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View Diary: Fed Audit: $16T in secret loans (228 comments)

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  •  Inland, it appears you are not the "expert" (1+ / 0-)
    Recommended by:
    polecat

    you think you are.

    One example of the FED pursuing unemployment as a means of protecting corportate profits:

    NY TIMES, 29 October 1999, Section C, page 6

    Numbers and [........] are mine.

    “Greenspan Calls Recent Rate of U.S. Growth Unsustainable”  

     “…(1) Mr. Greenspan warned that the growth rate of productivity would inevitably level off, leaving the economy vulnerable to a resurgence in inflation…repeated his longstanding warning that the economy was running out of workers [low unemployment] so fast that continued strong growth could lead to a surge in wages and then prices [cost-push inflation]…(2) ‘All the same, the rate of growth of productivity cannot continue to increase indefinitely,’ Mr. Greenspan said.  ‘At some point it must, at least, plateau.  Should, at that point, labor market tightness [low unemployment] result in faster growth of nominal wage rates [labor as an increasing cost of production], there would be no offset from accelerating productivity.  As a consequence, unit costs [price of labor] would likely rise, pressuring profit margins and prices.’…(3) Mr. Greenspan left no doubt that he was particularly concerned about the shrinking pool of available workers [unemployed workers].  The number of people seeking jobs has declined over the last two years and is heading lower as the economy hums along, he said…(4) The problem for the Fed…is that it can no longer [because of productivity gains from fast-changing technologies] assume that it knows when the economy is at risk of overheating.”

    The purpose here is to draw out the assumptions contained within Greenspan's statement and then articulate what they reveal about the underlying dynamics of contemporary U.S. accumulation processes.  From (1) and (2) we see that as a consequence of low unemployment there exists an upward pressure on wages: low unemployment creates bargaining conditions favorable to labor as well as a collective action problem, i.e., an incentive for individual capitalist firms to raid one another’s labor forces, thereby driving up labor costs, which is mutually ruinous. If wages [unit costs] increase then this leads to lower profits [pressuring profit margins] or inflationary pressures or both insofar as there are not corresponding increases in productivity. One conclusion is that current economic practices require unemployment to ensure high profit margins (3), that is,  unemployment disciplines labor.  Conversely, anything mitigating the sting of starvation or an inability to pay the rent or mortgage—unemployment insurance, welfare programs, etc.—favors labor militancy.  Another pertinent issue is the trade-off between full employment and inflation [(1) and (2)] and how this paints an accurate portrait of contemporary U.S. capitalism as an irrational system with two mutually unsatisfactory options: (A) unemployment, stable prices, high profits, and job insecurity; or (B) full employment, destabilizing inflationary pressures, and low profit margins.  I reject (A) because all citizens have a right to work.  

    Though option (B) may sound better than (A), it is not.  Low profits adversely impact research and development, and  unstable prices result in production and distribution inefficiencies.  These inefficiencies have negative material and ecological consequences.  It is also important to note that money is based on social trust, a social relation.  With inflation—and even more so with hyperinflation—social trust breaks down.  Breakdowns in social trust tempt persons to act in ways they would otherwise avoid.  These breakdowns in social trust can even result in violence.  

    The last comment is on (4).  The economy as engine metaphor [overheating = inflation] is telling of the Fed’s outlook: overheating is bad, i.e., no one wants an overheated car engine; thus, the Fed favors option (A).  There is no discussion of option (B) or of purchasing through the political transformation of existing relations of production a rational economic engine.  Unarticulated option (C)—the rational economic engine—might be stable prices, full employment, and job security.  Solving the collective action problem of capitalist firms in times of full employment would require strong unions acting in comprehension of economic tendencies and laws: wage growth should not exceed productivity growth.  Because the marginal productivity of some workers is such that they cannot adequately provide materially for themselves, option (C) ought be combined with progressive taxation and redistribution policies whose central focus ought be on the State’s obligation to provide a deep and far-reaching social safety net for all of its citizens.

    Inland, you may want try a little harder before asking me to "give you a link" or I will continue to make you look like you don't know shit.

    "The attack on the truth by war begins long before war starts and continues long after a war ends." -Julian Assange

    by Pierro Sraffa on Fri Jul 22, 2011 at 07:45:42 AM PDT

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    •  You should be writing a series of diaries on (0+ / 0-)

      Economics and options available to the Fed, chained-CPI, what the current employment numbers mean, and why 1931 isn't like 1937.

      IMHO.

      Happy little moron, Lucky little man.
      I wish I was a moron, MY GOD, Perhaps I am!
      -Spike Milligan

      by polecat on Fri Jul 22, 2011 at 07:49:28 AM PDT

      [ Parent ]

    •  No. Not even close. (0+ / 0-)

      a)  As always, the fed is targeting inflation, not profit margins, not unemployment.  Even by standards of hyperbole, nobody can say that the fed is pursuing unemployment to push up profit margins.  

      Now, when would the fed chairman make a remark about things that cause inflationary pressures, like a possible shortage of labor?  Why, in 1999, when there was such a thing.  

      Heard anything since?  

      Of course not.  Since then, there hasn't been any inflationary pressure from an overheated economy, and the Fed doesn't see it's job has holding down wages.  The Fed is countercyclical.  It changes what it sees as "the problem" every month.  It's in all the papers.

      But the statement that you are "defending" said something about a policy since Volcker.  That's 1980.  It's 2011.  

      It would be equally honest for me to cherrypick out a statement from Bernanke last week and say that the Fed sees its job as fighting deflation since Volcker.  

      b)  And speaking of dishonest, the parentheticals you insert bear watching.  He's not talking about wages per se but the cost of production.  As the actual statement says, a rise in productivity would also lower the cost of production.  Either one would stave off inflation pressures. But you insert a parenthetical that makes it seem like all he really wants is wages down, not productivity up.

      c) As for your discussion of strong unions and labor, it's not wrong, it's just irrelevant.  The fed, being an unelected and quasi government institution, isn't give a portfolio over everything.   Just as Greenspan doesn't have the power to increase productivity.

      THat's why Sanders isn't saying, get rid fo the fed: he's saying "where's the help for everyone who isn't a bank?"   THat's exactly the opposite of the attitude that the Fed is intentionally sabtotaging the economy.

      Avg. Medicaid cost to New Jersey: $1936 per child per year. Avg cost of helicopter commute for Governor: $2300 per hour. Guess which one Christie wants to cut back on?

      by Inland on Fri Jul 22, 2011 at 08:09:42 AM PDT

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      •  Jesus, you willingfully obfuscate when shown (0+ / 0-)

        that you wrong.

        You:

        As always,the fed is targeting inflation, not profit margins, not unemployment.  Even by standards of hyperbole, nobody can say that the fed is pursuing unemployment to push up profit margins.

        Nobody?  Greenspan says it himself, in Fed Speak so that most people will have no idea what he is talking about.

        Greenspan:

        ...longstanding warning that the economy was running out of workers so fast that continued strong growth could lead to a surge in wages and then prices…‘All the same, the rate of growth of productivity cannot continue to increase indefinitely,’ .... As a consequence, unit costs would likely rise, pressuring profit margins and prices.’…Mr. Greenspan left no doubt that he was particularly concerned about the shrinking pool of available workers unemployed workers.

        Just admit that Greenspan raised rates and created unemployment for the reason he said he did: because corporate profit margins are more important to the FED than the well being of workers.  Accept that the reason Greenspan did this is the reason Greenspan himself publicly stated.  If you can't do that then you are too intellectually dishonest to have a meaningful discussion about any of this.

        If you want to talk about the relationships between inflation, unemployment, and productivity we can.  But you need to be honest first.

        You may want to read the minutes from actual FED meetings, where the veneer comes off and they reveal just how intimately they are concerned about unemployment, profit margins, and the state of class warfare.  

        Greider's Secrets of the Temple is a good place to start.  PERI also does good work when it comes to the FED.
         

        "The attack on the truth by war begins long before war starts and continues long after a war ends." -Julian Assange

        by Pierro Sraffa on Fri Jul 22, 2011 at 08:30:32 AM PDT

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        •  Sorry about the typos above. I stand behind the (0+ / 0-)

          thrust of my argument though.

          "The attack on the truth by war begins long before war starts and continues long after a war ends." -Julian Assange

          by Pierro Sraffa on Fri Jul 22, 2011 at 08:44:00 AM PDT

          [ Parent ]

        •  Nuts. (0+ / 0-)

          That's like saying Volcker raised rates to lower the price of oil.    

          I realize there's a relationship between unemployment, inflation and productivty.  That's why pretending that the Fed's concern is lowering wages, not inflation, is so dishonest.

          Similarly, cherrypicking out one moment from 1999, when there were inflationary pressures,  is dishonest.  What's the Fed's position on wages and employment now?   If the Fed is really for lower wages and higher profits as opposed to fighting inflation, you'd see it working to raise rates and cause unemployment, right?  But if the Fed is really trying to stablize the currency, it would be lowering rates.

          So.  Which is it?

          You may want to read the minutes from actual FED meetings, where the veneer comes off and they reveal just how intimately they are concerned about unemployment, profit margins, and the state of class warfare.  

          Well, for god's sake, I hope they are concerned about unemployment.  But saying they are "concerned" includes concerned about the high unemployment, and your thesis is that the Fed has been fighting for highER unemployment for thirty years.  Fail.

          Avg. Medicaid cost to New Jersey: $1936 per child per year. Avg cost of helicopter commute for Governor: $2300 per hour. Guess which one Christie wants to cut back on?

          by Inland on Fri Jul 22, 2011 at 10:56:13 AM PDT

          [ Parent ]

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