From Citizen To Peasant: Central Bank Nuttery

This sort of thing is mostly out of my area of expertise, but it’s important enough that I’m going to take talk about it anyway (in this brave new world you apparently don’t need prior knowledge and expertise even to run a cabinet level department, so I think I’m probably ok):

The tame inflation and weak retail-sales data released Wednesday won’t deter the Federal Reserve from raising short-term interest rates later in the day but do raise doubts about another rate hike in September.

Economists said the Fed will not want to back away from a rate hike Wednesday that has already been signaled.


Consumer-price index posted the second decline in three months, the government said Wednesday. The rate of inflation over the past 12 months slowed to 1.9% in May from a five-year high of 2.7% just four months ago.


If you’re unaware, the US Federal Reserve is tasked with a dual mandate- provide the monetary conditions for both full employment and low inflation. It is generally accepted among economists that full employment means an unemployment rate around 4%, and low inflation means a 2% annual rate.

However, inflation is compounded continuously. This makes sense: if prices rise in 2010 at 2% and 3% in 2011, that 3% represents more than if inflation had been only 1.5% in 2010. With that said, here are the average rates of inflation per year since 2009 (so we are completely post-crash):

2009:  -.4%

2010: 1.6%

2011: 3.2 %

2012: 2.1%

2013: 1.5%

2014: 1.6%

2015: .1%

2016: 1.3%

Most people aren’t a fan of inflation, and I get that: who wants to pay higher prices!? But inflation is something that happens when an economy is growing, and it also tracks with wage growth.

Taken together, all those years with sub 2% inflation (a number which is already too low) represent bad years for workers, years which the Fed could make up for with some catch-up inflation. Instead, even though our economic outlook is pretty obviously not good in the near-to-medium term (this is noted in the linked article), the Fed still wants to raise rates!

And why?

He said the central bank in tightening in the face of softer economic outlook because the Fed wants to “normalize financial conditions.”

What’s that mean? Well, money has been “easy” for too long- banks can borrow from the fed at historically low rates, and for years after the 2008 crash the rate of interest was actually 0%! Lucky sons of bitches. Normalizing conditions means tightening credit for large financial institutions, which translates to higher rates down the line for others.

But we don’t live in “normal” times. We live in an age of nearly unprecedented inequality and rising fascism. We live in an age when the average American worker hasn’t had a raise since the ’70s. So if things have been too “easy” for too long, “normalize” means a harder life for you peasants.

The Federal Reserve is supposed to work for the citizens of the US- not its large financial institutions and multinational corporations. It doesn’t it’s dedicated to keeping wage growth as low as possible, even in the face of evidence that suggests they should be doing the complete opposite. It’s just one more mechanism power uses to keep the common person down and desperate lest they find the time and energy to engage their government and become dissident.