Wednesday, June 29, 2022
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Who would so foolishly advocate for deliberately putting 2.3 million workers out of work? Guess who? – Bill Mitchell – Modern Monetary Theory

Today is Wednesday and I am pressed for time today. My local community is in the final stages of trying to stop massive overdevelopment among us that will damage our community’s social cohesion and environmental amenity while generating huge profits for greedy real estate developers. I have to appear in court today to document the impact of developments on these things. Real estate developers are the scourge. The same goes for mainstream economists like Larry Summers, who proposes intentionally increasing the unemployment rate by more than 2.3 million and holding it at that level or higher for years to reduce current (temporary) inflation. Who would be so stupid? After being so pissed at this and Keir Starmer for giving up working class representation, we can soothe our souls with some Roy Elridge.

Who would foolishly advocate for adding more than 2.3 million unemployed over the years just to bring the CPI down a little?

In May 2022, the U.S. unemployment rate was 3.6%, meaning 5.95 million workers were still unemployed, but wanted and could.

The broader measure of labor underutilization – U6 – was at 7.1%, but with the official unemployment rate rising and falling.

For example, if the US unemployment rate rises to 5%, there will be approximately 8,218,800 workers unemployed.

I just did a simple regression analysis and it shows that the U6 rate will rise to just over 10%.

Thus, moving from current labor market status to 5% unemployment would put an additional 2.268 million workers unemployed, and approximately 16.4 million workers would be considered generally underutilized (underemployment, marginally attached, unemployed) .

in conclusion:

1. A high degree of destruction of human potential.

2. National income is losing a lot every day.

So, who would be foolish enough to suggest that the U.S. government adopts a strategy that makes this situation a solution to temporary supply-side shocks and oil producer cartel behavior?

Well, mainstream economists would suggest so.


And in the past day, it was Larry Summers who was reported in a Bloomberg article (June 21, 2022)— Larry Summers says U.S. needs 5% unemployment in five years to ease inflation

Here is some analysis of his past judgments:

1. The embers of neo-Keynesian reasoning (31 August 2021).

2. It’s not enough to be humiliated and humiliated (December 18, 2009).

Summers said:

We need five years of unemployment of over 5% to keep inflation in check – in other words, we need two years of 7.5% unemployment or five years of 6% or one year of 10%… America might need Monetary tightening as severe as Paul’s, Volcker advanced in the late 1970s and early 1980s.

First, in this blog post – US Federal Reserve Bank Economists Take Marxism on Us (May 30, 2022) – I analyze new research from Federal Reserve Bank economists who categorically reject the “Volcker end inflation” claim.

They show that a marked decline in workers’ bargaining power allows inflation to subside after a period of conflict over the distribution of labor and capital.

They concluded that the volatility of monetary policy devised by Paul Volcker did not work as Summers claimed.

Last week, I was speaking at the Levy Summer Symposium when I was reminded of a quote from Milton Friedman about how a deflationary monetary policy event will ultimately remove inflationary pressures, workers and bosses are making a There is a lot of debate over who will bear the real loss of income. The supply of imported raw materials fluctuated.

He said the period of high unemployment (beyond his claimed natural rate of unemployment) must be around 15 years – almost a generation of workers denied work.

Summers really pitched in the same league.

The first graph shows the evolution of US CPI inflation from 1949 to May 2022 – the core measure is currently 6%, while the all-item measure is 8.5%.

Neither measure is likely to rise to levels seen in the 1970s, as the wage war with capital simply did not continue to spread.

It is unclear when the effects of the pandemic will dissipate, when Putin will stop his war, and when OPEC will end its current profit-fraud.

But when these things are over, inflation falls to low levels almost immediately.

Yes, a rapid and prolonged recession with more than 5% unemployment (and additional underemployment) will eventually reduce demand for gasoline, which will ultimately force OPEC to lower prices.

But at what cost?

Lots of.

The second graph shows the relationship between U.S. unemployment and inflation, broken down into historical periods.

The slow improvement shown by the 1970s cycle and the 1980s-1990s cycle is something Summers believes should be enforced.

Except for the smooth relationship since 2000 versus the current spike, which tells us a lot about the dynamics of the labor market within the U.S., especially in terms of wage pressures and changes in the unemployment rate, which will cause the planet to be so bad that inflation falls .

Since inflation is largely driven by supply-side factors, demand-side policy actions will come at a high price in lost revenue, among other things.

Yes, there is a problem of excess demand.

But they are not typical “inflation gap” type excesses, where the supply side is fully utilized and nominal demand continues to grow faster than capacity.

All of China’s factories, along with undeliverable ships and workers infected with the coronavirus, mean there is considerable slack on the supply side.

In this case, even normal levels of spending can create “excess demand” pressures.

But the answer is not to cut spending, but to expand supply to make better use of existing capacity.

This will not happen until Covid is gone and the situation in Ukraine is resolved.

The next graph highlights the period from the 1970s and 2000s – to get a clearer picture of the differences between the two episodes.

The two decades are not comparable.

The current rise in the slope of the Phillips curve is temporary.

The flat section better describes the existing rationale.

They are very different from the 1970s, when unions were stronger and workers could more successfully defend their real wages.

The intentional design of a massive increase in unemployment and the pain that comes with it is insane, because policymakers don’t have the patience to see the end of this transition period.

The wisdom of Max Planck is summed up in this quote—paradigms change one funeral at a time.

Never intended to hurt anyone, but….

UK Labour Party – Leaders fearful of backing legal industrial action

The increasingly unpopular Keir Starmer has apparently told his frontbenchers not to offer apparent support for rail workers who are currently seeking better wages and conditions.

Apparently, Stammer believed that his team was showing “leadership” by avoiding any contact with workers on the picket lines.

The Guardian’s story – Kirstarmer tells Labour front row they shouldn’t join rail strike pickets (June 20, 2022) – A belief that the traveling public should take precedence over the interests of workers.

If this idea had dominated workers’ long struggle for better wages and conditions since the beginning of the Industrial Revolution, all workers would not still be living in poverty.

At the last general election, Labour lost touch with its traditional support base.

Presumably they were pinning their hopes on the Tories so bad that the base would return.

I wouldn’t bet at all.

Labor must be reconciled with the struggles of unions and workers.

Not everyone is a high-paid lawyer!

This article – Keir Starmer’s stance on rail strike raises questions over strategy (June 21, 2022) – Shows that Starmer is more interested in continuing to purge the left from Labour than representing the interests of the working class.

He should look at the Channel to see how left-wing solidarity benefits France’s progressive political forces.

Music – Roy Elridge

Here’s what I’ve been listening to this morning at work.

This is an American trumpeter’s classic – Roy Elridge – who established a new style after domination – louis armstrong – later defined – Dizzy Gillespie.

Roy Elridge plays with the saxophone — Coleman Hawkins – they all elevated the so-called- Tritone Replacement – New heights of jazz.

For musicians, this might mean replacing the G7 chord with a Db7 chord to enhance improvisation.

For non-musicians, it just means it sounds good – creating more contrast in the harmonic content.

Franz Schubert used this alternative method in his classics to great effect.

Here he plays— echoes of harlem – 1936 Classic Composition – Duke Ellington.

Roy Elridge recorded the album in Stockholm in 1951 (see below), but it wasn’t until 1955 when – Roy has a rhythm.

It’s a very complex piece with multiple parts, ranging from minor to major, overlaid with a beautiful trumpet melody.

It just means – yes – it sounds good.

Roy Elridge recorded the tune in the following way:

1. Charlie Norman – piano.

2. Karl-Henrik Norling – Tenor.

3. sundval lip – Bass speaker.

4. Anders Berman – drum.

5. Thor Jedby – Double bass.

almost perfect.

Enough for today!

(c) Copyright 2022 William Mitchell. all rights reserved.

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