Thread by @ptcherneva

Thread:
I realize many celebrate the Fed’s newfound comfort w/ low unemployment. I do too. But I don’t think this is a fundamental change in perspective. As @TheStalwart points, for Powell “It’s all about wages”. I.e. wage discipline is still the Fed's plan to fight inflation 1/n

@TheStalwart So inflation will continue to be stabilized on the backs of working people. Before it was the NAIRU (not yet dead btw): unemployment as inflation fighting tool. But w/ unemployment breaking through every NAIRU barrier, the Fed acknowledges the relationship isn't a good guide 2/n

@TheStalwart Instead the Fed is now watching wages. Powell’s statement means that, if we see robust wage growth, the Fed is still intent on stopping it in the name of price stability. 3/n

@TheStalwart The last time we saw worrisome demand-driven inflation was right after WWII. In the postwar period, it’s mostly been cost-push. Even the 70s wage growth was not THAT robust. Income inequality was already eroding. 4/n

@TheStalwart The Fed fought the oil shock cost-push inflation by breaking labor, unions, and the ability of wages to keep up with productivity. It helped accelerate the already worsening inequality. See @rohangrey ’s great piece on Volker’s legacy 5/n

https://twitter.com/rohangrey/status/1205171203704578048

@TheStalwart @rohangrey The median pay for 44% of workers is $18,000! Job Quality index has been collapsing.
❓Bottom line is this: why are we wedded to a policy that aims to slow down whatever advancements working people eek out in order to fight inflation. This has to stop. 6/n
cbsnews.com/news/american-…

@TheStalwart @rohangrey We have another countercyclical policy. Replace the NAIRU with a #JobGuarantee with an above-poverty/living wage floor. It’s anti-cyclical and will do what the NAIRU does, without using the scourge of unemployment as inflation-fighting tool. 7/n
pavlina-tcherneva.net/job-guarantee-…

@TheStalwart @rohangrey If inflation rears its head, look at the source. Is it a production bottleneck? Spec activity in real estate, fin markets? Does it come from other parts of the govt budget? No-bid contracts to firms? Subsidizing near-monopolies with outsized pricing power? Slay that beast. 8/n

@TheStalwart @rohangrey While I welcome the relaxed Fed stance, I don’t believe fine-tuning interest rates is as effective as ppl think in stimulating the economy or hitting an inflation target. And I don’t think that unemployment & poorly paid employment should be used as bulwark against inflation. 9/n

@TheStalwart @rohangrey The Fed has many, many important jobs to do. Financial oversight and regulation, anyone? How about redirecting its abundant resources and attention there. Enough of this labor market surveillance: employment and pay conditions have a lot of catching up to do. 10/10