Fighting inflation, or workers?
For the Fed, “balance” in the labor market means maintaining the imbalance of power:
Jerome Powell, the chairman of the Fed, has made one thing crystal clear: He is not going to let up on his war on inflation. American workers are the inevitable casualty.
“Demand for workers far exceeds the supply of available workers, and nominal wages have been growing at a pace well above what would be consistent with 2 percent inflation over time,” Mr. Powell said in a speech late last year. For that reason, the Fed wants to see “the restoration of balance between supply and demand in the labor market” before it stops fighting inflation. In layman’s terms, that means a restoration of the power imbalance in favor of employers over their workers.
On March 7, Mr. Powell sounded a similar note, declaring that in order to get inflation down to where he thinks it should be, “there will very likely be some softening in labor market conditions.” There’s nothing soft about what he means: less demand for American employees, which leads to fewer raises and more people out of work.
Read more here. Meanwhile, in Europe it is dawning on the central bankers that something else is going on: see here.
More on the SVB collapse
Econ4’s Gerald Epstein interviewed on the latest financial crisis:
There are five main causes of the SVB collapse and the subsequent knock-on problems facing the U.S. and global financial system: the Federal Reserve’s anti-inflation obsession causing it to raise interest rates too high and too fast; the inherent fragility of banking, which for centuries has periodically erupted in crises; inadequate regulation of this fragile system, which often leads to high profits that accrue to banks and their wealthy owners; the corruption and self-dealing that often result from banks’ insufficient supervision; and the lack of public alternatives for financial institutions and services that could perform many of the key functions of banking and finance with less risk and without the private financiers taking their cut. Some of the huge profits financiers make from this system are funneled to buy support from politicians to prevent adequate regulation, and to secure bailouts when the system crashes.
Read more here.
Another piece of the carbon puzzle
Who can get involved in “investor activism”? You may be surprised:
Source: Gregor Semieniuk at TedX Boston, January 2023, https://www.youtube.com/watch?v=NgvPlJA9-yE.
Banksters
They’re playing their favorite game again, privatizing profits and socializing losses – heads the bankers win, tails the public loses:
While the regional banks that are now struggling are not large enough to face the most intense level of regulatory scrutiny, they were deemed important enough to the financial system to warrant an aggressive government intervention.
“At the end of the day, what has been shown is that the explicit guarantee extended to the globally systemic banks is now extended to everyone,” said Renita Marcellin, legislative and advocacy director at Americans for Financial Reform. “We have this implicit guarantee for everyone, but not the rules and regulations that should be paired with these guarantees.”
Read more here.
Mega-disastrous mega-farms
In American agriculture, as elsewhere, the plunder of man goes hand-in-hand with the plunder of nature. Two new books make the link between environmentally ruinous mega-farms and the ruination of small and medium farmers. To set the scene:
We are eating a big hole in the middle of the Midwest and sucking up California’s ancient aquifers until the land collapses like an empty juice box. The awe that new arrivals from other countries feel when they see the bounty in a US supermarket is an illusion—more like what one might experience when stepping from a cold night into a nice, warm house where they’re burning the furniture. In short, we are plundering the natural sources of our food production and can’t go on this way.
Read more here.
Naming the problem: Global oligarchy
Bernie nails it:
“One of the points that I wanted to make is yeah, of course the oligarchs run Russia. But guess what? Oligarchs run the United States as well. And it’s not just the United States, it’s not just Russia; Europe, the UK, all over the world, we’re seeing a small number of incredibly wealthy people running things in their favour. A global oligarchy. This is an issue that needs to be talked about.”
Read his Guardian interview here.
Fossils
A 2021 memorandum by staff of the House Committee on Oversight and Reform investigated lobbying activities by the fossil fuel industry. Here’s what it reported:
In recent years, four major oil companies operating in the United States—ExxonMobil, Chevron, Shell, and BP—have claimed that action on climate change is a top public policy and investment priority. All four companies have publicly asserted that they support the Paris Agreement and carbon pricing—two key policies to address climate change. However, an analysis of lobbying data indicates this public support has not been matched by meaningful action to advance these policy results. Instead, the companies appear to be using their praise of the Paris Agreement and carbon pricing to bolster their own public image while they continue to produce billions of barrels of fossil fuel and invest in new oil and gas extraction—actions that are making the climate crisis worse.
Read it here or below.
Inequality surges
The latest inequality numbers are out, and they’re obscene:
According to Oxfam’s annual inequality report, released to coincide with the World Economic Forum meetings in Davos, the richest 1% of people have captured nearly twice as much new wealth as the rest of the world combined since the pandemic. Their fortune soared by $26tn, increasing their share of new wealth from 50% to two-thirds.
The breakdown of these figures exposes how on a global basis, extreme wealth is accumulated not by innovating or increasing production, but by taking advantage of rising prices and exploiting labour. In this effort, wealthy people are enabled by lack of regulation and taxation. The result is a bonanza of plunder with no sheriff in town.
This has been happening for a while, but the pandemic accelerated the trend. Rich people benefited from everything – every positive intervention from the state and negative impact of the crisis somehow still ended up increasing their wealth. They benefited from rising costs by using them as an alibi to charge higher-than-inflation prices, then distributing the rewards as dividends instead of higher wages. Food and energy corporations made a killing, making $306bn in windfall profits in 2022, then distributing 84% to shareholders.
Read more here.
Thinking – that’s right – about inflation
In The American Prospect‘s Great Inflation Myths series, Josh Bivens writes:
The inflation of 2021-2022 has sparked furious debate over the proper policy response. It also exposed how little innovative thinking has been done on inflation by either macroeconomists or policy analysts since the 1980s price acceleration was ended by the “Volcker shock”—when the Federal Reserve (led by chair Paul Volcker) raised short-term interest rates to 20 percent and threw the economy into its worst recession since the end of World War II.
Check out the series here.
