‘Fantasy’ to Control Inflation with Minor Interest Rate Tweaks Says Fed Official
They don’t have the tools or the ideology to manage the problem
Here’s a nice doom scroll fact for the day: central bank officials have admitted they don’t have a formula for inflation. They can barely even diagnose the causes and have few tools and a broken ideology when it comes to solving it. They pretend economics is all cold-hard rational science when, in reality, it is closer to a shaman finding the meaning in a bundle of sticks thrown to the ground.
“The Fed has no reliable theory of inflation.” — former Fed gov. Daniel Tarullo
A very common and convenient misconception is that the main culprits are always government spending or high wages. People who’ve been wrong about everything for decades are getting on TV and saying we need to stop spending on the poor, then cut wages of the poor, and raise inflation rates a teeny tiny bit— news flash: that won’t help.
There are other factors.
Inflation cannot be ignored and is currently skyrocketing, particularly in Europe which usually has an even more conventional mentality towards economic policy than the US. And that’s troubling for someone who lives and works here.
It’s been devastating to see the minor minor minor gains in wages that came from the labor having some post-pandemic leverage. In a cruel joke, inflation rates have already all but erased those gains, meaning working people are back to square one or sliding even further behind.
And what’s the Federal Reserve doing? They’re thinking about tweaking interest rates by half or quarter percent.
In terms of controlling our current inflation crisis, St. Louis Federal Reserve President James Bullard called this approach ‘a fantasy.’
They pretend economics is all cold-hard rational science when, in reality, it is closer to a shaman finding the meaning in a bundle of sticks thrown to the ground.
The inflation worries are everywhere and were everywhere even before the war in Ukraine. Due to COVID, the US and…