The horizon is not so far as we can see, but as far as we can imagine

The Fed Wants To Crush Wages So Corporations Can Price Gouge

There are multiple sources of inflation. As a friend once said, one man’s inflation, is another man’s pricing power.

Right now we have a situation where inflation is caused by (non exhaustively):

  1. Disruptions to the supply chain.
  2. Lots of dead and disabled workers (over a million dead in the US, who knows how many disabled) leading to a tight labor market in some countries.
  3. Sanctions on Russia (food, fuel, minerals, which feeds into other things, plus disruption of the dollar hegemony system.)
  4. Massive price increases by corporations above their costs, to increase their profits.

I’ve seen estimates of about 50% for corporations simply increasing prices because they can, even though their costs haven’t risen that high.

What does the Fed think should be done about inflation?

Chair Powell keeps mentioning the relationship between the high level of job openings and wage/price inflation,” Nicholas Colas, co-founder of DataTrek, wrote in a newsletter on Tuesday. “He’s not talking to investors. He’s talking to corporate America, and his goal is to have companies essentially institute a hiring freeze and end the cycle of paying up for new hires.”…

…“The Fed’s goal is to convince corporate America to enact a short-term hiring freeze, and it will keep raising rates and talking about aggressive monetary policy until that happens,” Colas wrote. “Lower stock prices are his way of convincing C-suites and boards to do that.”

“Chair Powell mentioned the ratio several times at last Wednesday’s press conference,” said Colas, who said job postings need to drop from 11.5 million to around 8 million to get to normalcy.

The only way to get there would be some sort of freeze from companies.

Since 1979 the only type of inflation pressure either the Federal Reserve or legislatures have been willing to recognize is wage-push inflation.  (See HERE for a long explanation of how the Federal reserve crushed wages with wage push inflation measures.)

This is why, for going on 43 years now, workers wages have not kept up with GDP, most people can’t afford to buy a house, rent is thru the roof, and people die due to medical care costs.

But the way to deal with companies increasing prices faster than their costs isn’t to stop employers from hiring, it’s to institute an excess-profits tax, where companies that are making a lot more than they did before the pandemic simply have it taxed away. Granted, that would take legislative action, but the Fed isn’t even calling for it, and the Fed has a powerful bully pulpit.

You could also aggressively act on anti-trust concerns and break companies up so that they have competition: they can raise prices in large part because they are unregulated oligopolies who raise prices in lockstep.

Those are legislative actions, but the Fed is the main regulator of banks and brokerages and could stop loans from being given to firms buying up the housing and rental supply and jacking up prices. It could encourage the government entities which guarantee housing loans to put conditions which disallow rent increases beyond a few percentage points, and not allow large numbers of homes to be owned by corporations.

There are certainly other steps which could be taken, but the point is that the Fed isn’t pushing anything but “don’t hire and don’t give raises”.

In tight labor markets wages should rise. That’s good. If every time there is a tight labor market you squeal about inflation then hammer the economy into the ground to kill wages, of course people’s wages will fall behind, and if that’s substantially the only thing  you ever do to deal with inflation for over 40 years, of course wages will be hammered.

If, at the same time you run policies which cause massive inflation in housing, rent, and medical care (and now food), well then, ordinary people will be screwed because those are things they must have, no matter the cost, so if they can pay they have to.

What the Fed is doing, in other words, is class warfare, the same as everything of significance it has done since 1979. People will die because of this and become homeless.

As for Congress, well, increasing taxes on corporations is unthinkable to them, so I guess people dying and becoming homeless and so on is their preferred outcome.

Might want to go demonstrate at the houses of key Congress members and Fed Reserve members too.

And remember, much of why the labor market is tight is because they let a million people die and probably millions be disabled by not handling Covid, It was noted near the beginning that the Black Death caused an increase in wages and that Covid might do the same.

It has. Now, on top of letting you die, they want you to not get wage increases, so that corporations can make huge profits and the rich can get even richer.



The Democratic Bargain, Abortion and Responsibility


Open Thread


  1. VietnamVet

    Yes, this is as plain as day. The only thing that is working in the West is profiteering.

    In over three quarters of a century, I do not remember anything similar to today, Friday the 13th. Crypto’s are crashing. North Carolina beach houses washed out to Sea. A Dust Storm in Midwest. Giant mansions burning on California’s Coast. A proxy World War III with Russia is underway with no effort to avoid a nuclear war. American women’s reproductive rights are ending. Washington DC keeps having super spreader events. Yesterday, flags were lowered for a million American COVID deaths. Shortages of goods and workers are exploding. Diesel rationing is predicted for the US East Coast. But the oligarch run American government is simply incapable of fairly rationing energy or food. American mothers have to relearn how to prepare evaporated milk baby formula.

    The bottom line that this is intentional. It makes more money for the rich.

    Sri Lankans burning their politician homes is harbinger of “End Days”.

  2. bruce wilder

    On the plus side, the War with Russia has vindicated the principle that the state can sanction the rich and simply take their stuff, neither taxes nor civil or criminal litigation is necessary — just say-so. A way forward is clear.

  3. Steve Ruis

    Re “Lots of dead and disabled workers (over a million dead in the US, who knows how many disabled) leading to a tight labor market in some countries.” Since just under 75% of the deaths are to those aged 65 or older, I don’t think this factor is as big as you infer. It may just be that there are still working aged folks are tired of corporate bullshit and low wages and are not playing the game.

    It is hardly surprising that the “Fed” is suppressing wages, it seems both political parties have adopted that strategy into their platforms. Apparently they no longer need donations from us little people. I wonder why that is.

  4. Ché Pasa

    I think that this time, wage suppression isn’t really going to mitigate price gouging. Wage increases are nowhere near keeping up with inflation. As you recognize, this is not a wage-push inflationary cycle, no matter what the opinionators are saying about it. No, it’s another pure greed cycle, driven by the opportunities present in all the crises occurring simultaneously.

    Baby formula, for example, is available — for a price. Just so with so many other needful things in supposedly short supply. They can be had — so long as you can pay.

    Wages aren’t really the point any more. If the vast majority of people can’t afford to pay, too bad for them. Interest rate hikes will mostly affect the lower and middle class debtors getting by on credit. In other words making it more difficult for them to obtain needful things. The overclass often doesn’t pay interest on their debts. They collect it from the little people. So with higher interest rates, they’ll collect more of it — at least for a while.

    And from the looks of things, the short term benefit to the already overly well-off is the point. What happens to you’n’me? Too bad, so sad.

  5. Blueberry Hill

    The rich are the state bruce and Sir Lankans need to be burning the homes of the wealthy elite along with the homes of the politicians. I remember once upon a time Russians had the gall, the temerity, to rid themselves of the rich but no more. The Russians, like all of us for that matter, are right back where we started. Same as it ever was. Same as it ever was. Square One.

  6. anon y'mouse

    bruce wilder—that’s just one set of oligarchs using their bought government to punish another set somewhere else and indirectly, its government.

    we can’t even nationalize healthcare, telecom nor many utilities here. too many armies of lawyers, lobbyists and political puppets.

  7. someofparts

    Ian, I hope you folks in Canada can hang onto some civilized semblance of the country you are now, because your neighbor to the south is a cursed hellhole.

  8. Ian Welsh


    yeah, that’s why I included disabling. But also, when you’re talking marginal pricing, small amounts can have large effects.

    I have no idea what the real Long Covid numbers are, but the disabling numbers seem to be between7 and 10% (they’ll rise over time.) Those are some very large numbers, given almost everyone is getting it.

  9. someofparts

    Right now I feel like I cannot stand anyone my own age. They got theirs, by damn, and they care not one tiny bit about the hell enveloping the millions around them. I hope that before they die, some of the hell they have created with their smug inhumanity hurts them too.

  10. Ché Pasa

    Shortly after his inauguration, I took to calling Obama “Barack Hoover Obama” because the policies he chose to deal with the GFC were essentially retreads of Hoover’s policies with regard to the Great Depression, ie: shower the banks and financial institutions with money for nothing, hold them harmless, and do as little as possible for the masses, and then do only what will provide a profit for the lordly classes.

    It’s not true that Hoover did nothing to relieve the suffering of the ordinary people, but nearly all the relief money his government provided went to prop up the financial sector — which was then supposed to be socially conscious and provide relief for the lower orders.

    From my perspective, Obama took these policies a step further. He not only propped up the financial sector, his policies ensured far greater wealth to them than prior to the GFC; endless streams of money and perpetual bonuses. For the rest of us, the barest minimum. Sometimes not even that; millions upon millions were impoverished, many died in poverty, and for the rest, partial recovery took at least 10 years. And then, whoopsy!, let’s go through it again.

    These policies to endlessly fulfill the Bankers’ Dreams no matter what, usually at the expense of the underclasses, are now doctrine, baked in, and realistically we have no political recourse. No matter who is ostensibly in charge, the policies won’t change substantially.

    Of course we have plenty of power outside the political system, and they’re terrified we’ll find out and use it. Oh my yes.

    Among ways to keep us from using inherent power: wage suppression and pension theft. Ensure that we have only enough income to keep us from starvation and homelessness. And that some of us don’t even have that. Always.


  11. different clue

    @Vietnam Vet,

    Perhaps Sri Lankans’ burning their politicians homes is a harbinger of ” Better Days to Come”.

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