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Yellen's goof hands GOP a potent campaign issue

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I'm shocked that The Hill would print this.

*

 

Yellen's goof hands GOP a potent campaign issue


BY LIZ PEEK, OPINION CONTRIBUTOR — 05/07/21 02:30 PM EDT  439

 

Treasury Secretary Janet Yellen stepped in it big time on Monday when she warned: "It may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat." 

 

This was a major goof. Yellen inadvertently handed Republicans yet another powerful weapon in their quest to retake control of Congress in 2022: blaming Democrats for prices moving higher. If we are on the verge of the economy overheating, clearly the $1.9 trillion American Rescue Plan was excessive (as many of us argued at the time) and President Biden’s proposed $4 trillion infrastructure plan is outrageously reckless.

 

Going into the midterm elections, Republicans can campaign on broken borders, closed schools and now…rising prices. That’s compelling.

 

Democrats seem convinced voters will reward Biden’s giant spending blitz, and especially those $1,400 checks included in the recent stimulus bill, by allowing them to keep the House and the Senate.

 

But for millions of Americans, those checks are already in the rear-view mirror, while the reality of rising grocery and gasoline prices is the speedbump straight ahead. Inflation could well become the kitchen-table issue of the midterm elections. And Biden may take the blame.

 

Yellen, realizing that her comments created a squall on Wall Street, joined several brainiacs at the Federal Reserve in reassuring us that inflation was not a serious issue. Yes, prices may go higher for a bit, she argued, but, not to worry, the Fed will step in if necessary.

 

Here’s the problem: Yellen, Federal Reserve Chairman Jerome Powell and all the other folks trying to calm our inflation fears have clearly not gone to the supermarket recently. People don’t care whether the rise in diaper and Coca-Cola prices is a one-off and unlikely to be repeated next year; they are seeing their spending power drop…now. And it could get worse.

 

It’s one thing to read that the consumer price index just posted the largest month-to-month gain in nine years, that commodity prices are on a tear and that tech stocks are being battered by expectations that interest rates may rise.

 

It’s another to pay 10 percent more for chicken breasts and pork chops, 6 percent more for cheddar cheese and eggs, and nearly $3.00 per gallon to fill up your car, up from $1.81 a year ago.

 

Not only are grocery prices rising, car prices and rents are moving up as well. These are things people notice.

 

Democrats don’t seem to care about massive budget deficits. Biden continues to tell Americans that our economy and our country are in dire straits and need his trillions in social engineering medicine to heal our woes. He has yet to acknowledge that, like most prescriptions, an overdose can kill you.

 

What Yellen should have said was: We don’t know if inflation will accelerate, because we have never seen such massive levels of federal spending combined with ultra-low interest rates and ongoing asset purchases. We have never experienced an economy shut down by fiat being unlocked when we also have $3 trillion in “excess” savings and the money supply is $4 trillion above “normal” levels.

 

And: We have never lived through all these things happening as other economies around the world are also gathering steam.

 

Yellen should have admitted: We are in uncharted waters and have no idea what’s coming next.

 

But that would call for some prudence, and some humility.

 

Ed Hyman, a top Wall Street economist, says inflation is not coming; it is here. He points to the huge increase in commodities prices, higher oil prices (today $65 per barrel for West Texas Intermediate crude versus $24 a year ago), increased import prices, sky-high lumber prices ($96/sheet today up from $38 a year ago), investor inflation expectations, and the recent CPI data (2.6 percent, well above the Fed’s 2 percent target) as proof.

 

Not only are prices rising on all kinds of industrial and household goods, labor costs are increasing as well. In the first quarter, the employment cost index beat estimates by jumping 3.7 percent at an annualized rate, the highest level reached since before the 2008 financial crisis.

 

It is rising labor costs that could tip inflation from transitory to structural. Surprisingly, wages and benefits are climbing even as Biden’s rationale for the $1.9 trillion American Rescue Plan centered on putting people back to work. If unemployment is so high, why are employment costs rising so fast? 

 

Two reasons: first, labor is tight in part because Congress, as part of the American Rescue Plan, extended the extra $300 per week in emergency federal unemployment benefits through September. Studies show that nearly half of people receiving unemployment are making more staying home than they would if they went back to their jobs. Why work?

 

Second, only 60 percent of the nation’s schools are fully open, making it difficult for women, especially, to return to their jobs.

 

The latest employment report, showing only 266,000 jobs were added in April, speaks more to a scarcity of workers than any slump in demand.

 

Rising wages should help working Americans, but only if their gains are not eaten up by higher prices.

 

Yellen is confident that the Fed is on top of the problem. We wonder.

 

Eric Rosengren, president of the Boston Fed, said recently, “My view is that this acceleration in the rate of price increases is likely to prove temporary…Toilet paper and Clorox were in short supply at the outset of the pandemic, but manufacturers eventually increased supply, and those items are no longer scarce.”

 

Someone might want to alert Mr. Rosengren that Clorox recently announced that it may have to raise prices because of increasing materials and transportation costs. Scarce or not, Clorox products are about to become more expensive.

Edited by TimS
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1 hour ago, fishweewee said:

I'm shocked that The Hill would print this.

*

 

Yellen's goof hands GOP a potent campaign issue


BY LIZ PEEK, OPINION CONTRIBUTOR — 05/07/21 02:30 PM EDT  439

 

Treasury Secretary Janet Yellen stepped in it big time on Monday when she warned: "It may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat." 

 

This was a major goof. Yellen inadvertently handed Republicans yet another powerful weapon in their quest to retake control of Congress in 2022: blaming Democrats for prices moving higher. If we are on the verge of the economy overheating, clearly the $1.9 trillion American Rescue Plan was excessive (as many of us argued at the time) and President Biden’s proposed $4 trillion infrastructure plan is outrageously reckless.

 

Going into the midterm elections, Republicans can campaign on broken borders, closed schools and now…rising prices. That’s compelling.

 

Democrats seem convinced voters will reward Biden’s giant spending blitz, and especially those $1,400 checks included in the recent stimulus bill, by allowing them to keep the House and the Senate.

 

But for millions of Americans, those checks are already in the rear-view mirror, while the reality of rising grocery and gasoline prices is the speedbump straight ahead. Inflation could well become the kitchen-table issue of the midterm elections. And Biden may take the blame.

 

Yellen, realizing that her comments created a squall on Wall Street, joined several brainiacs at the Federal Reserve in reassuring us that inflation was not a serious issue. Yes, prices may go higher for a bit, she argued, but, not to worry, the Fed will step in if necessary.

 

Here’s the problem: Yellen, Federal Reserve Chairman Jerome Powell and all the other folks trying to calm our inflation fears have clearly not gone to the supermarket recently. People don’t care whether the rise in diaper and Coca-Cola prices is a one-off and unlikely to be repeated next year; they are seeing their spending power drop…now. And it could get worse.

 

It’s one thing to read that the consumer price index just posted the largest month-to-month gain in nine years, that commodity prices are on a tear and that tech stocks are being battered by expectations that interest rates may rise.

 

It’s another to pay 10 percent more for chicken breasts and pork chops, 6 percent more for cheddar cheese and eggs, and nearly $3.00 per gallon to fill up your car, up from $1.81 a year ago.

 

Not only are grocery prices rising, car prices and rents are moving up as well. These are things people notice.

 

Democrats don’t seem to care about massive budget deficits. Biden continues to tell Americans that our economy and our country are in dire straits and need his trillions in social engineering medicine to heal our woes. He has yet to acknowledge that, like most prescriptions, an overdose can kill you.

 

What Yellen should have said was: We don’t know if inflation will accelerate, because we have never seen such massive levels of federal spending combined with ultra-low interest rates and ongoing asset purchases. We have never experienced an economy shut down by fiat being unlocked when we also have $3 trillion in “excess” savings and the money supply is $4 trillion above “normal” levels.

 

And: We have never lived through all these things happening as other economies around the world are also gathering steam.

 

Yellen should have admitted: We are in uncharted waters and have no idea what’s coming next.

 

But that would call for some prudence, and some humility.

 

Yellen is confident that the Fed is on top of the problem. We wonder.

 

Not happening. She’s another Fauci.  
 

Wonder no more.

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Posted (edited) · Report post

How do you communicate that in a political campaign? 

 

The primary tools that exist for reducing the rate of inflation - increased interest rates, increased taxation, increased imports (putting competition on higher priced domestic production) - are not particularly popular with the masses.  

 

"Hey, I'm gonna increase interest rates... but it will make milk cheaper in about six months." doesn't seem like an easy sell in a 30 second commercial.

 

Edited by Slacker

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3 hours ago, fishweewee said:

 Yes, prices may go higher for a bit, she argued, but, not to worry, the Fed will step in if necessary.

 

Step in and do what?

 

 

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2 hours ago, Slacker said:

How do you communicate that in a political campaign? 

 

The primary tools that exist for reducing the rate of inflation - increased interest rates, increased taxation, increased imports (putting competition on higher priced domestic production) - are not particularly popular with the masses.  

 

"Hey, I'm gonna increase interest rates... but it will make milk cheaper in about six months." doesn't seem like an easy sell in a 30 second commercial.

 

You don't need to communicate.

If people think prices are higher they remember and make their own conclusions.

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3 hours ago, Slacker said:

How do you communicate that in a political campaign? 

 

The primary tools that exist for reducing the rate of inflation - increased interest rates, increased taxation, increased imports (putting competition on higher priced domestic production) - are not particularly popular with the masses.  

 

"Hey, I'm gonna increase interest rates... but it will make milk cheaper in about six months." doesn't seem like an easy sell in a 30 second commercial.

 

We're trapped.

 

We have to keep interest rates low.

 

Why?

 

So that people can afford to buy a home.

 

Home prices have kept pace with the expansion in the money supply since 2000.

 

I talked about a home in Livingston, NJ that might have been $250,000 in 1999 (okay maybe that's low but hang with me) that is now $1,250,000.

 

People just can't afford that unless they take on huge debts ... at low interest rates.

 

If you raise interest rates just 0.25% - that hurts home sales (you can measure that in housing activity).

 

Crazy as that sounds - we are addicted to essentially free money.

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Posted (edited) · Report post

same song,same dance,same economics same mindset from the politicians......,this new method of buying a home seems to be a rerun of a mortgage crisis....a quarter point in a mortgage rate and folks can't buy a home or puts a strain on their existing domestic economics ......hmmm so much for being white privelidged....lol lol lol.....either you can clear your mortgage payment with one weeks pay or you cant....unless you have cash....1.25 million for a house ..$500 Thousand down leaves $750 thousand mortgage plus taxes....for thirty years ....unless you earn stupid money you have no business buying a normal house floating those kind of numbers....bu bu butt butt if we hold on to it for two years and resell it ...do you know how much it will be worth ....no I don't   .....but the older folks have been down this road....and the politicians all sound the same...lol lol lol...Cash is king...and hasn't changed in a long time

Edited by Surf bomber

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Absolutely a legitimate issue for political campaigns.  But I don't think the GOP will use it.

 

What matters now are transgender athletes and the running purge of politicians inadequately loyal to DJT. The claim of a stolen election is all that matters to him, and therefore it's all that matters to the GOP.  Substantive political issues don't interest Donald, and therefore don't interest the Party.

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