by Robert Reich:

[elleng]

'Do you want to know how bonkers U.S. policymaking is when it comes to jobs and wages? Despite the fact that the economy is producing jobs at a snail's pace, and more Americans are seeking unemployment insurance, the Fed is poised to raise interest rates and thereby slow the economy even more.

Why? Because of the ghost of inflation – the fear that there’s so much demand for goods and services that prices will start accelerating. That’s utter baloney. Inflation is only 1.6 percent – and that’s almost entirely because of housing and healthcare. Housing prices are rising because high-end and luxury construction far exceeds new affordable homes (which in turn has a lot to do with widening inequality); healthcare costs continue to rise because boomers need more of it, and also because insurers are gaining market power to raise prices (and expand deductibles and co-payments) as they consolidate.

In other words, there's no real demand-driven inflation, and this is the worse possible time for the Fed to raise interest rates and slow the economy. The fact certain members of the Fed are pointing to increases in housing and healthcare costs as justification for a rate rise shows they don't have a clue what's happening to the typical American family.

What do you think?'

https://www.facebook.com/RBReich/?fref=nf

[stuffmatters]

1. I agree with Robert Reich,Dean Baker, Hacker ... to me.the 21st century realists

Yellin-Bernake-Greenspan....I think it's time to challenge their traditional Fed "wisdoms" that have brought so much carnage to
the middle class. I'm just a lay person, but in what rational universe is raising interest rates by definition not inflationary for a middle class that depends on variable interest for most credit but their first mortgage?

[seabeckind]

2. Here's where I disagree with Dr Reich.

Maybe at one time before all the money manipulations to make money and where money was invested in real stuff instead of just to make money, there might have been a closer relationship between the economy and the fed interest rates.

But I think those days are long gone.

Just like at one time the stock market was an indicator of the health of the economy.

At this point those fed rates are nothing more than trickledown. I think only a part of the money that is made easily available actually goes to strengthen the economy. I think the biggest players are first in line and grab the biggest chunks and then away they go. The part that would actually make the lifeblood of the economy flow is just a minuscule part. And there ain't nough leftover to actually feed the economy.

The problem is that the fed is built to favor the top, not the bottom. I don't even think they can see the bottom from their corner office.

A little inflation is a good thing for main street because their investments are in stuff that increases in value with inflation. Like the value of their labor.

A total anathema to the guys who have all their assets tied up in money cause they lose.

Let me repeat: A little inflation is a good thing for main street.

[KoKo]

3. ....!

[KPN]

5. Yes, but only if it is the result of demand. Inflation for the

sake of creating Fed maneuverability, which is really all this is about, does nothing to improve the economy for the working class. Inflation is a good thing when it's moderate and results from greater ability to buy goods due to greater income levels among working and middle class. Otherwise, it only harms them.

[seabeckind]

6. Pretty scary. I guess it isn't an easy switch to flip, is it?

I guess that's why we give them the big money.

BTW, we've been living this bullshit for 20 years.

[KPN]

7. Yep. But more like 30 years.

We are screwed if this doesn't get turned around. Well, my kids and grandkids are. Me, not so much. The $15 minimum wage is hugely important in this regard. We need a return to the old system where wages increased, the prices, then wages, then prices. We have been in a flat wage cycle since the late 70s effectively. Thank you Ronald Reagan.

[seabeckind]

8. Exactly. All that money in the economy

needs to be invested in this country and that which brings us value. Not a few hundred hoarders.