Inflation, we are told, results when people spend too much money, driving up prices; too much money chasing too few goods. Wall Street wants to cure it by hammering on working people. The Federal Reserve raises interest rates, in effect sending every employer a memo saying it’s time to lay people off. People without jobs can’t spend, demand for goods and services falls, and prices stop rising.
This is crazy because there are other ways to stop inflation. Companies can hire more people and increase production. Companies aren’t doing this because corporate managers are using their profits to buy back their stock instead. They get most of their pay in stock, and so driving up stock prices makes them happy.
Throwing people out of work is also crazy because workers aren’t the ones raising prices. Forty years ago, a group of us had the chance to ask the former CEO of one of the country’s major manufacturing companies how he set prices. Without batting an eye he answered, “Whatever the market will bear.” In other words, if the market will accept higher prices because workers are making more, then just take some of that money. You may have noticed that every time Social Security payments increase, your health insurance payments go up.
President Biden doesn’t own any oil refineries, baby formula factories or health insurance companies. Neither did President Trump. Just as Wall Street blames workers for something they have no control over, voters blame inflation on presidents who have little control over it. Folks, this is no way to run a railroad.
Robert Supansic
McKeesport