Category Archives: Ian Welsh

The Continued Collision Between Trump and the Fed

Ian Welsh | January 10 2017

As I noted before, the Fed and the Trump admin are on a collision course. More evidence:

Fed minutes show many officials think they may need to accelerate rate hikes if fiscal raises demand over sustainable levels

— Sam Fleming (FT) (@Sam1Fleming) January 4, 2017

The Fed’s argument is that the unemployment rate is low enough that it is at the natural rate of employment which doesn’t cause wage-push inflation. As of December, that was 4.7%.  (There are tons of problems with this, but we’ll ignore most of them, what matters is what the Fed thinks.)

I am old enough to remember when an unemployment rate of 5% was considered a scandal, but no matter.

The fact is that the people who elected Trump aren’t feeling good.  To make them feel good Trump is going to have get the official unemployment rate lower than it is now, at least under 4%, and hopefully to 3% or lower and hold it there for some time, at least 2 or 3 years.

This stuff takes time to ripple thru the economy, and it takes time for a tight labor market to push employers both to raise wages and to hire people who they consider marginal.

If the Federal Reserve raises rates if Trump’s policies (“fiscal”, in the above) start to work, they will be making sure he can’t deliver to his constituency.

This is a direct collision course.

Now let me say something simple.  The Federal Reserve, for over 30 years, has deliberately crushed wages. This was policy.  Policy.

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“Voltaire’s Bastards” by John Ralston Saul: The Death of Purpose at the Hands of Reason

Ian Welsh | May 29 2016

I have re-read John Ralston Saul’s Voltaire’s Bastards. But because I haven’t read it since it first came out in the early 90s, it was more like reading it for the first time.

For those who haven’t read it, Saul basically says that reason (rationality) has become un-moored from common sense, democracy, and purpose.

I think purpose is probably the core of the argument. Organizations, including government, parliaments, and so on, have become rational and forgotten the purpose of their existence.

Saul eviscerates the military—slow, ponderous, capable of winning only with overwhelming force, and usually not even then. Full of rational mediocrities and controlled by staff officers who squash any field officer capable of initiative or of winning battles without vast waste of men and material.

He eviscerates the arms trade—weapons sold for less than it costs to make them; non-capital goods that make up the largest manufacturing sector in the world; and completely irrational from the point-of-view of both the economy (guns being the paradigmatic drain on the economy) and from winning wars: selling weapons to everyone and their mother means your enemies know their weaknesses, something you should be trying to avoid.

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The Role of Politicians in an Oligarchy

Ian Welsh | May 20 2016

… is to wrangle voters for oligarchs then enact policies to make the rich, richer.

This is clearly indicated by jobs for the families of politicians and the way that politicians are rewarded post-career.

The Clintons had a 100 million dollars a few years after leaving the White House.

Seven figure lobbying jobs are routine for Senators after their legislative career.  Before that their families are taken care of, and most of them somehow become multi-millionaires.

The same is true for high ranking bureaucrats.  Timothy Geithner, who helped bail out Wall Street was giving six figure speeches almost immediately after leaving his post.

If you want to know who someone works for, look for who pays them.

You pay lawmakers far less than the rich.  They do not work for you.

I would estimate that this is true of well over 90% of American politicians.

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