Wednesday, March 15, 2017

No Prosperity For You

Politicians promise their policies will creeeaaatte jayuuuuuuubs. Journalists judge policies by imagined (usually based on supply side fairy reasoning) jayyyuub creation of those policies. The Fed raises rates as soon as too many jayuuubbs are created, ensuring that not enough jayyyuuubs are created to ever give anybody a raise.

Nobody ever seems to recognize the contradiction here.

...adding, this the issue:

The Federal Reserve’s announcement today that it would raise short-term interest rates is not surprising, but is disappointing. As always, the issue is less about the direct impact of today’s 0.25 percentage point hike, and more about what this hike means, especially given that it has come relatively hard on the heels of a hike in December. Today’s hike seems to signal that Fed policymakers think that we’re currently at or very near full employment, and that failing to slow the pace of economic growth in coming months would soon lead to accelerating wage and price inflation. They could be right, of course, but it is important to note that there is little in actual economic data to indicate this.

The issue isn't that one small rate hike will destroy the economy, it's that rate hikes like this are the Fed's way of signalling that they will never let wages go up again.