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There’s a reason central banks are independent

The government should use a firehose better aimed at the conflagration, which won’t so badly burden the bottom 80%.

For starters, impose a temporary windfall profits tax on big oil, on giant sellers of consumer staples and on big ag. This would reduce their incentive to engage in price gouging.

Bolder antitrust enforcement – even the threat to block mergers and break up giant companies – could also reduce their ardor to raise prices.

If Congress refuses to allow the government to use its bargaining power to reduce the prices of pharmaceuticals, big pharma is a good candidate for temporary price controls. (FDR controlled prices via executive order.)

Finally, higher taxes on the wealthy – such as Democrats seem finally ready to enact – will help dampen total demand, thereby dousing some of the inflation fire.

The Fed’s single tool for fire-fighting – interest-rate increases – is aimed in the wrong direction. It’s hitting working people rather than corporations responsible for most price increases (over and above the rising costs of global supplies).

We need to fight rising prices, not working people.

Because that set of policies to fight inflation – not that it would – would cock the economy for the long term. Whereas an independent central bank raising interest rates will calm inflation and not cock the economy long term.

7 thoughts on “There’s a reason central banks are independent”

  1. Can you ban me now?

    What about fully indexing the economy? Why shouldn’t central banks buy and sell inflation swaps to control expectations?

  2. rsm (stop looking for pity, you wanker)
    Because indexation invites manipulation. Better to simply eliminate inflation, or reduce it to a tolerable level. Who would central banks buy and sell inflation swaps with?

  3. Can you wank me now?

    dcardno

    And non-indexed economies don’t already invite manipulation?

    What if your real purchasing power was stable, even as nominal prices rose uncontrollably? Would nominal prices even matter anymore?

    Don’t inflation swaps today protect businesses against price risk? Price takers pay insurance to price makers, if prices rise above the breakeven takers get paid and the Fed can make the money, and set the breakeven to 2% or whatever using Open Market Operations?

  4. I thought we were told that the rich don’t spend all their income, thus hurting working people. Now you are saying they spend too much….

  5. Finally, higher taxes on the wealthy – such as Democrats seem finally ready to enact – will help dampen total demand, thereby dousing some of the inflation fire.
    How the fuck do they work that out? I think I’d describe myself as having the spending patterns of the wealthy. My personal inflation rate’s running negative at the moment. I don’t buy much more of the things other people buy than they do. But I spend a lot of money on things they don’t buy much of. They’re buying less of those now because they can’t afford them. So there’s no shortage of them. Quite the opposite. And those selling them are reducing prices to try & sell them.
    Tax the rich & they’ll buy less of these things. That’s money not going to the people produce & sell them. Ends up in the economy as poorer people’s wages.

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