In a speech on Friday at the Jackson Hole Economic Symposium, Federal Reserve Chair Jerome Powell delivered a deeply troubling message: in order to curb inflation, the Fed is willing to “bring some pain to households and businesses.”
In an op-ed published in OtherWords last week, Dr. Rakeen Mabud, chief economist at Groundwork Collaborative, pushed back against this cruel and misguided approach:
“Bringing prices down must be a top priority for lawmakers, but Washington’s default tool for dealing with inflation — aggressive interest rate hikes — only makes life harder for these families. That’s because aggressive interest rate hikes work by increasing unemployment and slowing down wage growth, a ‘cure’ far worse than the disease.”
Email press@groundworkcollaborative.org to speak with Dr. Mabud about the dangers of a Fed-manufactured recession. And read more from Dr. Mabud in Other Words and on Twitter.
KEY EXCERPTS FROM DR. MABUD’S OP-ED
“Former Treasury Secretary Larry Summers is a longtime advocate of this cruel approach. Earlier this summer, Summers cheered the idea of throwing millions out of work when he suggested that the Fed should ‘raise interest rates enough that the economy will slip into recession.’ More recently, he doubled down: ‘My worst fear would be that the Fed will continue to be suggesting that it can have it all in terms of low inflation, low unemployment, and a healthy economy.’”
What’s more, throwing millions out of work would do little to address the root causes of rising prices: outsized corporate power, supply chain shortages, and the war in Ukraine. As Federal Reserve Chair Jerome Powell admitted in June, raising interest rates “can’t affect… all the supply-side things that are still pushing upward” on gas and grocery prices. Rate hikes also won’t break up the megacorporations that Powell conceded could be “raising prices because they can.”
“We can’t ‘save’ the economy if people are struggling. After all, we are the economy. When we do well, that’s when our economy thrives.”