I

 

used to be a really big fan of Robert Reich.

My Enthusiasm has waned somewhat over the years 

but he still makes some very valid points.

The US central bank is poised to cause untold hardship to millions of Americans

"The Federal Reserve chairman has admitted that at least 2 million people could lose their jobs if interest rates keep rising"

(Trust me they are going to,)

"Over the past year, the Fed raised interest rates at the fastest pace since the 1980s, from near zero to more than 4.5%. But consumer spending isn’t slowing. It fell slightly in November and December but jumped 1.8% in January, even faster than inflation."

(That I found pretty surprising...at first...it will make more sense here in a minute...)

"A recent paper by a group of academic and Wall Street economists suggests that he will need to raise interest rates as high as 6.5% to meet his 2% target."

(They are going to have to get them above the rate of inflation otherwise they will never tame it and in that year when rates went from 9 to 4.5% The debt went up 20% over the next decade. We got a mini8mum of 7%...so add another 10% on to the debt next decade etc...How do you really think this all gets straightened out?)

"You see, the Americans who are doing most of the spending are not the ones who will be hit hardest by the rate increases. The biggest spenders are in the top fifth of the income ladder. The biggest losers will be in the bottom fifth."

"Widening inequality has given the richest fifth a lot of room to keep spending. Even before the pandemic, they were doing far better than most other Americans."

"The top fifth’s savings are still much higher than they were before the pandemic, so they can continue their spending spree almost regardless of how high the Fed yanks up rates."

"That spending is a big reason Powell and his colleagues at the Fed are having so much difficulty slowing the economy by raising interest rates (in addition to the market power of many big corporations to continue raising prices and profit margins)."

(Okay here's where he looses me somewhat 

by not suggesting that raising interest rates 

CAN NOT 

do anything to shrink the money supply 

which was the cause of inflation to start with.)

"Those higher rates are flowing back into the top fifth’s savings, on which they’re collecting interest. But yank up rates much more and we’ll impose big sacrifices on lower-income Americans."

(The lack of available good options tells you what time were approaching etc...)

"The study I mentioned a moment ago concludes that “there is no post-1950 precedent for a sizable central-bank-induced disinflation that does not entail substantial economic sacrifice or recession”.

(Others were saying it before they published their study.)

"There’s no reason for further hikes, anyway. Inflation is already slowing."

(A dip dont mean a trough yo...

Everybody already knows my thoughts on this.)

"He (Fed Chair Powell) should abandon the 2% target rate of inflation. There’s nothing sacrosanct about 2%. Why not four? Getting inflation down to 2% is going to cause too much pain for the most vulnerable."

(4% inflation still causes 2/3rds of what were now experiencing. Thats really what we want to become the new standard?

Double from what was acceptable before?

As stated above:

"The lack of available good options tells you what time were approaching etc")