What we will discuss today is that central bankers are effectively intent on increasing poverty in their societies. And, whichever way one looks at it, relying on such a pernicious policy tool – one that deliberately seeks to increase poverty – is not a sound basis for achieving social stability. And, and as inflation has been falling anyway, despite the hikes, the negative distributional impacts should militate against using such a nasty and inefficient instrument....William Mitchell — Modern Monetary Theory
Central bankers deliberately trying to increase poverty is not a sound policy framework
Bill Mitchell |rofessor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia P
“ So, in effect, the Federal Reserve and the rest of the central bankers who are hiking rates, are intent of causing rising poverty rates among the most disadvantaged workers in the community.”
ReplyDeleteBill providing political cover for Democrats…
https://www.cnbc.com/2019/10/31/trump-rails-against-powell-day-after-fed-cuts-rates-for-a-third-time-this-year.html
ReplyDelete“ Trump has slammed Powell and the Fed numerous times, including last month, after the central bank voted to cut interest rates by a quarter point to a target range of 1.75% to 2%.
“Jay Powell and the Federal Reserve Fail Again,” he tweeted. “No ‘guts,’ no sense, no vision!”
Trump wants the Fed to push interest rates down to zero or even into negative territory. Trump argues that the current rates put the U.S. at a competitive disadvantage to other countries,”
GOP wants low policy rate…
https://www.newsweek.com/how-donald-trump-plans-fix-housing-market-1811663
“ "We'll get the prices way down and then the interest rates down and then the home builders will start building again, because nobody can get money from the bank because the interest rate's high."
It’s a political choice…
“Central bankers re deliberately trying to increase poverty.”
ReplyDeleteThis only applies to central bankers in the West and its allied nations (e.g. Australia).
As the world splits into the Western bloc vs everyone else, so central bank policies likewise diverge. For example, the US Federal Reserve serves only the rich, while the Bank of China serves China.
In the West, central bankers want to increase poverty for workers (i.e. salaried people) while increasing wealth for owners and creditors. Therefore central bankers in the West see inflation in strictly monetary terms. If inflation is up, then central bankers say we need higher interest rates in order to have more unemployment and more poverty among workers, so that workers have less money to spend, and prices come down. This has the added benefit of widening the gap between the rich and the rest (i.e. between workers and owners / creditors).
By contrast, the Bank of China focuses more on the supply side of the inflation equation. If inflation is up, then the bank needs to lower interest rates in order to increase the production and supply of goods and services, so that prices naturally come down. This lifts everyone up, not just the rich.
To repeat, central bank policy in the West is to increase poverty for workers, while increasing wealth for owners and creditors. This is a big reason why the West is doomed.
This impending doom causes despair, hopelessness, and psychosis among young people in the West, which manifests as social pathologies (i.e. wokery, LGBTQ supremacy, trans-gender mania, “climate change” hysteria, rampant anti-whitism, mass homelessness, runaway crime, etc.).
The Federal Reserve’s emphasis on continually widening the gap between workers and owners became pronounced when the USA sent its manufacturing abroad, and thereby became neoliberal -- i.e. financialized and de-industrialized. This process has been gradual, but the tipping point happened in late 1975 when the USA changed from a net exporter to a net importer.
I agree with Bill Mitchell here…
The Federal Reserve Bank like most central banks (the Bank of Japan being the notable exception) has sought to quell inflationary pressures by hiking interest rates.
Their stated aim is to increase unemployment because they think that will douse the inflation, despite the obvious fact that inflation is falling rapidly as the supply-side factors abate.
Those factors are not abating because of interest rate increases but, rather, because the world is adjusting somewhat to the Covid, Putin and recent OPEC shocks.
We also know that when unemployment rises it impacts on the low-income workers disproportionately – they are typically the first to go and the last to be hired again.
Bill Mitchell calls central bank policy in the West “ill-advised.” I say it is only ill-advised if you think that central bankers in the West care about workers. They don’t. Central bankers in the West only care about owners and creditors.
Also, inflation has eased a bit in some areas, but inflation still rages in other areas such as housing costs, which remain extremely high because of high interest rates. No one can afford to buy a house, and no one dares to sell his house that he got with a previous low-interest mortgage.
America serves owners at the expense of workers. Ancient Rome was the same, and consequently went extinct. America will likewise go extinct.
MATT FRANKO SAYS that central bank policy is a political choice.
ReplyDeleteExactly.
See my comments above.
“ The Federal Reserve Bank like most central banks (the Bank of Japan being the notable exception) has sought to quell inflationary pressures by hiking interest rates.”
ReplyDeleteBill is FOS here it’s the Biden political people..
Yellen and Powell were saying the price instability was “transitory” due to pandemic policy and that prices would stabilize without rate increases once the economy normalized post pandemic.. and lower rates would actually help facilitate normalization…
Then they were told to increase rates by the Biden/Democrat political people…
“ central bank policy is a political choice”
ReplyDeleteWell what good is it to pretend it’s some sort of technocratic mix up?
All this does is provide political cover for the politicians who are actually responsible… 🤔
Right now in US voters have a political choice between Democrats advocating higher interest rates and GOP advocating lower interest rates..,
All you have to do is vote accordingly.,,
Well what good is it to pretend it’s some sort of technocratic mix up?
ReplyDeleteYou do that all the time. Blame the Art degree. Blame Plato, Socrates, Damocles.
Because that is a technical deficiency in these people but if you advocate for lower rates then why not just vote for the people also advocating for lower rates?
ReplyDelete“Just win baby”
Too few MMT aware voters to make a difference. "I'm with Joe" tribe versus "I'm with Don" tribe will decide this election.
ReplyDeleteAnd if you're "with Israel", you're guaranteed to win, Benji.
“Well what good is it to pretend it’s some sort of technocratic mix up? All this does is provide political cover for the politicians who are actually responsible.” ~ Franko
ReplyDeleteExactly correct. The Fed and its allies (i.e. the owner / creditor class) pretend that these matters are too complex for the peasants to understand. And for the most part they are correct, because the peasants don’t want to understand it. However the fact remains that Fed policy is 100% political, albeit camouflaged with b.s. about it being “technical.”
After the 2008 crisis, when the Fed and the Treasury bailed out the banks, and caused millions of Americans to be foreclosed on, and then re-inflated the financial markets with fourteen years of near-zero interest rates, these were political decisions.
So now we have the Fed ostensibly fighting inflation by using monetary policy, while ignoring the supply log-jams caused by the ever-increasing sanctions on Russia and China. Again, these are political decisions.
What I’m saying is that average Americans don’t need to understand all the technical details. They just need to understand that their financial struggles are the result of political decisions.
The core political decision is that the parasite class (i.e. owners and creditors) must be served at all costs, while the host (i.e. workers) is expendable. As a result, the West has been financialized and de-industrialized. In my opinion this is what has doomed the West. It caused mass despair among young peasants, which gave rise to all forms of wokery.
Franko and Konrad are both Fascist cranks...
ReplyDeleteI’m to the right of fascism…
ReplyDelete“ As a result, the West has been financialized and de-industrialized.”
ReplyDeleteThe off shoring was US soft power Cold War policy…
And US probably has highest per capita industrial output…
This is the largest industrial initiative in the world I’ve seen in the last few years and it’s back in the rust belt north of Syracuse, NY:
https://businessfacilities.com/micron-to-invest-up-to-100b-in-central-new-york-megafab/#:~:text=Micron%20intends%20to%20invest%20up,manufacturing%20fab%20in%20Boise%2C%20ID.
$100b project…
The previous soft power initiatives are being shut down… has proven to be unreliable and commies still in control in China and Russia so it didn’t work…
When something doesn’t work you have to make an adjustment…
Unless you have an Art degree then you keep doing the same thing… and expect others to do the same due to your Art degree bias