A Benjamin Cole post
Like a lot of Americans, I tend to shrug off class warfare. Not for us. I want to make my money in boom times. Bring on Fat City.
And like most people who think about economics, I prefer the lightest taxes and regulations on productive behavior possible, and I am dubious about public programs for anything, from welfare to overseas occupations.
And so like most Market Monetarists, I am puzzled by the peevish fixation, the monomaniacal hysteria displayed by many influential right-wingers regarding inflation.
The right-wingers should be our allies. Why not?
Fisher Explains Why Tight Money
Like a dead mackerel in the moonlight, we have Richard Fisher, Dallas Fed President, to set me straight. You see, tight money is not about economics, tight money is about class warfare.
Well, call me “Mr. Chump.”
Fisher, a successful former money manager, has been going round-robin on press conferences of late, in a rising fever that wages in Texas are rising faster than inflation.
This led to the lamentable lead paragraph in the The Dallas Morning News that reads, “Richard Fisher, president of the Federal Reserve Bank of Dallas, is worried that wages are growing faster than price inflation in Texas.”
Egads. And the preferred alternative is?
Fisher then drew some inflation statistics out of a magic hat, as they do not exist anywhere except at the Dallas Fed. Fisher reported that Texas inflation was running at 2.5 percent and wages were running up by 3.5 percent, annually. The horror of it all.
Except for one problem: Such statistics do not exist at the Bureau of Labor Statistics. Reuters called the Fisher figures “Fed estimates.”
There are some CPI-U figures for Dallas and Houston, the biggest cities in the Lone Star State. Dallas is running a CPI-U at 1.2 percent in August year-over-year and Houston at 2.6 percent. The BLS “South” region, of which Texas is the largest part, is reporting a CPI of 1.7 percent. And the CPI runs about 0.5 percent higher than the PCE, the Fed’s preferred inflation measuring stick.
There is a BLS estimate for employment costs for the “Southwest Central” district that includes Texas, Arkansas, Oklahoma and Louisiana. It is up by 2.0 percent ending June 2014.
Fisher appears to be off-base.
So Why Fisher?
The spectacle of Dallas Fed President Fisher exaggerating inflation, and then fear-mongering and condemning wage growth, is undeniable. Is this why?
Labor Gets Thumped, 1982-Present
As we can see from the above chart, labor is getting thumped. The labor losing streak started when Fed Chairman Paul Volcker famously went to tight money in the early 1980s.
Is that it? Is there a sense among the influential that tight money tilts the playing field against labor? And for the upper class, a fatter piece of a smaller pie tastes all the sweeter? That by squeezing the money supply, we now see 62 cents of business income dollar go to labor, and not 72 cents? And when that gets down to 52 cents, all the better?
Well, I hate to think the modern right-wing has sunk to this.
Obviously, U.S. owners/management have prevailed against labor in the last three decades (a most rarely discussed statistic), and the demand for labor has been tamped down continuously by the secular war on inflation waged by the Federal Reserve. A war ongoing, btw, as the Fed makes the rubble bounce.
And we have the Richard Fishers of the world to pose this question: “Well, you wouldn’t want wages to outpace inflation, would you?”