>Who is benefiting from a scary headline like this?
My wider, lay understanding of this is that the powers-that-be (hereafter "PTB") do not like the FRB's interest rate hikes, so from the PTBs' perspective:
1. Create fear and more fear and further fear among the public in the hopes of triggering further bank runs ("ohnoes the gov can't bailout savings no more!") and other fiscal destruction.
2. FRB is eventually forced to reconsider their current (read: undesirable) fiscal plans. Ideally go back to zero interest rates?
3. ????
4. PTBs PROFIT once more?
All journalism is propaganda and exist strictly to benefit someone out there, so I would be particularly skeptical if that propaganda is also fearmongering.
Such a derogatory statement detached from reality. It's like saying all health professionals are out there to get your money by keeping you as sick as possible. Or all teachers are out to indoctrinate your kids. Or all firefighters are arsenists.
I have quite a few journalists as friends or acquaintances, and many of them are the most honest people I know, with strong ethics and admireable ideals.
Of course there are bad apples out there. In any profession. But your statement is just ridiculous.
A few bad apples spoils the bunch. You can have thousands of apples in a barrel, but a couple of bad ones can quickly make the whole barrel worthless.
For example, the New York Times makes the right call on integrity vs profits, access, etc dozens of times a day for years. Then one time 20 years ago they make the wrong call vis a vis Iraq weapons of mass destruction, and they've almost completely destroyed their integrity. Seems unfair, but as a consumer we can no longer trust them, and probably never should have.
> Then one time 20 years ago they make the wrong call vis a vis Iraq weapons of mass destruction, and they've almost completely destroyed their integrity.
If you think about the Iraq war whenever your read a piece by a journalist in the NYT, even if that journalist wasn't even out of their diapers at that time, then you may need to re-adjust your grudges.
This is probably one of the most commonly-used fallacies I see people used to deal with cognitive dissonance caused by information that might make them uncomfortable.
I mean to get through life without having to run every single thing down you use heuristics to evaluate whether it is worth pursuing the details or not. My heuristic wrote off whether looking at pursuing his perspective is worth it or not based on the comments in his twitter feed which seem to match up perfectly with his charges. It's why credentials have value.
I don't know what's on his twitter feed, but I've yet to see a single rebuttal to any of the main highlights of that book. Don't be blind to the truth because of your own personal biases.
I just scanned his twitter feed and I don't see anything terribly problematic, so I'm not even sure what you're referring to that would make you ignore him.
Are there any large orgs that haven't made a significant misstep in the past 20 years? It sounds like this could be shortcutted into "don't trust any organizations" which rounds to ... not useful? Some organizations can be trusted more than others, and "trust" should be multi-dimensional.
> but as a consumer we can no longer trust them, and probably never should have.
This doesn't follow. I'm not a fan of the mainstream media by any means, but trust is not an all or nothing thing. It is entirely possible to develop a relatively sophisticated relationship with news media and to assign different levels of trust to different elements of what is encountered. Indeed, one might even vary their level of trust on a sentence by sentence basis!
The idea that the media must be entirely correct and entirely unbiased is jejune. It isn't the world we live in, has never been the world we live in. Take a little epistemological responsibility.
And that 99%ish of them realize that they need to at least look like they have integrity to be paid.
And if asked, I’m sure 99% of them would admit that the best way to keep getting paid and look like they have integrity is to actually have integrity.
usually where the problems happen is when they can’t see the disconnect between their day to day actions and the long term goal, or when they hit a challenge where they can’t do what they need to do - and then can’t take ownership of what they did and instead hide/project/deny, etc.
I’m guessing less than 90% would really have actual integrity, and the rest should hopefully be kept in check by fear of discovery or whatever. But things slip through regardless.
The problem isn't with the individual journalists, it's that the structural incentives of for-profit journalism require that editors, writers et al. bias their thinking to assume that the current structure is valid and generally whomever the highest bidder over the longest term determines what the structure is.
That is to say, every human act is political whether you acknowledge it or not because it either maintains the current system or attempts to change it. So we should question the motives of anyone who is structurally incentivized to give you information that benefits the owners of the periodical.
Propaganda is just information released to push a particular point of view. Propaganda is far more derogatory sounding than it should be. The analogy to healthcare is way too extreme.
Then you are halfway to realizing how extreme the claim is that all journalists actively push a particular point of view, i.e., are engaging in propaganda.
I wonder if the bank run on SVB wasn't planned or coordinated in some way by VCs & private to create a scare in the financial system to force rate hikes to stop or slow down as VCs and Private Equity did very well in the era of free money and now are facing headwinds. It is not as if the VCs who triggered the collapse are not very smart people who would not have understood the exact implications of what they were doing.
The powers that be love them. They raise the rates whenever they think they can afford to.
Money is like equity. Raising the rates is essentially a way for them to consolidate more equity. They distributed more equity than they were comfortable with as stimulus during covid, and now they're calling it back. The pattern has been going on since the 70s at least. They made up the BS idea of "natural rate of unemployment" to justify it and gave a nobel prize to the guy who said to keep the unemployment at 5% to keep down "wage inflation"... a.k.a.. people getting paid more. Pay hasn't tracked productivity ever since. Look at the unemployment vs fed rate charts.
Letting your currency inflate is a populist move for a reason. It's not because people are dumb, it's because while it devalues people's savings, it puts money in the pockets of people without savings, and devalues debt as well. It was used previously in Portugal, Italy and Greece to spur exports whenever the economies were hitting a rough spot. Once they got on the Euro and the powers that be wouldn't inflate, they were screwed, and Germany was able to buy up a bunch of their assets and essentially takes tribute via interest rates on their loans now. It skims off the productivity of their economies. Raising the rates helps them skim more.
Libertartian types tend to have savings. They like to spin a story that justifies what they sense... that raising rates is good for them. It is good for them. People are really good a sniffing out their incentives, even if they don't quite know why. It's also good for the powers that be though.
Whilst it devalues debt, I'm not sure I follow it being populist? Since it results in higher food, energy, rent prices etc and wages do not typically keep pace.
The federal reserve defines the "natural rate of unemployment" as being around 5%. This is just a number they made up that happens to be high enough to continuously erode the power of labor. If unemployment starts to dip below that, they raise the rates as quickly as possible. You can look at historical graphs of fed rate vs unemployment to verify. The rates are jacked up, it causes a recession. Unemployment increases. They reduce the rates, we recover from the recession, then they raise them as quickly as possible to stem "wage inflation" (a.k.a. people making more money) and within several months, the next recession starts.
The reason the wages don't rise with the prices is because that 5% are getting hired, and the under-employed are getting more hours, and they jack up the rates as quickly as possible as soon as they sense that wages are rising. However with the increased hours, and fewer under-employed there are people who couldn't afford toilet paper who are finally able to, and that increase the prices. That's not a bad thing. More overtime has a much bigger effect than increased egg prices to most people in low wage jobs. And lower unemployment improves their working conditions as well. It's still essentially a transfer of shares to the broke, even if the wages don't directly increase. Also, a lot of the inflation that was happening this go-around was due to rich people with their PPP loans being able to speculate. Taxing the rich at a more progressive rate as was done in the 50s and 60s would be an alternative way to stem inflation besides using the fed rate. But of course they haven't touched that one in a while.
It's not just trump and sanders that are populists looking for lower fed rates from the central banks. In most countries I think you'll find that the populist parties (i.e. the party with most representation among the poorest) tend toward pushing for lower interest rates and more government spending. You'll also find that those representing the rich tend to push for austerity. There's a reason for that. And it's not that the populists are all working together. You can tell they have much more disparate values than the centrist globalists who want high rates.
Great clear-eyed and cynical take here, I like the spirit of this comment if not all the details/conclusions, but can you provide a link/source for "You can look at historical graphs of fed rate vs unemployment to verify" and the "federal reserve defines the "natural rate of unemployment" as being around 5%" claims?
I think both of these are probably roughly true-ish but by brief Googling I couldn't verify either one.
https://commons.wikimedia.org/wiki/File:Federal_funds_rate_v... <-- that's a graph like what I'm talking about. Notice how the blue tends to go up sharply before the grey recession bars. And this tends to happen right as the red line starts to approach 5%. There's an exception recently because trump was in office demanding that they keep the fed rate low, and I guess they decided to listen to him because he was cutting their taxes. But you can tell they didn't love the guy by the way the media covered him. I'm no fan either, but for different reasons.
That wiki graph does not show what you say. There are multiple place in the curve that don't follow your theory. And by places, I mean for example the stretch from 1980 to 2000.
Right, they use their super scientific model that was definitely arrived at in a very scientific way that just so happens to keep the number hovering at 4 or 5%. There's nothing real stopping us from cruising around with unemployment at 2 or 3%. Other countries do it. It's been like that in the past in the US. And the invention of the concept just so happens to coincide with a complete de-correlation between productivity gains and wage gains. It's also based off of a dogmatic assumption that you can't have low unemployment and low inflation, and a failed economic model.
Anyway, as for a source, the 2nd paragraph of the wikipedia article on NAIRU states it's generally 5-6%. You can pretty readily google it and see that it's been between 4-6%.
https://www.ft.com/content/facf6989-7cd2-3724-a6d4-dfe7c7551...
"Among a certain set, the big debates in the 1960s were about whether the government should target an unemployment rate of 3 per cent or 5 per cent." Guess which one they picked. Economics, as it intersects with politics, is not a science at all. Not even close. It's the result of people with agendas funding grants with hopes that someone will show the results they want, and then them cherrypicking those results. If you throw enough money into it, you can find a "scientific" justification for anything. The more academic side of it has some merit... but for the most part it gest brushed aside because it's not telling the people making the policy what they want to hear.
Or you simply are inverting cause and effect. Or at least cause and multiple independent effects. When the inflation goes up, both interest rates and unemployment go up.
It's akin to saying that coughing causes lung cancer. Smoking causes coughing and lung cancer. One cause, multiple effects.
Libertarian types don't have a preference for high interest rates because they have savings. They have a preference for the interest rate to be set by the market freely, instead of being intentionally manipulated up and down by central planners and causing havoc in the economy.
The reason they currently support higher rates is twofold: 1) The Fed has kept rates artificially low for an irresponsibly long period of time, leading to inflation and other economic distortions, and 2) The only way to get inflation (which is pernicious) under control is with higher rates.
You can control inflation with taxes, and it's a more fiscally responsible way to do it.
As for "irresponsibly low" and "(which is pernicious)"... these are your value judgements that you've arrived at based on your perspective. That's fine, but other people have other perspectives. To someone with debt who wants a well-lubricated economy, or to someone who makes money off of exports, it's not irresponsible at all.
If you look at the history of fed rates vs unemployment and recessions, it's a very clear trend that the fed rate has to stay lower longer for a recovery, and it takes less raising of the rates to put us back in a recession. Why would this be? Maybe because it's not the appropriate tool to be using to control inflation. Maybe it's not because the fed is being irresponsible, but it's doing what it has to to keep the economy afloat and that's less and less effective because the country refuses to do what it has to, which is raise taxes on the rich.
"You can control inflation with taxes, and it's a more fiscally responsible way to do it."
There is an interesting and compelling theory that you can control inflation with taxes (broadly, MMT[1]) but the cautious and (in my opinion) warranted skepticism that you voice, upthread, about prevailing economic theories should be extended to MMT as well.
We don't really know if money supply creation via "printing" and the corresponding destruction via taxation will work just as MMT suggests it will.
"What field of economic thought leads you to claim that inflation can (and should) be controlled by taxing the rich?"
Not "the rich" per se, but he is speaking of MMT[1] which maintains that the government of a sovereign printer (sorry, Argentina) does not need taxes at all because they don't "need" the money.
MMT purports that money is created by "printing" it into existence and money is destroyed by taxing it away.
Even Fisher Black admits that there is a currency trap at 0% and he doesn't mean that the problem is that the interest rate is too low but rather that the zero lower bound is like a minimum price control that constraints the formation of interest rates and he basically predicted what the IMF blog Said about this resulting in cash and electronic bank accounts ending up with an exchange rate between them.
My smart friends - rich and poor - universally approve of the rate hikes, because they understand, like me, that price stability is their primary mandate. Many also believe, like me, that the Fed really screwed this up in the last few years.
If by "PTB" you mean the market, then of course it hates rate hikes. Also just hates uncertainty.
Seems like a convenient coincidence that all your "smart" friends agree with you lol.
Actually the fed has a dual mandates: price stability and unemployment. Price stability can also be achieved by taxation.
And in this case the massive inflation we saw was mostly due to supply chain issues. So many businesses shut down during the pandemic. Others were hanging on by a thread. Which sounds like it will help supply chains recover? Increasing interest rates for loans? Or keeping access to lots of liquidity? Hmmm, seems like if we're wanting to expand capacity again, we want liquidity. Then prices can go back down due to capacity going back to normal, rather than artificially reducing demand by getting everyone fired.
If we need critical immediate measures to stem inflation, then we can raise taxes. Get some of that PPP money back. Make everyone who was speculating on housing sell their investment homes. That will drive inflation back down without starving the recovering supply chains.
I did say "primary mandate". I don't think that is controversial.
>then we can raise taxes
I totally agree that raising taxes is the right thing to do (as do my smart friends and most economists ;) ). But that's not the lever the Fed has. And of course it's politically untenable.
> Make everyone who was speculating on housing sell their investment homes.
Agree there too. But that's not the lever the Fed has.
I don’t understand this comment so may have this completely wrong.
But using Jewish stereotyping in articles about a kind of banking conspiracy theory is something I would avoid though.
My wider, lay understanding of this is that the powers-that-be (hereafter "PTB") do not like the FRB's interest rate hikes, so from the PTBs' perspective:
1. Create fear and more fear and further fear among the public in the hopes of triggering further bank runs ("ohnoes the gov can't bailout savings no more!") and other fiscal destruction.
2. FRB is eventually forced to reconsider their current (read: undesirable) fiscal plans. Ideally go back to zero interest rates?
3. ????
4. PTBs PROFIT once more?
All journalism is propaganda and exist strictly to benefit someone out there, so I would be particularly skeptical if that propaganda is also fearmongering.