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Even The Mainstream Economists Are Fed Up With The Fed
Authoreed by Joseph Stiglitz, originally posted at Project Syndicate,
At the end of every August, central bankers and financiers from around the world meet in Jackson Hole, Wyoming, for the US Federal Reserve’s economic symposium. This year, the participants were greeted by a large group of mostly young people, including many African- and Hispanic Americans.
The group was not there so much to protest as to inform. They wanted the assembled policymakers to know that their decisions affect ordinary people, not just the financiers who are worried about what inflation does to the value of their bonds or what interest-rate hikes might do to their stock portfolios. And their green tee shirts were emblazoned with the message that for these Americans, there has been no recovery.
Even now, seven years after the global financial crisis triggered the Great Recession, “official” unemployment among African-Americans is more than 9%. According to a broader (and more appropriate) definition, which includes part-time employees seeking full-time jobs and marginally employed workers, the unemployment rate for the United States as a whole is 10.3%. But, for African-Americans – especially the young – the rate is much higher. For example, for African-Americans aged 17-20 who have graduated high school but not enrolled in college, the unemployment rate is over 50%. The “jobs gap” – the difference between today’s employment and what it should be – is some three million.
With so many people out of work, downward pressure on wages is showing up in official statistics as well. So far this year, real wages for non-supervisory workers fell by nearly 0.5%. This is part of a long-term trend that explains why household incomes in the middle of the distribution are lower than they were a quarter-century ago.
Wage stagnation also helps to explain why statements from Fed officials that the economy has virtually returned to normal are met with derision. Perhaps that is true in the neighborhoods where the officials live. But, with the bulk of the increase in incomes since the US “recovery” began going to the top 1% of earners, it is not true for most communities. The young people at Jackson Hole, representing a national movement called, naturally, “Fed Up,” could attest to that.
There is strong evidence that economies perform better with a tight labor market and, as the International Monetary Fund has shown, lower inequality (and the former typically leads to the latter). Of course, the financiers and corporate executives who pay $1,000 to attend the Jackson Hole meeting see things differently: Low wages mean high profits, and low interest rates mean high stock prices.
The Fed has a dual mandate – to promote full employment and price stability. It has been more than successful at the second, partly because it has been less than successful at the first. So why will policymakers be considering an interest-rate hike at the Fed’s September meeting?
The usual argument for raising interest rates is to dampen an overheating economy in which inflationary pressures have become too high. That is obviously not the case now. Indeed, given wage stagnation and the strong dollar, inflation is well below the Fed’s own 2% target, not to mention the 4% rate for which many economists (including the International Monetary Fund’s former chief economist, Olivier Blanchard) have argued.
Inflation hawks argue that the inflation dragon must be slayed before one sees the whites of its eyes: Fail to act now and it will burn you in a year or two. But, in the current circumstances, higher inflation would be good for the economy. There is essentially no risk that the economy would overheat so quickly that the Fed could not intervene in time to prevent excessive inflation. Whatever the unemployment rate at which inflationary pressures become significant – a key question for policymakers – we know that it is far lower than the rate today.
If the Fed focuses excessively on inflation, it worsens inequality, which in turn worsens overall economic performance. Wages falter during recessions; if the Fed then raises interest rates every time there is a sign of wage growth, workers’ share will be ratcheted down – never recovering what was lost in the downturn.
The argument for raising interest rates focuses not on the wellbeing of workers, but that of the financiers. The worry is that in a low-interest-rate environment, investors’ irrational “search for yield” fuels financial-sector distortions. In a well-functioning economy, one would have expected the low cost of capital to be the basis of healthy growth. In the US, workers are being asked to sacrifice their livelihoods and wellbeing to protect well-heeled financiers from the consequences of their own recklessness.
The Fed should simultaneously stimulate the economy and tame the financial markets. Good regulation means more than just preventing the banking sector from harming the rest of us (though the Fed didn’t do a very good job of that before the crisis). It also means adopting and enforcing rules that restrict the flow of funds into speculation and encourage the financial sector to play the constructive role in our economy that it should, by providing capital to establish new firms and enable successful companies to expand.
I often feel a great deal of sympathy for Fed officials, because they must make close calls in an environment of considerable uncertainty. But the call right now is not a close one. On the contrary, it is as close to a no-brainer as such decisions can be: Now is not the time to tighten credit and slow down the economy.
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Jeb! (won't end the Fed!)
Neither will the Donald. Only a throat-slitting revolution would, it seems.
Sorry but you must be the only one that feels any sense of sorry for these pricks
A dual mandate in name only is not a dual mandate.
And that is not even addressing the lies that come from situational data manipulation.
"The Fed has a dual mandate – to promote full employment and price stability. It has been more than successful at the second,"
Horseshit.
Now THAT will have Wall Street quaking in their lizard skin boots, the fucking economysterists are fed up up...oooohhhh.....scary...surly THIS of all signs surely portends the fall to come...
The important question is what does Krugman and Cramer think?
The Fed should simultaneously
be locked into prisons and await execution.
We need a settlements bank with nothing else tacked on, most especially printing money. Unfortunately our world runs on bribery with the political class leading the pack. It's going to all fall apart and Wall St. and the mega-banks will be throwing molotov cocktail all the way down.....
await? Why?
"Inflation would actually be good for the economy."
These people are morons. If housing inflates further, consumption will tank and so will the economy. Because they don't measure the total cost of living all of their models are bullshit.
And how will rising housing, education, health care, and everything else be a net positive for minorities or young people?
Again, stiglitz is a fucking moron.
I often feel a great deal of sympathy for Fed officials, because they must make close calls in an environment of considerable uncertainty.
-Sympathy? Call me a sociopath. Am I supposed to feel sympathy for an institution that has robbed America of it's wealth? An institution never authorized by the Constitution, the unregulated 4th branch of government which actually controls our country, robs the poor and delivers to the rich? A private bank that controls our currency and inflates away our buying power?
Fuck the FED and fuck Stiglitz. You wanna cheer for Charlie Manson? Go ahead. I don't feel one scintilla of sympathy for any of thosecrooked cocksuckers in suits.
+10^6
Must be a serious case of Stockholm to feel so sad for the international bankers that have controlled humanity for centuries.
Mainstream Keynsians are worried the Fed won't be able to prop up their failed ideology. Maybe they won't be mainstream for much longer.
We need more inflation so the proles need to prostitute themselves to pay the rent. The price of blow jobs will drop to $5 and I'll be a happy customer.
Standing on a street corner is too much work so the free shit army will demand their own whorehouse......
MOAR counterfeit money for Financiers and Oligarchs.
LESS jobs and less pay for the Productive members of society.
" In the US, workers are being asked to sacrifice their livelihoods and wellbeing to protect well-heeled financiers from the consequences of their own recklessness. "
This is an execellent rationalization for sustaining counterfeit fiat dispensations directly to the Financiers and Oligarchs by Stiglitz: without offering or advocating for a method of distributing 'easy money' to the Productive.
Keep him on the payroll.
-TPTB/TBTF/Duopoly
It appears the Jackson Hole crowd will have to implement Bilderburg type security when the green shirted sheep are able to get close enough to get their message across.
But, I suspect even the elites enjoy watching the circus on the other side of the fence.
Don't let the concentration of financial power in one location every August give anyone ideas now!
did you see this on one news channel? or, did you see it in one print paper? or, did you even see it on one web site? you sure the fuck didnt see it on cnbc. ony if i were god for a day. i would send my soldgers to ft lee to rid the earth of evil.
Nigga Please!
I'm fed up with being fed up too, to outer space with the evil ones any day now.
They seem to be an exclusive orbit.
May I suggest a fiery reentry?
" I often feel a great deal of sympathy for Fed officials, because they must make close calls in an environment of considerable uncertainty."
FUCK YOU U FUCKING MORONIC ASSHOLE.....
The fed needs to close its doors. The market needs no help other than open price discovery, honest economic reporting. We are getting none of this...so fed should close up.
Unemployment should be much higher when all the government enslaving agencies are eliminated. You can't manage the market. It will be what it is...it is not a puppy to train. The arrogance of the academics is lack of experience and common sense....and simple theft from the marketplace.
Jackson Hole is a ski resort. It should stay that way. Economists are not helpful in controlling what will be...rather ...they are helpful in describing what is.
There are ENORMOUS weaknesses in the economic models that the Fed uses for America. The Fed has never understood the "average Joe on the street" and they haven't got a clue about the balance sheet for the Average American Family.
The Fed models consumers in terms of "aggregate demand". And then when consumers stop buying, the Fed throws up its hands and exclaims ... "well gosh, there is a deep mystery about aggregate demand. we don't understand why, in a low-interest rate envronment, people aren't buying more goods!!!"
MAYBE if the Fed actually checked the interest rates on consumer credit cards - they would discover the incredible 'revelation' that those interest rates are enormously high. Ya' think that might have something to do with the problem???
"The Fed has never understood the "average Joe on the street..."
And they don't give a shit about them either!
We have the same problem we had in 1930. The economy has changed structurally and the workers are not trained for the new economy. It will take 20 years (a generation) to work this out.
That is what they want you to think.
Let's just market to market and talk in term opf solvency now. Today. Couple years in bankruptcy court will fix the A-holes right out to where they can understand working for a living personally.
What can they be trained for in the "new" economy? Everything is being automated to the point that there are no jobs. Not everyone can be a developer for Amazon or Facebook. We will need an army of people to care for the elderly, is this the new economy?
RE
“They want you to cook the dinner; at least they ought to let you shop for the groceries.” - Bill Parcells
my only hope is,the "main-streamers" keep on talking their lies up until the day after it hits,after that,all bets are off..say whatever you want (the truth...finally),meanwhile i will keep on collecting up my many cans of spam(yummy) and ammo.
This author is a professor at a university and a former world bank advisor. Do I need to say more.
Article heading says mainstream economists fed up with fed..
Then says African Americans showed up in green t shirts?
Wtf?
Lame article... waste of time
Article should read "I'm fed up and want to talk about fed.. please give me attention as i vent some"
"restrict the flow of funds into speculation and encourage the financial sector to play the constructive role in our economy that it should"
Get Joe another Nobel prize.
I thought he was going somewhere with this, but then he throws it away at the end:
>Now is not the time to tighten credit and slow down the economy
Say what? He just argued that the Fed is protecting the banksters, and then he finishes by saying they should keep on doing it "to protect the economy"? Did Stiglitz read his own article? Did he write it, or just use a ouija board?
The doublespeak is strong in this one.
eCONomists.
What
a
fucking
joke.
Now is the time to tighten credit, for it is the easy credit for the wrong reasons that gives the fuel to inflate asset bubbles across all asset classes. The sooner they are deflated the sooner we can get the rebuilding process going. I would like to see this on the financial and political fronts and certain people, cor[oration and governmental agencies need to be audited and then many tried on various charges from treason to murder to theft.
Twenty-five basis points isn't even a hike; let us see them raise it by 50 basis points. Then we can see the fireworks as a mass UST dumping of the magnitude 3-5 trillion comes home. Then they can just implode this time-bomb and we can begin to rebuild; starting on a moral foundation upon which the nation was founded. Unless we begin to teach ourselves and the next generation biblical moral values & trash to the relative/politically correct moral values, which are immoral; nothing will help this generation or any other. It starts with the way we think, which manifests the way we talk & behave and the way we dress; parents no longer lead by example "do as I say, not as I do" and the same is true for "leadership", which is not leadership. The natural result is everyone doing as they see fit because truth is relative and various person by person; just as we have historical examples as to where that leads, we are doomed because we have not learned from the past and it is the current and upcoming generations that will suffer the consequences.
Perhaps it truly is time for the FED to meet it's demise as Dr. Ron Paul has been insisting for quite some time now. To Hell with their "Dual Mandates', in which they have proven themselves a miserable failure! End the FED!
A return to The Constitution has been Long Overdue!
#3 FED Mandate.....Bankster Bonuses Matter!
The Fed isn't working for you Pal, and doesn't give a shit what you think, say or do.
I don't know why you would have any sympathy for the Fed. Their supposed "close calls" are just policies to make the wealthiest people in the world even wealthier. Don't forget who employs them.
have a FEDUP sticker on my van since 2004 when I was a liberty associate with NORFED aka Liberty Dollar, getting closer to having my confinscated silver back from the feds.
I've just done a very long interview/conversation with Allan Meltzer, the official historian of the Federal Reserve for RealVisionTV. He has personally worked with every Chairman since 1958 and remains at 87, sharp as a tack. He did not mince his words. He says the Fed is "shameful" for taking two years to decide on a 25bip move. It's unprecedented. He says the Fed has not "lost" its independence. No, he says "Bernanke and Yellen gave it away"! Plus all the new regulation and repression are vastly increasing the crony capitalism and insider shenanigans. When a measured, knowledgable person like Meltzer rails this hard, sonething is wrong. Zerohedge and its readers are not imagining things.
Don't bother reading the comments. Here they are in a nutshell, it's all the Jews' fault and those goddamn Spics coming here illegally. That's the Zerohedge party line on any issue.
And if you replace "Jews" with "banking mafia" then Stiglitz shilling for the banking mafia supports that line 100%.
Fake leftie shill for the banking mafia?
Anyway he did say one thing right
Increased prosperity can only come from increased productivity and that generally means technology and innovation.
Cheap labor can increase employer's profits in the short term but in the long term it destroys innovation.
So counter-intuitive as it may sound, labor shortages are the route to prosperity because they drive innovation.
Ah, someone who still believes The Myth Of Progress. I'm sorry, darling, but Technology cannot save you from Peak Energy. Technology has proven successful at driving down costs and improving living standards precisely because it has been burning through fossil-fuel energy -- think of it as Gaia's capital -- for four centuries. Now, however, we've burned through enough capital that the interest is diminishing. That means that Technology can do little for us, because Technology was always code for running through our capital assets as fast as we could shovel them on the fire.