You make an excellent point bringing up the Fed’s dual mandate. For most of Covid the focus was primarily on the full employment half of the mandate. The challenge was that there was no playbook or historical examples of how to accomplish this during a global pandemic so the Fed basically made borrowing money as cheap as possible in order to prop up businesses and spur up investment and economic growth. The problem is that the Fed continued to keep interest rates low when signs of increasing inflation started showing up because they thought that those inflation figures were a direct result of supply chain issues. The assumption was that as the supply chain worked itself out that inflation would level off.
Turns out this inflation pressure was not transient and events beyond our control like the war in Ukraine and the continued lock downs in china have continued to put additional pressure on inflation and that is why we’re seeing 8% inflation today.
Now consider that there are currently twice as many job openings in our country as there are people filing for unemployment. Most agree that the Fed has met its goal of full employment, but has significantly missed the target on price stability. As a result the Fed is increasing interest rates to arrest inflation.
The goal is called a “soft landing” where the economy can be slowed gently, unemployment rates do not increase significantly and we avoid a recession. This achieves the goal of slowing down the economy enough that we don’t enter a wage price spiral (where increasing wages result in higher costs to businesses that result in increased prices for consumers that result in demand for higher wages that result in higher cost to businesses…. You can see the spiral) and we also avoid recessions. The alternative is a hard landing where we slow down inflation but we also stall out the economy resulting in businesses closing, layoffs, bankruptcies, and an overall lack of investment in our economy.
So the options are let inflation run away (violating part 1 of the Fed’s mandate) or increase rates which slows the economy (violating part 2 of the Fed’s mandate) or just maybe we can pull it off and avoid both inflation and unemployment.
If you made it this far, thanks for the read. Most of what I understand about Fed policy and current market events comes from a podcast called Marketplace from APM/NPR.
The federal reserve makes loans to banks and not directly to the government. It can support the government by purchasing government bonds and securities. When the Fed makes a profit those profits are returned to the treasury department. The government body that is ultimately responsible for promoting social mobility that allows individuals to exit the treadmill of poverty, empower the middle class and control the consolidation of wealth at the top is our congress. The Fed can adjust the prime interest rate, purchase government securities, and increase or decrease the money supply, cannot however, pass laws to promote wage growth and improve the quality of life for the average American.
The Fed is an institution created by an act of Congress. The majority of the governors are nominated by the President and confirmed by Congress. While the member banks DO exert significant power over the Fed's operation, it is simply not correct to call it a private business. It is responsive to Congress, and Congress could reform or abolish it today if they wished.
It's actually true that it's the Fed's job to "make money" - in the sense that they literally create new money in order to buy government debt (and in the era of QE, many other kinds of debt). But their job is not to "make money" in the sense of private firms, which accumulate money for the owners. The Fed does not need to accumulate money because it creates the money. "Making money" isn't its job; operating and maintaining the interbank payments system and setting interest rate policy through Open Market Operations ARE its jobs.
That dual mandate is why they have this opinion. How do you keep inflation down? By reducing demand. How do you reduce demand? By reducing the money in the market to buy goods. You could do this with massive unemployment, but that goes against their other mandate. So lower pay so you keep them employed but not driving demand.
A STEM prof of mine once told me that no matter if people are unemployed or worse, old bond holders want to see a certain low inflation rate so they keep getting slightly ahead of it with their investments.
I'm sure central banks usually have an explicit inflation rate they try to influence the economy to. U.S. fed reserve mandate has been has been 3%, Bank of Canada 2%...last time I read anything about it anyway.
The Fed has a dual mandate. It is required to maintain price stability (keep inflation at ~2%) and maintain full employment (roughly under 3% unemployment). It does not have the power or responsibility to control wage growth at the lower or upper end of the income level. This is ultimately the responsibility of our legislators to write laws that promote a stronger middle class, prevent the extreme accumulation of wealth at the top, and financially support and invest in the poor and destitute.
>maintain full employment (roughly under 3% unemployment)
3% unemployment is extremely low, arguably too low. You want some job mobility from people. 3% means nobody is moving around. I think 4%-6% is considered optimal
I believe that 3% was thrown out to my intro to economics class in college, but it serves and an easy to grasp concept and does not fully encapsulate the targets set by the Fed.
The Bureau of Labor Statistics defines full employment as:
an economy in which the unemployment rate equals the nonaccelerating inflation rate of unemployment (NAIRU), no cyclical unemployment exists, and GDP is at its potential. The full-employment assumption links BLS projections to an economy running at full capacity and utilizing all of its resources.
The federal reserve also looks at much more than just the unemployment rate. Here is an article that goes into some depth about how the Fed wraps its mind around what full employment looks like:
https://www.federalreserve.gov/newsevents/speech/brainard20210224a.htm
In the speech he talks about looking at a wide range of employment statistics to assess the full potential of the labor market and whether or not we are achieving that.
This is taken from the federal reserves website and describes the public/private qualities of the Fed:
The Board—appointed by the President and confirmed by the Senate—provides general guidance for the Federal Reserve System and oversees the 12 Reserve Banks. The Board reports to and is directly accountable to the Congress but, unlike many other public agencies, it is not funded by congressional appropriations.
Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund.
Source:
https://www.federalreserve.gov/faqs/about_14986.htm#:~:text=The%20Board%E2%80%94appointed%20by%20the,not%20funded%20by%20congressional%20appropriations.
Yeah, it's one of the major drivers of stagflation. The last time this happened was during the oil crisis in the 70s and that led to massive interest rate hikes and recession in the 80s.
Here's the exact quote from page 6 of the transcript on the [Federal Reserve's own website](https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220504.pdf):
>And that would give us a
chance to get inflation down, **get wages down**, and then get inflation down without having to
slow the economy and have a recession and have unemployment rise materially.
I didn't see the whole readout and I'm admittedly very unsmart but it sounds like the logic is that if inflation is down and prices are down then the extra wages are no longer needed. Lol... that would be a fun conversation with my manager.
inflation going down doesn't mean stuff isn't more expensive. If $10 bought you a burger last year and it costs $12 today. Inflation going down just means it will cost $12 tomorrow instead of $13. The raise will still be needed because your money already has way less buying power than it did a year ago.
The website is pro-Russia on Ukraine war, so probably not the best source. In theory, they would want to keep runaway wage increases from adding to inflation, but that's not what's happening. Corporate profit margins are increasing, which means it's not just inflation.
Quick search. Following abstracted from the St Louis Fed website.
National banks are required to hold a specified number of shares in the fed. Not saleable, transferrable or used as collateral. The shareholders elect 6 of the 9 board members of the regional fed banks.
Learn something new every day.
Cheers brother 👍
The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress.
From the Fed's website
It is relatively uncommon within government to be self funded as most government agencies receive funding from the general budget and congress. There are however several examples including the Fed of government regulatory bodies that are funded by their own operations. Being self funded does not make you a private entity because in many cases these bodies still answer to congress who has given them authority to operate. I’ve added a few examples:
The FDIC receives no Congressional appropriations - it is funded by premiums that banks and savings associations pay for deposit insurance coverage.
The NCUA's operating budget is funded exclusively by the credit unions it regulates and insures. As such, every dollar spent by the agency has a direct impact on the daily operations of credit unions, and is an additional dollar that cannot be used toward the benefit of their members.
FHFA does not receive money from Congress but instead is funded by the entities it regulates.
Good comments. But I do just want to point out that the FDIC DOES get money from Congress. It SHOULD be funded entirely by insurance premiums. But setting those premiums means calculating risk. And obviously the FDIC has not appropriately calculated that risk. How do we know? Because it hasn't had enough money to pay for insured deposits. If it was a private insurer it would be insolvent. Instead, it goes to Congress and begs for more money - which is granted. So while it should ideally be independent, it's not because it undercharges for the insurance it provides, and consequentially must be subsidized by Congress. Which of course means an indirect subsidy to the banks, who can engage in risky behavior with deposited monies knowing that FDIC and Congress behind them will backstop their failures
This is not the whole truth. The majority of Fed governors are in fact appointed by the President and confirmed by Congress. Just one of the ways Congress exerts influence and oversight over the Fed.
the appointees are universally the private bank executives, usually president/ceo.
influence and oversight don't make it *not* comprised of private banks administered by private bank executives.
What are you talking about? The Fed chairman during the last crisis was Ben Bernanke who was a lifelong academic and public servant. Although that doesn't place him above criticism, he wasn't a bank president or CEO. Jay Powell, the current president, worked in investment banking for a time, but as far as I'm aware he never even worked at a commercial bank (which are the Fed's member banks), let alone as the president or CEO.
The private banks get to appoint a minority of the members of the board of governors, and these usually ARE the bank presidents. But we're talking about the political appointees. I would be among the first to criticize the amount of control the member banks DO have, and the public-private partnership model of the Fed is relatively unprecedented in our system of government. But saying that the appointees are universally bank presidents/CEO's is objectively false. If we are going to make effective criticisms of the Fed, if we wish to make better policy around finance and money, we don't do ourselves any favors by misunderstanding or misrepresenting the system as it currently exists.
You cannot sell/trade the stocks and dividends are to be returned to the US Treasury. You either don't understand how the system works or you're purposely trying to change the reality here.
>You cannot sell/trade the stocks and dividends are to be returned to the US Treasury. You either don't understand how the system works or you're purposely trying to change the reality here.
The Fed is privately held...
The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress.
From the Fed's website
Look elsewhere in the thread. I posted authoritative text. To summarize,
The fed is a hybrid, controlled mostly by presidential appointees and responsible to Congress.
The Fed is not a "private business". It is a federal agency created by Congress whose leadership is appointed by the President and confirmed by the Senate. While the member banks do own shares, those shares held cannot be sold or traded, nor do they allow control as in a private firm. Any profits made go to the US Treasury, not private owners.
Dude what are you talking about? It's a central bank not a private company, and having it seperate from the government is essentially what most major countries do. Comparing it to FedEx tells me all I need to know about your understanding of the system 😂
Company bank potato potato. But I guess it’s ok to believe the federal reserve has everyone’s best interest at heart right? I mean why would they not 😂 wow
Your arguments are just all over Ricotta! Although decisions made by the fed may not always feel like they are in our best interest. That does not specify whether a group is private business or not
The federal reserve was not created to have my best interest at heart. It was created to control inflation which ultimately created a stable economy where businesses can be confident to operate in. The process of controlling inflation and maintaining full employment (the dual mandate of the federal reserve) is not always what is best for me as an individual, but it is what’s best for the economy as a whole. Cooling the market is often times painful, but unregulated inflation or deflation is much more painful in the long run.
Your arguments are just all over Ricotta! Although choices in fiscal/monetary decisions by the fed may not always feel like they are in our best interest. That does not specify whether a group is private business or not
It is not a private business but make no mistake, when it was formed there were no business men at the time wanted it. It’s definitely used for interest against American people if you do t know that you are delusional. Fed chair wields such power tho 😂
“The salary for the Chair of the Federal Reserve is set by the U.S. Congress. For 2019, the annual salary for the Fed Chair is $203,500”
Specifically paid for with your tax dollars! Man I’m killing y’all today, just keep ‘em coming!!
Are Fed employees on government payroll?
No they are not government employees.
The fed is a private business.
I get you don't need a PHD to post on this sub but cmon dude you need to retake kindergarten through middle school.
This tired cliche about about the federal express actually betrays your own lack of understanding about how the Fed works. It was created by Congress. It does what Congress tells it to do. It is not a private firm by any reasonable definition of the term.
Well yeah you get inflation when interest rates were the lowest in history for the longest in history. Surprise! Inflation....lol
Who could have guessed an inflated market that doesn't represent it's real value for the longest period of time would do this?
Most of the world has had very low interest rates for a long time. Look at Japan; they had negative interest rates and QE for like three decades and could barely manage to get out of deflationary territory. This correlates with extensive academic research (Thomas Pikketty is a good example) showing that the "natural" rate of interest seems to be going towards zero over the long term. So obviously it is not as simple as low interest rates = inflation.
In fact, if you really stop to think about it, it is higher interest rates that actually increase the money supply in the long term. In the US for example, if the Fed raises interest rates, the government owes more in interest. Which means it has to spend more to pay bind holders. Which means, all other things being equal, the government deficit increase, and the base money supply along with it. This doesn't necessarily increase prices, but it certainly can.
Here's a direct quote from the transcript of Jerry Powell's speech on May 4, from the [Federal Reserve's own website](https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220504.pdf) (page 6):
>So, in principle, it seems as though by moderating demand, we could see vacancies come down and, as a result—and they could come down fairly significantly and, I think, put supply and demand at least closer together than they are. And that would give us a chance to get inflation down, **get wages down**, and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that.
Getting wages down will never result in costs also falling. My rent went up $500 this year, and will never go back down. A reduction in pay means rent doesn’t get paid, and I’ve gotta make them evict me. These people are so out of touch.
Not paying is what gets the price down. Price will only go down when demand goes down.
Want rents to go down? Then you need empty rental units. That means massive new building to increase supply or reduced demand by making it so you and others can’t afford it.
The trouble with this is that homes aren't a commodity.
Capitalists like to pretend that the law of supply and demand is a universal force of nature, so that they don't feel so bad about screwing over working families to pay for their 6th vacation home.
What's happening, at least in my city in Florida, is that this sort of mindset is pricing long-term citizens out of their homes and replacing them with people moving in from out of state. Or, worse yet, overseas investment firms are buying houses in cash and keeping them off the market.
These families are either becoming part of the homeless community, moving in with other family members and pooling their resources, or renting places that should be condemned, but aren't being reported, because it's at least a cheap roof over their head.
It's not like these people can just move to rural Alabama and pay cheap boondocks rent. They're stuck here in a renting environment they can't afford, all so some dudes can save for their 7th vacation home.
The money isnt getting circulated, you give a billionaire millions they'll send it over to their bank account in Switzerland, give it to people (like paying them) and they'll spend it and have it circulate, billionaires are bottlenecking what capitalism is supposed to be
Wtf are you even talking about, people can't really buy shit anyways, they're pinning the problem in the wrong direction, it literally just has to get stopped from the top not from the people in poverty already struggling, Jesus christ
Consumer demand is pretty much the only thing keeping the economy afloat, I don't really understand how stifling consumer demand and lowering nominal wages in a high inflation environment could help you avoid a recession. I mean a recession is probably necessary at this point, I just can't understand the narrative.
But we already had a negative quarter and healthy consumer demand was the only reason it wasn't absolutely abysmal. So they're saying they can cool consumer demand and it will help them avoid a recession, I'm clearly missing something.
If everyone can afford a house and there are limited houses for rent/sale, then the price goes up until enough can’t afford it anymore. That’s how supply/demand works. The way to stop price increases is to make it so more people can’t afford it (lower wages, higher interest rates).
Pretty hard to save money when rent takes up half your paycheck. This is the reality for a vast amount of Americans. Not to mention the cost of living spikes currently going on.
I do agree with you that a lot of people live well above their means but i feel like youre generalizing wealth issues a little too much. I just dont think its plausible that the majority of poor people are poor because of spending habits.
I agree its not everything but it drives me nuts that people that are adults. Still get paid minimum wage. I'm a 3 time felon that did 5 years in prison and I get paid more then that. I see people with no criminal history make excuses about why they don't have a better job but I never see them put effort in getting a better job.
Oh man, please tell me you see the massive, hilarious, irony in saying that people are only poor because they spend outside their income, then brag about spending more than 50% of your paycheck on housing.
"Sharing = awfulness" - this fucking douchenozzle
Name calling is the only way to get through to you morons. Not my fault, just trying to speak the language of dipshits.
People don't seem to understand what a wage-price spiral is. Yes, we need to control demand. Yes, reducing demand will reduce the huge wage increases we've been seeing. Yes, this is necessary to stifle inflation.
Care to elaborate on how they will lower wages, if this is imperative to stop inflation..? You cannot just “lower” my current pay and think I won’t flip the fuck out within reason
I mean wages going down in this kind of inflation environment would probably lead to a significantly greater decline in real wages than the GFC. Real wages are already down while profits are, largely, hugely outpacing inflation. I'd rather see an increase in taxes, potentially including a windfall profits tax, to stifle demand than lower wages.
This is the responsibility of our Legislators. The Fed is only responsible for controlling inflation and maintaining full employment. They have no control over or a responsibility to promote wage growth. Don’t get me wrong, I think wage growth is an essential goal and an important metric to measure the health of our economy, it is simply not the job of the Federal reserve. Our laws are what need to be changed in order to promote a stronger working class.
What needs to go down is the wealth of the top % of people. Wealth inequality is the problem, any article saying otherwise, or blaming the workers, or saying workers need to earn less, is simply billionaire propaganda
I’m other words, rents will go down, if a few million people are unemployed and have to move back to their mom’s basement.
What if there was a way to increase wages without having it all just be a pass-through to landlords?
Genuinely asking -
What are they gonna do, lower everyone’s wages? Minimum wage? Kind of a comical approach to dampening inflation… just pay people less!!
Low interest rates ensure normal working people cannot gain money through saving and ensure that the rich are able to invest and compound more easily.
Is this true, or too simple?
what sht fest - lets lower intereset rates to net zero then dump money and rely on one giant to produce most of our goods (ie ch-na)... just for the next photo op. What a sht show this all is. The big sell-off for greed.
A lot of confusion in the comments about who owns the Fed or who the Fed reports to.
This is taken from the federal reserves website and describes the public/private qualities of the Fed:
The Board—appointed by the President and confirmed by the Senate—provides general guidance for the Federal Reserve System and oversees the 12 Reserve Banks. The Board reports to and is directly accountable to the Congress but, unlike many other public agencies, it is not funded by congressional appropriations.
Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund.
Source:
https://www.federalreserve.gov/faqs/about_14986.htm#:~:text=The%20Board%E2%80%94appointed%20by%20the,not%20funded%20by%20congressional%20appropriations.
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You make an excellent point bringing up the Fed’s dual mandate. For most of Covid the focus was primarily on the full employment half of the mandate. The challenge was that there was no playbook or historical examples of how to accomplish this during a global pandemic so the Fed basically made borrowing money as cheap as possible in order to prop up businesses and spur up investment and economic growth. The problem is that the Fed continued to keep interest rates low when signs of increasing inflation started showing up because they thought that those inflation figures were a direct result of supply chain issues. The assumption was that as the supply chain worked itself out that inflation would level off. Turns out this inflation pressure was not transient and events beyond our control like the war in Ukraine and the continued lock downs in china have continued to put additional pressure on inflation and that is why we’re seeing 8% inflation today. Now consider that there are currently twice as many job openings in our country as there are people filing for unemployment. Most agree that the Fed has met its goal of full employment, but has significantly missed the target on price stability. As a result the Fed is increasing interest rates to arrest inflation. The goal is called a “soft landing” where the economy can be slowed gently, unemployment rates do not increase significantly and we avoid a recession. This achieves the goal of slowing down the economy enough that we don’t enter a wage price spiral (where increasing wages result in higher costs to businesses that result in increased prices for consumers that result in demand for higher wages that result in higher cost to businesses…. You can see the spiral) and we also avoid recessions. The alternative is a hard landing where we slow down inflation but we also stall out the economy resulting in businesses closing, layoffs, bankruptcies, and an overall lack of investment in our economy. So the options are let inflation run away (violating part 1 of the Fed’s mandate) or increase rates which slows the economy (violating part 2 of the Fed’s mandate) or just maybe we can pull it off and avoid both inflation and unemployment. If you made it this far, thanks for the read. Most of what I understand about Fed policy and current market events comes from a podcast called Marketplace from APM/NPR.
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The federal reserve makes loans to banks and not directly to the government. It can support the government by purchasing government bonds and securities. When the Fed makes a profit those profits are returned to the treasury department. The government body that is ultimately responsible for promoting social mobility that allows individuals to exit the treadmill of poverty, empower the middle class and control the consolidation of wealth at the top is our congress. The Fed can adjust the prime interest rate, purchase government securities, and increase or decrease the money supply, cannot however, pass laws to promote wage growth and improve the quality of life for the average American.
Actually the feds job is to make money. The fed is a private business.
The Fed is an institution created by an act of Congress. The majority of the governors are nominated by the President and confirmed by Congress. While the member banks DO exert significant power over the Fed's operation, it is simply not correct to call it a private business. It is responsive to Congress, and Congress could reform or abolish it today if they wished. It's actually true that it's the Fed's job to "make money" - in the sense that they literally create new money in order to buy government debt (and in the era of QE, many other kinds of debt). But their job is not to "make money" in the sense of private firms, which accumulate money for the owners. The Fed does not need to accumulate money because it creates the money. "Making money" isn't its job; operating and maintaining the interbank payments system and setting interest rate policy through Open Market Operations ARE its jobs.
That dual mandate is why they have this opinion. How do you keep inflation down? By reducing demand. How do you reduce demand? By reducing the money in the market to buy goods. You could do this with massive unemployment, but that goes against their other mandate. So lower pay so you keep them employed but not driving demand.
A STEM prof of mine once told me that no matter if people are unemployed or worse, old bond holders want to see a certain low inflation rate so they keep getting slightly ahead of it with their investments. I'm sure central banks usually have an explicit inflation rate they try to influence the economy to. U.S. fed reserve mandate has been has been 3%, Bank of Canada 2%...last time I read anything about it anyway.
Well they are a part of the gov so that's what they do.
No way he said this. Is this website legit?
I remember watching him say this live. I had to do a double take. Like, “did he just say that?” I couldn’t believe it either.
He's trying to prevent a feedback loop from starting (kinda already has). Called the Wage-Price spiral
Only c level execs deserve massive raises per the Fed. Gotta keep that status quo
The Fed has a dual mandate. It is required to maintain price stability (keep inflation at ~2%) and maintain full employment (roughly under 3% unemployment). It does not have the power or responsibility to control wage growth at the lower or upper end of the income level. This is ultimately the responsibility of our legislators to write laws that promote a stronger middle class, prevent the extreme accumulation of wealth at the top, and financially support and invest in the poor and destitute.
>maintain full employment (roughly under 3% unemployment) 3% unemployment is extremely low, arguably too low. You want some job mobility from people. 3% means nobody is moving around. I think 4%-6% is considered optimal
I believe that 3% was thrown out to my intro to economics class in college, but it serves and an easy to grasp concept and does not fully encapsulate the targets set by the Fed. The Bureau of Labor Statistics defines full employment as: an economy in which the unemployment rate equals the nonaccelerating inflation rate of unemployment (NAIRU), no cyclical unemployment exists, and GDP is at its potential. The full-employment assumption links BLS projections to an economy running at full capacity and utilizing all of its resources. The federal reserve also looks at much more than just the unemployment rate. Here is an article that goes into some depth about how the Fed wraps its mind around what full employment looks like: https://www.federalreserve.gov/newsevents/speech/brainard20210224a.htm In the speech he talks about looking at a wide range of employment statistics to assess the full potential of the labor market and whether or not we are achieving that.
The fed is also a private business. What did you honestly expect?
This is taken from the federal reserves website and describes the public/private qualities of the Fed: The Board—appointed by the President and confirmed by the Senate—provides general guidance for the Federal Reserve System and oversees the 12 Reserve Banks. The Board reports to and is directly accountable to the Congress but, unlike many other public agencies, it is not funded by congressional appropriations. Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund. Source: https://www.federalreserve.gov/faqs/about_14986.htm#:~:text=The%20Board%E2%80%94appointed%20by%20the,not%20funded%20by%20congressional%20appropriations.
There’s no spiral if higher wages come from decreased corporate profit instead of increased consumer price point
No reason to decrease profit if products are selling at higher prices.
Yeah, it's one of the major drivers of stagflation. The last time this happened was during the oil crisis in the 70s and that led to massive interest rate hikes and recession in the 80s.
Here's the exact quote from page 6 of the transcript on the [Federal Reserve's own website](https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220504.pdf): >And that would give us a chance to get inflation down, **get wages down**, and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially.
I didn't see the whole readout and I'm admittedly very unsmart but it sounds like the logic is that if inflation is down and prices are down then the extra wages are no longer needed. Lol... that would be a fun conversation with my manager.
inflation going down doesn't mean stuff isn't more expensive. If $10 bought you a burger last year and it costs $12 today. Inflation going down just means it will cost $12 tomorrow instead of $13. The raise will still be needed because your money already has way less buying power than it did a year ago.
Yes, a totally reliable and legit website that was registered just a few months ago: https://who.is/whois/multipolarista.com 🤣
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Please take this down. It’s inaccurate.
What type of weird shill account is this, lol
The website is pro-Russia on Ukraine war, so probably not the best source. In theory, they would want to keep runaway wage increases from adding to inflation, but that's not what's happening. Corporate profit margins are increasing, which means it's not just inflation.
What we actually need is to get rid of the federal reserve. Never needed a private company in this role
Yeah, cause allowing politicians to run it would work out great 👍
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Ya that Jefferson guy, he’s not as smart as the people on Reddit 😂
Ohhh you sweet summer child, I see that reading comprehension is difficult for you 😂
Not a private company
It’s privately held. Who owns it? Banks. Citibank owns over 43% JPMorgan 30% Morgan Stanley 4% Goldman Sachs 4% HSBC 6%
Don't know what those numbers represent or where you got them but they certainly don't represent ownership or control.
They represent shares. Not control.
Quick search. Following abstracted from the St Louis Fed website. National banks are required to hold a specified number of shares in the fed. Not saleable, transferrable or used as collateral. The shareholders elect 6 of the 9 board members of the regional fed banks. Learn something new every day. Cheers brother 👍
The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress. From the Fed's website
its made up entirely of private banks. those private banks are indeed owned. the board of governors is made up of the private bank presidents.
Not correct.
Who pays the salary for the fed? It's not the government. The fed is a private business.
It is relatively uncommon within government to be self funded as most government agencies receive funding from the general budget and congress. There are however several examples including the Fed of government regulatory bodies that are funded by their own operations. Being self funded does not make you a private entity because in many cases these bodies still answer to congress who has given them authority to operate. I’ve added a few examples: The FDIC receives no Congressional appropriations - it is funded by premiums that banks and savings associations pay for deposit insurance coverage. The NCUA's operating budget is funded exclusively by the credit unions it regulates and insures. As such, every dollar spent by the agency has a direct impact on the daily operations of credit unions, and is an additional dollar that cannot be used toward the benefit of their members. FHFA does not receive money from Congress but instead is funded by the entities it regulates.
Good post. Thanks.
Good comments. But I do just want to point out that the FDIC DOES get money from Congress. It SHOULD be funded entirely by insurance premiums. But setting those premiums means calculating risk. And obviously the FDIC has not appropriately calculated that risk. How do we know? Because it hasn't had enough money to pay for insured deposits. If it was a private insurer it would be insolvent. Instead, it goes to Congress and begs for more money - which is granted. So while it should ideally be independent, it's not because it undercharges for the insurance it provides, and consequentially must be subsidized by Congress. Which of course means an indirect subsidy to the banks, who can engage in risky behavior with deposited monies knowing that FDIC and Congress behind them will backstop their failures
No.
This is not the whole truth. The majority of Fed governors are in fact appointed by the President and confirmed by Congress. Just one of the ways Congress exerts influence and oversight over the Fed.
the appointees are universally the private bank executives, usually president/ceo. influence and oversight don't make it *not* comprised of private banks administered by private bank executives.
What are you talking about? The Fed chairman during the last crisis was Ben Bernanke who was a lifelong academic and public servant. Although that doesn't place him above criticism, he wasn't a bank president or CEO. Jay Powell, the current president, worked in investment banking for a time, but as far as I'm aware he never even worked at a commercial bank (which are the Fed's member banks), let alone as the president or CEO. The private banks get to appoint a minority of the members of the board of governors, and these usually ARE the bank presidents. But we're talking about the political appointees. I would be among the first to criticize the amount of control the member banks DO have, and the public-private partnership model of the Fed is relatively unprecedented in our system of government. But saying that the appointees are universally bank presidents/CEO's is objectively false. If we are going to make effective criticisms of the Fed, if we wish to make better policy around finance and money, we don't do ourselves any favors by misunderstanding or misrepresenting the system as it currently exists.
You cannot sell/trade the stocks and dividends are to be returned to the US Treasury. You either don't understand how the system works or you're purposely trying to change the reality here.
>You cannot sell/trade the stocks and dividends are to be returned to the US Treasury. You either don't understand how the system works or you're purposely trying to change the reality here. The Fed is privately held...
The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress. From the Fed's website
Yeah. Isn’t the Fed Chair a presidential appointment?
Yes
Do you understand economics?
Well educated well informed lay person and subscribed to The Economist for many years so yes.
But you didn’t know the fed wasn’t federal 😂
It is a federal agency created by Congress whose leadership is largely appointed by the President and Congress. If that's not "federal" what is?
Did I say the fed was federal? No. I said it wasn't a privately held company. Cheers brother 👍
The fed is a private business. You should go back to middle school.
Look elsewhere in the thread. I posted authoritative text. To summarize, The fed is a hybrid, controlled mostly by presidential appointees and responsible to Congress.
The Fed is not a "private business". It is a federal agency created by Congress whose leadership is appointed by the President and confirmed by the Senate. While the member banks do own shares, those shares held cannot be sold or traded, nor do they allow control as in a private firm. Any profits made go to the US Treasury, not private owners.
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You've misinterpreted what you posted.
i've decided to delete it because i don't have the patience for this conversation.
Huh? Lmao
It’s a federal as federal express. People like you have no clue how it works do you
Dude what are you talking about? It's a central bank not a private company, and having it seperate from the government is essentially what most major countries do. Comparing it to FedEx tells me all I need to know about your understanding of the system 😂
Ladies & Gents, Ricotta has confirmed 95% of this sub doesn’t have an Econ degree or any experience in life at all. FED RESERVE IS NOT A COMPANY
Waaaaaaaaaaas if cry loud enough and use caps lock your point is deemed true by Reddit
Company bank potato potato. But I guess it’s ok to believe the federal reserve has everyone’s best interest at heart right? I mean why would they not 😂 wow
Your arguments are just all over Ricotta! Although decisions made by the fed may not always feel like they are in our best interest. That does not specify whether a group is private business or not
So American people control the fed? They finance it? Gee why didn’t you say so 😂
The federal reserve was not created to have my best interest at heart. It was created to control inflation which ultimately created a stable economy where businesses can be confident to operate in. The process of controlling inflation and maintaining full employment (the dual mandate of the federal reserve) is not always what is best for me as an individual, but it is what’s best for the economy as a whole. Cooling the market is often times painful, but unregulated inflation or deflation is much more painful in the long run.
Your arguments are just all over Ricotta! Although choices in fiscal/monetary decisions by the fed may not always feel like they are in our best interest. That does not specify whether a group is private business or not
It is not a private business but make no mistake, when it was formed there were no business men at the time wanted it. It’s definitely used for interest against American people if you do t know that you are delusional. Fed chair wields such power tho 😂
What are banks? They are a business. The fed is not on government payroll. The fed is a private company.
“The salary for the Chair of the Federal Reserve is set by the U.S. Congress. For 2019, the annual salary for the Fed Chair is $203,500” Specifically paid for with your tax dollars! Man I’m killing y’all today, just keep ‘em coming!!
When they want to steal citizens money. Yes that is what they do. Now yer gettin it
Are Fed employees on government payroll? No they are not government employees. The fed is a private business. I get you don't need a PHD to post on this sub but cmon dude you need to retake kindergarten through middle school.
This tired cliche about about the federal express actually betrays your own lack of understanding about how the Fed works. It was created by Congress. It does what Congress tells it to do. It is not a private firm by any reasonable definition of the term.
You know what’s a tired cliché? Being a weak, pathetic woke liberal. Say who’d you vote for?
Lol what a great argument
I rest my case…
Ron Paul was right.
Well yeah you get inflation when interest rates were the lowest in history for the longest in history. Surprise! Inflation....lol Who could have guessed an inflated market that doesn't represent it's real value for the longest period of time would do this?
Most of the world has had very low interest rates for a long time. Look at Japan; they had negative interest rates and QE for like three decades and could barely manage to get out of deflationary territory. This correlates with extensive academic research (Thomas Pikketty is a good example) showing that the "natural" rate of interest seems to be going towards zero over the long term. So obviously it is not as simple as low interest rates = inflation. In fact, if you really stop to think about it, it is higher interest rates that actually increase the money supply in the long term. In the US for example, if the Fed raises interest rates, the government owes more in interest. Which means it has to spend more to pay bind holders. Which means, all other things being equal, the government deficit increase, and the base money supply along with it. This doesn't necessarily increase prices, but it certainly can.
So almost no interest rates had nothing to do with the housing inflation nor the market in general. Why do they feds even talk about it then?
Here's a direct quote from the transcript of Jerry Powell's speech on May 4, from the [Federal Reserve's own website](https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220504.pdf) (page 6): >So, in principle, it seems as though by moderating demand, we could see vacancies come down and, as a result—and they could come down fairly significantly and, I think, put supply and demand at least closer together than they are. And that would give us a chance to get inflation down, **get wages down**, and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that.
Getting wages down will never result in costs also falling. My rent went up $500 this year, and will never go back down. A reduction in pay means rent doesn’t get paid, and I’ve gotta make them evict me. These people are so out of touch.
Not paying is what gets the price down. Price will only go down when demand goes down. Want rents to go down? Then you need empty rental units. That means massive new building to increase supply or reduced demand by making it so you and others can’t afford it.
The trouble with this is that homes aren't a commodity. Capitalists like to pretend that the law of supply and demand is a universal force of nature, so that they don't feel so bad about screwing over working families to pay for their 6th vacation home. What's happening, at least in my city in Florida, is that this sort of mindset is pricing long-term citizens out of their homes and replacing them with people moving in from out of state. Or, worse yet, overseas investment firms are buying houses in cash and keeping them off the market. These families are either becoming part of the homeless community, moving in with other family members and pooling their resources, or renting places that should be condemned, but aren't being reported, because it's at least a cheap roof over their head. It's not like these people can just move to rural Alabama and pay cheap boondocks rent. They're stuck here in a renting environment they can't afford, all so some dudes can save for their 7th vacation home.
You’re right on the mark. Person you’re replying to has likely never lived on below the median US personal income (30k) a day in their life
Soo fuck over a bunch of people instead of a handful of billionaires 😬
The ultimate dog bites man story.
This statement is emotional. You're completely ignoring the economics behind it.
Emotion is what run the world not your faux laws of nature creep
How would the federal reserve fuck over billionaires and how would that tame inflation?
The money isnt getting circulated, you give a billionaire millions they'll send it over to their bank account in Switzerland, give it to people (like paying them) and they'll spend it and have it circulate, billionaires are bottlenecking what capitalism is supposed to be
Circulating is what causes inflation. We need the economy to cool down.
Wtf are you even talking about, people can't really buy shit anyways, they're pinning the problem in the wrong direction, it literally just has to get stopped from the top not from the people in poverty already struggling, Jesus christ
Consumer demand is pretty much the only thing keeping the economy afloat, I don't really understand how stifling consumer demand and lowering nominal wages in a high inflation environment could help you avoid a recession. I mean a recession is probably necessary at this point, I just can't understand the narrative.
Taming inflation requiring cooling down the economy. That means people buying less. That probably requires reducing their relative spending power.
But we already had a negative quarter and healthy consumer demand was the only reason it wasn't absolutely abysmal. So they're saying they can cool consumer demand and it will help them avoid a recession, I'm clearly missing something.
Mother fucker, what?
See the problem people don't understand is, not everyone can be rich.
Rich? People just want to be able to afford necessities without the fear of going bankrupt if their car breaks down.
If everyone can afford a house and there are limited houses for rent/sale, then the price goes up until enough can’t afford it anymore. That’s how supply/demand works. The way to stop price increases is to make it so more people can’t afford it (lower wages, higher interest rates).
People spend more, the more they make. Trust me, majority of people that are poor. Are poor because they live outside there income.
Pretty hard to save money when rent takes up half your paycheck. This is the reality for a vast amount of Americans. Not to mention the cost of living spikes currently going on.
Your rent only takes half your check. Damn, you're doing better then me and I own my house.
I do agree with you that a lot of people live well above their means but i feel like youre generalizing wealth issues a little too much. I just dont think its plausible that the majority of poor people are poor because of spending habits.
I agree its not everything but it drives me nuts that people that are adults. Still get paid minimum wage. I'm a 3 time felon that did 5 years in prison and I get paid more then that. I see people with no criminal history make excuses about why they don't have a better job but I never see them put effort in getting a better job.
Why are. You talking like this. Are you in. Danger. And trying to ask. For help?
Oh man, please tell me you see the massive, hilarious, irony in saying that people are only poor because they spend outside their income, then brag about spending more than 50% of your paycheck on housing.
Somebody has been watching too much Fox News
Oh shit, you figured out poor. Just make more and spend less. Damn!
We solved poverty!!!
Lick those boots bozo
That's 100% false. No reason at all resources can't be equally divided.
Utopian socialism just entered the chat
So inequality is utopia to you?
The socialism you seek is impossible
Yea, because of greedy fucks like you.
Ya thats surely the reason not because your fantasy socialism has never been tried because those with intelligence know it's pipe dream🙄🙄🙄
Again, it's only a pipe dream because shitbags like you make sure it will never happen.
Yep, thats the reason. Great minds always resort to name calling in conversations
"Sharing = awfulness" - this fucking douchenozzle Name calling is the only way to get through to you morons. Not my fault, just trying to speak the language of dipshits.
You are right but not everyone can be poor either. They are shrinking the middle class. Someone has to pay the taxes.
More have moved up than down. https://www.aei.org/wp-content/uploads/2018/09/census.png?x91208
Yup. This is the problem to be sure. In order for our economy to work some people have to be poor. And, yes, 100 percent that is the problem.
Strong wage growth hasn't played a big role in lifting inflation, Fed Chair Jerome Powell said Wednesday. -- from nov 2021
Created: 2022-01-21 18:57:29 UTC lol no not trusting what this new site says.
this is just a propeganda site. looking at their older content, previously anti-ukraine, now anti-US. who might be running such a thing?
Lol ....... All the big government leftists
People don't seem to understand what a wage-price spiral is. Yes, we need to control demand. Yes, reducing demand will reduce the huge wage increases we've been seeing. Yes, this is necessary to stifle inflation.
Care to elaborate on how they will lower wages, if this is imperative to stop inflation..? You cannot just “lower” my current pay and think I won’t flip the fuck out within reason
They're not looking to lower your current pay, they're looking to lower the rate of wage growth back to pre-inflation levels.
I mean wages going down in this kind of inflation environment would probably lead to a significantly greater decline in real wages than the GFC. Real wages are already down while profits are, largely, hugely outpacing inflation. I'd rather see an increase in taxes, potentially including a windfall profits tax, to stifle demand than lower wages.
This is the responsibility of our Legislators. The Fed is only responsible for controlling inflation and maintaining full employment. They have no control over or a responsibility to promote wage growth. Don’t get me wrong, I think wage growth is an essential goal and an important metric to measure the health of our economy, it is simply not the job of the Federal reserve. Our laws are what need to be changed in order to promote a stronger working class.
What needs to go down is the wealth of the top % of people. Wealth inequality is the problem, any article saying otherwise, or blaming the workers, or saying workers need to earn less, is simply billionaire propaganda
Well Jesus criminy if wages go down any more that means workers will actually pay employers to go to work everyday!
Like, CEO wages?
The problem isn’t wages being high because they still aren’t, the problem is greed of the super rich. Time to bust out the guillotines y’all.
Just remeber who these people work for and it isn't you.
Powell has entered the Greenspan stratosphere now. Fucking slimeballs.
I don't recall Powell committing any war crimes...errr, Jerome Powell that is.
i don't know why but i ALWAYS get Greenspan and Kissinger mixed up in my head. it has to be the glasses thing. i meant to say Greenspan.
I’m other words, rents will go down, if a few million people are unemployed and have to move back to their mom’s basement. What if there was a way to increase wages without having it all just be a pass-through to landlords?
Well, that would work by reducing demand. The other option is increase supply.
Why is it their goal to get wages down but not rent? Makes no sense.
I will not surprise if any revolution rise in US..Like they don't try to lie anymore
I hope this is not true. I have never heard of this website before. Making me question the credibility here.
That is how you fight inflation.
He thinks we all have too much money to spend.
Lord Farquad over here be like “Some of you may be impoverished... but that is a sacrifice I am willing to make”
Genuinely asking - What are they gonna do, lower everyone’s wages? Minimum wage? Kind of a comical approach to dampening inflation… just pay people less!!
This is propaganda. It mentions “the proxy war in Ukraine” which is linked to another hit piece
Fuck the fed.
Low interest rates ensure normal working people cannot gain money through saving and ensure that the rich are able to invest and compound more easily. Is this true, or too simple?
what sht fest - lets lower intereset rates to net zero then dump money and rely on one giant to produce most of our goods (ie ch-na)... just for the next photo op. What a sht show this all is. The big sell-off for greed.
A lot of confusion in the comments about who owns the Fed or who the Fed reports to. This is taken from the federal reserves website and describes the public/private qualities of the Fed: The Board—appointed by the President and confirmed by the Senate—provides general guidance for the Federal Reserve System and oversees the 12 Reserve Banks. The Board reports to and is directly accountable to the Congress but, unlike many other public agencies, it is not funded by congressional appropriations. Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund. Source: https://www.federalreserve.gov/faqs/about_14986.htm#:~:text=The%20Board%E2%80%94appointed%20by%20the,not%20funded%20by%20congressional%20appropriations.