Fed Determined to Keep Americans Unemployed

Janet YellenOn Friday, we got the new jobs report. Usually, I anxiously await the first Friday of the month, but I’ve gotten to see it as pointless. I want to see good numbers — for the economy to continue to create jobs. But what does it matter? We really do not live in a democracy; we live in a plutocracy. And that is nowhere as clear as it is with the Federal Reserve. It is a group half made up of people whose only qualification is that they are rich. And these people aren’t looking out the best interests of the country — much less the American worker.

So if the economy looks like it might be taking off — like workers might be able to demand a more just share of the nation’s productivity — the Fed is right there to stop it. After years during which the rich capitalists have made scads of money and workers have seen their pay stagnate and even decrease, the Fed is unwilling to allow even a hint of “dangerous” inflation that might hurt the rich. It has now be years that the Fed has been wanting to raise interest rates. And they have quite literally been looking for any excuse to do it. The data do not drive the policy; the data are just tools of Fed apologetics.

We are looking at raising interest rates. Why? Sad to say, a lot of it has to do with this fact: the last time the Fed raised interest rates was June 2006. It’s like people are unnerved by this or something…

Consider that the standard U3 unemployment rate is 5%. Back in 2000, Janet Yellen was certain that this was full employment — the level that you do not go below for fear of accelerating inflation. But Alan Greenspan — admittedly a bit of a crank — said no and allowed unemployment to get down to 3.9%. You may remember that period as the last time you got a raise. And there was no accelerating inflation. So hooray! We learned something: 5% is not full employment.

But it is 15 years later, and now Yellen is in Greenspan’s position. But apparently, she learned nothing from the past. Or, she is just a hack for the financial industry — which is probably the more accurate reading of it. I’m not saying that full employment would be 3.9% now. I don’t know what it is. But the truth is that there is absolutely no sign of inflation, yet we are looking at raising interest rates. Why? Sad to say, a lot of it has to do with this fact: the last time the Fed raised interest rates was June 2006. It’s like people are unnerved by this or something — like they aren’t aware of just how bad the collapsing of the housing bubble was.

I listened to the beginning of Marketplace on Friday. In the segment about the jobs report, Linette Lopez of Business Insider is obviously giddy about the Fed raising interest rates. Sudeep Reddy of The Wall Street Journal just seemed to be resigned towards it. Regardless, lots of people are going to go without jobs because the Fed is going to raise interest rates. But none of these kind of business reporters seem all that aware of it — or at least care about it.

And it is worse than I’ve stated. As Dean Baker noted, in addition to an unchanged unemployment rate, “There was also no change in the labor force participation rate or the employment-to-population ratio, both of which remain far below pre-recession levels.” So the truth is that there is incredible slack in the economy. But the Fed must raise interest rates, because the rich might lose a couple of pennies. And besides, they haven’t raised rates in such a long time!

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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.

15 thoughts on “Fed Determined to Keep Americans Unemployed

    • Well, Yellen said as much about a week ago: basically if more than 100,000 jobs were added, they were going to raise interest rates. But maybe not. Maybe they’ll wait until March, throw us into a recession, and get Donald Trump (Ted Cruz, Marco Rubio) elected president! That’s a real fear of mine.

        • Yes, that would be my guess. Acceptable levels of fiscal somnambulism, not outright madness. Not quite yet.

        • I’m sure Yellen is confident that the Fed can manage this without throwing us into a recession. And she’s probably right. Just the same, I think there is far more slack in the labor market than even their worst case scenarios. So the Fed could screw up. The really terrible thing about the Fed is that Yellen is a liberal. Most of the liberals on the Fed are still far more worried about the profits of banks than the unemployment of workers.

            • That’s a good way of thinking of it. Although I also think it is systematic: it is just the way the Fed works. I know there are liberal (even conservative) judges who do like the sentences they have to pass. With the Fed isn’t like mandatory minimums. But more than anything, they are just cut off from regular working people. This is a general problem with rising levels of inequality. At least in more equal world, the rich would have to fly on the same airplanes as the working class.

              • One of the more troubling trends is how few people who have not obtained degrees from elite top colleges are being picked for non-elected policy positions.

                It first popped up with the SCOTUS but it holds for the Fed Board-none of them went to somewhere like ASU or Texas A&M. Almost all of them went to Georgetown, an Ivy League or other top school.

                The problem with this is that it makes them even more removed from the average Joe then is good for the country.

                • That’s very true. When I was looking at graduate school, I didn’t think college name mattered — just thesis adviser. Well, in a sense that was true, because my adviser was powerful and no one messed with me. But the truth is that if you look at faculty even at obscure colleges, most of the professors went to name schools. If I were talking to young Frank, I would tell him to go to a name school. I know I could have gotten into Princeton. Whether I would have managed to get my degree is another matter. (I also would tell him to study math or logic.)

  1. I’ve reached the point that I can only imagine things getting worse before there is even a chance of things getting better. Every Republican and apparently a majority of Democratic primary voters thinks that they are all millionaires in waiting.

    We can complain all we want about the Fed and super PACs and the way the Senate works and the media’s biases and all those things that makes our body politic an oligarchy. The biggest problem we face is ourselves, the voting public. The simple fact is that poor white trash people in Kentucky go to the polls and vote out their own health insurance. Voters are literally killing themselves at the polls and as long as the people keep up their masochistic tendencies, the ruling class doesn’t even need all of their other instruments of plutocracy.

    I fear that it will take seeing your grandparents deported because Donald Trump got elected, your wife dying of a curable disease and your kids being hungry because the GOP actually did abolish food stamps and medicare. It may take sons in coffins and families in the street to finally create a class consciousness among the nation’s “soon to have’s” and for us to finally reject neo conservativism abroad and neo liberalism at home.

    • I’m sympathetic to that view. But the truth is, if the Republican Party has not been revealed to this people yet, it never will be. In general, the problem is not how people vote; it is which people vote. The way to save America is very simple: democracy! It’s just that we need the people to vote.

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