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We will send it to you myFT Daily Digest email revolves around the latest US inflation news every morning.
Unlike many in the rest of America, I have always doubted that very low interest rates make things easier for the poor. Keeping prices low for a while it promotes ideas and credit unions. When they explode, they always hurt those who receive less money, as we saw in the 2008 financial crisis.
And over the years, recent developments have suggested that unsustainable monetary policy and low interest rates are essential for sustainable development, especially at the very end of the financial and economic crisis.
This is not the case. While inflation may have contributed to lower wages for low-income jobs, unemployment has continued in recent years even though the Federal Reserve has begun raising prices from low to low.
In the meantime, academic research has shown that the trend towards lower oil prices is very important for inequality, because it makes people richer, while it does not make people spend more money. In the US, the top 10 percent of the population owns 84 percent of the economy. There are so many homes, cars and jeans that these people can buy.
Most people live on their own. And despite a modest pay rise in the last six months, inflationary spending is still relatively new. down where he was in 2019, he says Karen Petrou, co-supervisor of Federal Financial Analytics.
“These are Kool-Aid: very low prices encourage employment,” he says. “But they don’t.” Most people work to make money, and even if central banks can make a fortune, they can’t make good jobs in the middle. Only a business, with the help of the right ideas, can do this. Wall Street and Main Street.
However, comparisons of low prices in some way to actual growth die hard. Watch out for this new push to oust the Fed’s chairman, Jay Powell, who last week expressed concern that the economy is growing at a faster rate than previously thought. This could indicate the urgent need to sell central banks and / or high interest rates.
The financial market doesn’t want to hear this, obviously. But politicians do not leave. Elizabeth Warren, a Massachusetts filmmaker, described Powell as a “dangerous man” in an attempt to overthrow the 2008 economic crisis. all were “all but fulfilled”, saying “the Fed cannot return every time workers get less power to demand higher wages”.
On the one hand, I am sorry for the inconvenience. I remember one time interviewing a Fed official and adviser who complained that the central banks always pulled punches only when ordinary people came to the party. Good. Stock prices are still very close, with US domestic prices rising by almost 20% a year, not surprisingly for small retailers who are desperate for their piece. Big money will not buy you a house.
And yet, the risk is even greater when the punchbowl is about to be pulled. I’m worried about the rise marketing ideas for programs like Robinhood. I worry that investors who have less water are the ones who take the biggest risks. Consider a recent study of Harris showing that 15% of Latino Americans and 25% of African Americans will buy invisible tokens, compared to only 8% of white Americans.
This also sounds like a surprise to low-income mortgage lenders at the end of 2008. However, who can blame people for wanting to drink less when inflation is zero and inflation is 5%?
The real problem here is that we have left it too late to help establish a financial system and create a sufficient economy that is not just enough to produce wealth. Disruptions to our operations were confirmed last week and commercial waste which forced two Fed ambassadors to resign.
But simply removing the monetary policy from the Fed or making sure that we do not break the bank rules (all praiseworthy intentions) will not bring the economy to the US where it should be. We must all abandon the notion that low prices alone will create better jobs and economic growth. We need to improve urgently, and move forward slowly but steadily with economic principles.
Many would argue, especially as we head into the long winter, when rising oil prices are particularly acute for low-income earners. However, as Petrou points out, many of them already pay with credit card numbers. A small mark on the Fed’s payments will not be necessary, he says, mainly because in the US, the prices only pass to buyers through real estate repayment, which is especially true for those with large debts.
In the meantime, low but real interest rates may allow smallholders to set up an egg. That is the right goal, regardless of your political affiliation.