Thread by @INdilimfumu

Chairman Powell is now speaking to the Senate Banking Cmte. and, sadly, both sides of the aisle are asking the wrong questions.

Inflation is too hot, sure. But the Senators (and the public they represent) fail to understand that inflation represents the FIRST DERIVATIVE (1/12)

of price and interest rates represent the SECOND DERIVATIVE of price.

Thus, the Fed can only affect the 2nd & 3rd derivatives of price -- price being what the consumer actually complains about -- by the level and speed at which interest rates rise. (2/12)

These tools are necessarily quite blunt and difficult to apply.

Moreover, the Fed can only influence aggregate demand, not supply, business profitability or overall consumer confidence.

All of these issues are exclusively the realm of CONGRESS, which continuously fails (3/12)

on both sides of the aisle to properly manage SUPPLY by appropriate TAX, Spending and Microecomomic Regulation.

Congress fails, here, because of widely excessive partisanship and bickering principally coming from the DO-NOTHING, "never-tax-me", obstinate and ecomomically (4/12)

illiterate Republican Party.

On the other hand, the high inflation has also led to amazing increases in jobs and wages of the kind that hasn't been seen in over 40 years. And these increased jobs and wages tend to be very "sticky."

Thus, the Fed's goal is to temper the (5/12)

rise in prices by raising interest rates and reducing the money supply (i.e., buying back debt and "reducing the balance sheet"), in order to stem BUSINESS demand without at the same time allowing prices to continue to rise so fast that businesses decide to (6/12)

begin laying off employees in seriously large numbers -- which always signals the onset of a recession.

It is up to Congress to influence supply through appropriate TAX policy (raising taxes on some business lines and reducing taxes on others), as well as influencing (7/12)

profitability by Congress's SPENDING and TAX policies in given microecomomies (by setting Government spending policies and allocations, and by its tax policies).

And it's Congress's job to affect both supply & demand by its SPENDING policies, especially regarding (8/12)

INFRASTRUCTURE SPENDING & REGULATION which have the net effect of influencing the efficiency of American business & personal spending and, indirectly, of prices, wages and inflation over the very long term.

Here, the Republicans constantly badger Democrats on the issue of (9/12)

AGGREGATE TAX & SPENDING, which distracts from the real issues, above, and which confuses and benights the Public's understanding of what Government is actually for.

We have seen just how the insane levels of partisanship among the MAGA crowd have hurt us. (10/12)

It's high time for the rest of the cowardly, obsequious and pusillanimous #GOP/#GOPCowards to stiffen their spines, resist Trump & his many MAGgots, and work truly collegially with the Democrats to continue adjusting Federal SPENDING & TAX policies to limit inflation and (11/12)

bolster the economy, without also causing a recession.

It's always a very tricky proposition, given that food, oil and other energy prices are set by OPEC and international supply chain issues (i.e., Putin).

But Congress has ultimate responsibility, here, not the Fed. (12/12)