Officials are trying to understand why consumer spending, the job market and overall growth have not responded to the most aggressive interest rates in decades.

  • gloriousspearfish@feddit.dk
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    1 year ago

    Another option to decrease spending is to increase taxes. That would of cause target the rich more, whereas increasing the interest rates is usually a benefit for the rich and hurts everyone else.

    No wonder why increasing taxes instead of interest rates are never discussed to tackle inflation.

    • hydrospanner@lemmy.world
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      1 year ago

      It’s also vastly easier for the Fed to adjust interest rates than for Congress to adjust taxes.

      Hell, it took them weeks to elect a speaker, could you imagine a debate over taxes!

      • rifugee@lemmy.world
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        1 year ago

        it took them weeks to elect a speaker

        And the best they could come up with is Mike fucking Johnson.

    • SCB@lemmy.world
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      1 year ago

      That would of cause target the rich more

      Though we should definitely raise taxes on the top 3 quintiles for a wide variety of reasons, your statement here is specifically why raising taxes to fight inflation doesn’t really work.

      The vast majority of consumer spending is non-discretionary

  • spittingimage@lemmy.world
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    1 year ago

    Understandable. Nothing’s worse for the economy than a strong economy. /s

    Economics is basically voodoo, isn’t it?

    • garretble@lemmy.world
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      1 year ago

      Some of my worst grades were in Econ class because it’s really hard for me to get beyond the fact that the answers to Econ questions always have an asterisk at the end since we don’t know what the future will hold.

      It’s like, yeah we say “all things equal” something should happen in a certain way. And in the vacuum of a classroom maybe that’s OK. But it’s really all just educated guesses. And really that’s the best that we can do, and maybe that’s just fine. But when I hear stuff like “economists predict [x]…” I kinda roll my eyes.

      • surewhynotlem@lemmy.world
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        1 year ago

        Economics 101 is like physics 101. It only makes sense in a vacuum, with no friction, and no vibration. Or to put it in economics terms, it only works with perfect consumer knowledge, no barriers to entry, and if the future is accurately predicted by the past.

        So yeah, voodoo.

        • SCB@lemmy.world
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          1 year ago

          And as everyone knows, no actual economist learns anything more than econ 101

    • SCB@lemmy.world
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      1 year ago

      When consumer spending is very high, inflation continues to rise because there is not an increase in supply. (Consumers are spending more to effectively get almost the same amount of things as before).

      This is, obviously, bad if unchecked.

    • lolcatnip@reddthat.com
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      1 year ago

      The Federal Reserve is like a cat that can’t make up its mind about whether it wants to be inside or outside.

  • MagicShel@programming.dev
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    1 year ago

    Caveat: I’m no economist.

    Despite the clear desire to see mass layoffs and unemployment so we will slow all our damn spending, the usual club to make that happen isn’t working. Labor is strong. Support for unions is strong.

    To explain this, I’d look at what has changed. I believe stock buybacks have been extremely high of late and that would be my guess. The big companies aren’t leveraged so, just like how the rates aren’t affecting recent home buyers who bought before the hike, they also aren’t hurting companies as much as would normally be the case.

    Another possibility is lingering effects of boomers taking COVID as a sign to retire, creating a labor shortage and putting pressure on companies not to have a layoff because they are worried they might have trouble re-hiring folks when the economy cools off.

    If anyone else has ideas, I’d be curious. I might not be right about the cause, but I’m right about looking at what is different right now.

    • SatanicNotMessianic@lemmy.ml
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      1 year ago

      Since the article is quoting some of the top economists in the world, I would t let not being one really limit your options for commenting.

      Here’smy hot take: economists have discussed sticky prices and sticky wages - which is a (imho) crappy way of describing effectively friction in economics. I wonder if what we are seeing here is sticky consumer spending. Normally we’d expect spending to react most quickly to interest rates and inflation, but people have gotten used to a certain level of spending and escalating debt, and so they might simply feel (or need to feel) unaffected by the fed changes.

      Honestly, until we update the idea of an economic rational actor, I don’t think we’re going to get very far. In fact I think we risk getting further afield the longer we persist, and the more difficult it will finally be to realign everything.

      • Semi-Hemi-Demigod@kbin.social
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        1 year ago

        Honestly, until we update the idea of an economic rational actor, I don’t think we’re going to get very far. In fact I think we risk getting further afield the longer we persist, and the more difficult it will finally be to realign everything

        I agree. The idea of humans being rational is so divorced from reality it makes me wonder if economists know real people.

    • SCB@lemmy.world
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      1 year ago

      Another possibility is lingering effects of boomers taking COVID as a sign to retire, creating a labor shortage and putting pressure on companies not to have a layoff because they are worried they might have trouble re-hiring folks when the economy cools off

      This is so rarely brought up and is such a massive fucking deal that it’s criminal not to discuss it.

  • Curiousfur@yiffit.net
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    1 year ago

    I work because I don’t have a choice and I spend my money because even saving 100% of my gross won’t get me even remotely close to affording a house because they keep going up in price faster than my income does.

  • EmpathicVagrant@lemmy.world
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    1 year ago

    If the people aren’t paid, and costs are up, then the 70% of the economy that is powered by spending will not be affected. Wild!