Federal Reserve Must Follow Paul Volcker's Approach in Decisively Beating Inflation (user search)
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  Federal Reserve Must Follow Paul Volcker's Approach in Decisively Beating Inflation (search mode)
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Author Topic: Federal Reserve Must Follow Paul Volcker's Approach in Decisively Beating Inflation  (Read 994 times)
The Swayze Express Finesses Railroad Baron Largesse
slimey56
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Korea, Democratic People's Republic of


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« on: August 10, 2022, 12:51:51 PM »

You mean the same Paul Volcker who gleefully cheered as Reagan fired all the air traffic controllers and crushed private sector bargaining power for the fundamental rights the rest of the Western world enjoys (e.g, paid leave, a work week under 40 hours, employee ownership)?

While Volcker correctly understood the Fed must reduce its balance sheet, supply shocks from KSA/other natural resource extractors contributes to the current ongoing inflation (at least in the colloquial definition of waning consumer buying power), I am skeptical a monetarist approach is necessary as overall growth/productivity continues to flourish. After all, the 90s’ deficit hawks owe their entire existence to Volcker’s Quasi-Austrian measures regularly underfunding the federal budget while Ol Ronnie embarked on his Star Wars wild goose chase. In fact, following the Volckerian philosophy of raising the federal funds rate ad nauseam to disincentivize capital investment only creates further barriers to entry, thus enabling those who’ve accumulated capital to further concentrate property ownership.

My contention is we are not experiencing stagflation, but rather should pursue windfall profits taxes and more pricing transparency to force the “invisible hand”. The Inflation Reduction Act’s 15% corporate minimum tax and $35 insulin pricing cap seem like good starts, however these types of moves need to be all-encompassing; To actually recuperate windfall profits, our tax code needs stronger enforcement/OECD reciprocity. The 2nd move risks the various pitfalls we’ve seen from price controls over the years. Look, I work in a competitive construction industry. Every project we have to submit our budget with marked out cost codes/budget lines  to the owners’ specifications, and we might lose out because some other contractor might swoop in with a better offer. The transparency brings out the best in everyone. If we’re okay with insurance companies existing as an administrative middle-man, shouldn’t we demand transparency in pharmaceutical negotiations out of the public interest?

Tl;dr: Yes, we need to shrink the fed’s balance sheet. Yes, rent-seeking behavior continuing to outpace production. However, tightening the belt on aggregate demand via raising interest rates will rival its austere predecessor in forcing the most vulnerable to shoulder the burden. I contend the solution is more post-WWII than Gas Crunch; we need to ensure buying power parity.
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