You should be outraged at Wall Street, Investment Banks and the Federal Reserve. But you're not. You're outraged at high gas prices, and that's pissing me off.
After the Federal Reserve stoked the inflation fires for too long with low rates and easy money (in order to push back a recession), now we're seeing news reports like the following:
The Federal Reserve will not be able to hike short-term interest rates until sometime next year, even if most would prefer to do it sooner, former Fed officials and economists say.
Oh, that's just great. The Fed is feeling "boxed in" just after it finally recognized that inflation might become a problem. Hmm. After Wall St. orgied on boundless easy money, low rates, and a bogus redefinition of mortgage risk during a highly-leveraged housing mania... who'da thunk there would ever be a nasty comeuppance? And who'da thunk that postponing the "comeuppance" would further complicate matters?
We're teetering between recession and prolonged stagflation, and the "powers that be" are feeling increasingly impotent. The current energy "crisis" is really the price run-up over the past year or two. That's what's hurting us, and much of that has to do with the weak dollar. Hard working people in every state are feeling the pinch, but Republicans and Big Oil are trying to channel that outrage towards environmentalists and Democrats who oppose expanded drilling. But more drilling won't alleviate the current suffering. It's not risk-free and it won't bring down prices at the pump for at least a decade. It's a dubious and partial "solution" to a long term problem, but it's being advanced for short-term political gain. Isn't that suspicious?
Ronald Reagan said inflation is the cruelest tax. And inflation is in effect, now, affecting everyone. You see it and feel it every day. But what's really "cruel" is when this inflation genie gets out of control. And guess who will get part of the blame then? Employees will be blamed. The working and middle class will be blamed-- precisely the people who have been squeezed so viciously by the slow economy and the rapid rise in prices! If and when employees start demanding higher wages just to stay afloat... well that's when the shit really hits the fan, in the minds of some.
Consider this "Ahead of the tape" column from the Wall Street Journal article:
Labor is a business's biggest cost. When the cost rises, it gets passed to consumer prices, pressuring workers to demand still more. The result can be what economists call a wage-price spiral. That is what happened in the 1970s, when labor had more bargaining power and job-market slumps were followed by quick, roaring recoveries that made labor costs rise quickly.
In recent decades, labor unions have lost power and companies have sent some jobs overseas and replaced others with machines. No hiring frenzy followed the 2001 recession, and there likely won't be another one after the current downturn.
The downside of all this is that workers get squeezed: While their energy and food costs are rising sharply, their wages aren't moving higher in step.
The benefit is that it is hard to get a wage-price spiral going in such an environment. That is one reason the Federal Reserve is hesitant to raise interest rates anytime soon.
Oh, that's just a bloody glorious catch-22 there, isn't it? Today's workers have less collective power, so they get relentlessly squeezed by the "cruelest tax" policies of a "weak dollar" President and a feckless Fed. However, if employees somehow demand and receive higher wages, they get blamed for the dreaded "wage-price" spiral.
My time is up here at the Rude Pundit, and I've sure enjoyed it, and I appreciate everyone who indulged me by reading these rants. So I'll just conclude by saying: don't be deluded by the shiny small stuff. Accordingly, the American worker doesn't deserve "blame" if this lackluster economy should worsen. They're the victims of it. And if employee demands for higher wages initiate a wage-price spiral, it would merely be the last in a long line of economic dominos, most of which were placed by greedheads at banks and in the government.
