Interest Rates Hikes, and Forced Unemployment

image: class warfare
In the boardrooms of corporate America, profits aren’t everything - they are the only thing. A JPMorgan research report concludes that the current corporate profit recovery is more dependent on falling unit-labor costs than during any previous expansion.
- Why The Rich Love Unemployment
After saying that “the halls of Congress are no joke,” Ocasio-Cortez said that “standing up to corporate power, and established interests is no joke. It’s not just about standing up and saying these things, but behind closed doors, your arm is twisted, the vise pressure of political pressure gets put on you, every trick in the book, psychological, and otherwise is to get us to abandon the working class.”
- AOC - Bernie Sanders Won’t Abandon the Working Class, 2020
To Wall Street and its backers, the solution to any price inflation is to reduce wages and public social spending. The orthodox way to do this is to push the economy into recession in order to reduce hiring. Rising unemployment will oblige labor to compete for jobs that pay less and less as the economy slows.
- Austerity American Style Part 22 - Forced Unemployment
Fed Chair Powell says
(1) interest rate hikes will inflict pain,
(2) no other choice exists.
Both points mislead.
(1) Pain will fall unjustly on those losing jobs (they did not cause an inflation the FED failed to prevent).
(2) Powell’s FED refuses to discuss price/wage controls that COULD DISTRIBUTE PAIN DIFFERENTLY.
- Richard Wolff on Facebook, 9/21/2022
THANK YOU President Obama for bailing out the BANKS, so the American People are the big owners, and thank you very much for the new Credit Card bill thats supposed to stop THE BIG BANKS from SCREWING US on on our credit cards starting next February.  I’ve had my CWA branded Union Plus Credit Card for at least 25 years, and don’t think I’ve ever missed a payment in all that time.  Saturday I got a letter from the bank that the INTEREST RATE IS GOING UP from 12% to 18% starting next month.
- Obama’s Big Business Bailout Screws The Public, 2009
The combination of lost jobs and millions of foreclosures means a lot of folks are homeless and hungry for the first time in their lives. One of the consequences of the recession that you don’t hear much about is the record number of children descending into poverty. The government considers a family of four to be impoverished if they take in less than $22,000 a year. Based on that standard, and the government projections of unemployment, it is estimated that the poverty rate for kids in this country will soon hit 25 percent.
- Poverty In Central Florida, November 2011
Today I had the opportunity to speak before Congress about a major driver of inflation that’s being ignored - price gouging corporations.
- Robert Reich’s Full Testimony Regarding Corporate Profits and Inflation to House Oversight Committee, September 21, 2022
Average long-term U.S. mortgage rates jumped by more than a quarter-point this week to their highest level since 2007 as the Federal Reserve intensified its effort to tamp down decades-high inflation and cool the economy.
- CBS News, Moneywatch, September 22, 2022
The only thing that can possibly transform the U.S. government to one that cares for the voters who elect it, rather than for the plutocracy that controls it, is a UNIFIED OPPOSITION BY ALL OF THE PEOPLE, irrespective of their social class or political beliefs. The energy driving such a mass movement must flow from the personal actions taken by each of its individual participants.
- Challenging America’s Plutocracy


Axios Macro

By Neil Irwin, Courtnay Brow
September 22, 2022

The overriding message out of the Fed’s communications yesterday was a simple one: Its leaders believe that some meaningful economic pain is necessary to bring inflation down, and they are willing to impose it.

It is a contrast with just three months ago, when the policymakers clung to a more optimistic story in which inflation resolves itself with a mere bumpy patch for the economy.

Why it matters: The Fed is now forecasting a meaningful rise in unemployment over the next year as it pushes interest rates to their highest levels since 2007 - which implies that it will not only tolerate a recession or near-recession, but see it as evidence of success.

“We have got to get inflation behind us,” chair Jerome Powell said in his news conference. “I wish there were a painless way to do that. There isn’t.”

The big picture: What matters most for both the economic and political outlook is who will feel that pain, and how. Already, some on the left are assailing the Fed for throwing workers under the bus in its inflation-fighting campaign.

Perhaps most prominently, Sen. Elizabeth Warren (D-Mass.) tweeted yesterday that she’s “been warning that Chair Powell’s Fed would throw millions of Americans out of work - and I fear he"s already on the path to doing so.”

If yesterday’s projections prove accurate meaning a 4.4% unemployment rate late next year, up from a low of 3.5% in July ח that would imply another 1.5 million Americans unemployed.

Hypothetically, unemployment could rise that much due to a mere soft patch in the economy. But in practice, historical examples of that playing out are scarce. Unemployment only rises that much in recessions.

There’s no doubt that in this scenario, moderately HIGHER UNEMPLOYMENT IS, IN FACT, A GOAL OF THE FED, with all the moral and political consequences that implies. But it goes too far to say workers bear the entire brunt of the war on inflation.

Tighter money from the Fed has its first-order effects through financial markets, as witnessed in the S&P 500’s 21% collapse this year.

Indeed, if you believe, as many people do, that the era of zero interest rates and quantitative easing made the rich richer and increased inequality, then the era of rate hikes and quantitative tightening ought to have the reverse effect.

There are many channels through which the Fed tightening can help bring down demand and inflation without people losing their jobs.

For example: An affluent investor decides they can’t afford a vacation home because of stock market losses. Or a business accepts lower profit margins because it believes it can’t raise prices in a slump.

Reality check: But just because those channels exist doesn’t mean job losses won’t be the most salient in how people experience the economy.

The bottom line: The 1.5 million people who may lose their jobs in the Fed’s scenario will experience a lot more pain than the tens of millions who experience a moderately lower balance in their investment portfolio.


Posted by Elvis on 09/23/22 •
Section Revelations • Section NWO • Section Dying America • Section Next Recession, Next Depression
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