The Federal Reserve Wants to Cut Your Wages

Robert ReichRobert Reich made a really good video about the Federal Reserve. I don’t pay that much attention to Reich anymore, because I fully understand everything he has to say. But he really is a great communicator. And unlike a lot of people, he doesn’t lose site of what most people — even politically engaged people — know. I know that I often take stuff for granted when writing about politics and economics. It’s easy enough to do when you spend so much time reading other writers who know as much or more than you do. But a lot of these issues are really important and not widely understood.

The Federal Reserve is an especially important and obscure topic. It’s important because it really does determine if you are going to get a raise — or even have a job. And it is obscure because very few people know what it does. There was the time during the 2004 Democratic debate when Al Sharpton totally blew a question about what the Fed does. So let me clear that up: the Fed controls the flow of money in the economy. Yeah, it does other things. But that’s the most important. And it is in this regard, that it has the power to decide if you have a job or not.

The two things that the Fed looks at are employment and inflation. But given whose interests the Fed actually looks after, it is far more focused on the latter issue. Everyone in the power elite seems constantly concerned that we are going to go back to the mid and late 1970s when inflation got almost as high as 15%. But the Fed was able to fix this by increasing unemployment. So it isn’t necessary now to “head off” inflation by killing jobs ahead of time.

The other thing about the economy of the 1970s is that the inflation problems were mostly the result of oil price shocks. So how is that an issue right now? It isn’t. What’s really going on is that the power elite think that it is much safer to allow American workers to continue to see their wages stagnate and to lose jobs rather than for the rich to see the slightest threat to their wealth. And that is what this is really all about. Like so much else in the United States, workers have accepted the world view of the power elite, even though it is not in the interests of workers.

What Reich talks about in this video is that the Federal Reserve should not raise interest rates until we clearly see inflation. It does seem to be the case that the Fed desperately wants to raise rates. They are just looking for an excuse to do it. But they haven’t raised rates because there is literally no indication of inflation. Worker wages are not going up. But to me, it is as simple as this: our unemployment rate is 5.3%. This is almost certainly artificially low because of involuntary part-time workers and others who have just given up looking for a job because they can’t find one. But even if that wasn’t the case, in 2000, the unemployment rate got down to below 4%, yet we didn’t have inflation. It makes no sense that the Fed can remember back 40 years, but can’t remember back 15 years.

Check out the video, it is very informative — and entertaining.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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