What Powell should say about wages

This Bloomberg headline caught my eye:

Powell Treads Tricky Path in Saying Wages Are Rising Too Fast

He’s right. Here’s how Powell should frame the issue:

1. Rapid real wage growth is good; it leads to higher living standards for average Americans.

2. Rapid nominal wage growth (relative to productivity growth) is bad, it generally implies high inflation.

3. The best way to promote higher real wages is through economic reforms that boost productivity.

Given our rate of productivity growth, the Fed needs to get nominal wage growth down to no more than 3%.

PS. Check out this FT headline:

Jay Powell channels his inner Paul Volcker with tough stance on US inflation

Tough? Did Volcker end the Great Inflation by raising interest rates from 0% to 0.25%?

Off topic, how about this FT headline and subhead:

Why I should have listened to Garry Kasparov about Putin

The chess grandmaster was dismissed when he warned about Russia. But he was right

Over the past decade, I’ve also noticed a lot of westerners in denial about Putin. Some even seem to idolize him.

Former US president Donald Trump posited that Russian president Vladimir Putin’s decision to invade Ukraine was driven by a desire to recreate the Soviet Union in which there was “a lot of love”.

So the war is Putin’s valentine to the Ukrainian people?


Tags:

 
 
 

22 Responses to “What Powell should say about wages”

  1. Gravatar of Jim Glass Jim Glass
    17. March 2022 at 16:47

    Here’s Kasparov and Julia Ioffe talking about Putin (and Trump) four years ago. Which makes good parts of this prescient.

    https://www.youtube.com/watch?v=bBsC9ey_H-s&t=4633s

    Long, but truth and prescience are worth it. Listen at 2x speed.

  2. Gravatar of Sean Sean
    17. March 2022 at 17:04

    It’s stupid to hold yourself accountable for not predicting Putin would invade. It’s for a very simple reason he’s getting crushed and has no chance at any strategic victory. Best he can do is destroy Ukraine and crash the Russian economy. Any rational person could not have seen this move. And Putin himself didn’t see this move because he thought victory in Ukraine in 3 days. In order to predict war you needed to have an extremely wrong view of the relative military strength.

    I have no problem saying I’ve liked aspects of Putin. I believe people should have pride in their nation and culture. The first ten years of Putin was reasonable as he regain the countries stability. It’s the militarism he turned to that is a problem I have no issue condemning. If he made more of a Chinese pivot of focusing on economic growth he could have been a good leader.

  3. Gravatar of Christian List Christian List
    17. March 2022 at 17:17

    Scott,

    Your TDS in great honor, but I can’t recall a single situation where Zelenskyy said anything negative about Trump and his administration.

    Spontaneously, I would have said there are a great many critical statements by Zelenskyy about Trump, even though I don’t remember any, but if you search in Google, just nothing comes up.

    In contrast, you will find critical statements from Zelenskyy when the Obama and Biden administrations were in place.

    This is not surprising. The axis Merkel Obama Biden mocked Zelenskyy extremely for years, with the supply of “non-lethal weapons” for example. Not to mention the promotion of Nordstream 2.

    The shameful Minsk Agreement is also another stillborn by them. It is oriented almost only at the Russian point of view, but Russia is not even mentioned as a party, much less as a harmful party that must be moderate.

    Trump has said a lot of nonsense, but on the whole Zelenskyy was not unhappy with Trump because he immediately ended the “non-lethal weapons” nonsense and gave real help to Ukraine.

    The same goes for deterrence against Putin. While Trump has been flattering to Putin, who has even restrained himself as a result, he also deterred Putin again and again, and he did nothing in actual deeds that helped Putin regarding Ukraine. On the whole, Zelenskyy was not dissatisfied.

    If anyone should hate Trump according to MTT (=Modern TDS Theory), it would probably be Zelenskyy. Still, he says nothing.

    Scott, this is what it looks like when someone is being normal and doesn’t have TDS. He makes real politics, he criticizes actors from the EU, the Biden administration, the Scholz administration.

  4. Gravatar of MIchael Sandifer MIchael Sandifer
    17. March 2022 at 19:04

    Scott,

    What’s the theory behind wanting nominal wage growth to be roughly 1% lower than the NGDP trend growth rate? And do you want this gap even at full employment?

    When it comes to the Volcker comparison, while Volcker took drastic action (much too drastic), to bring inflation down, inflation was relatively quite high for years after the ’82 recession, so there are limits to such a comparison. I wouldn’t point to the Volcker Fed as an example of optimal monetary policy.

  5. Gravatar of ssumner ssumner
    17. March 2022 at 19:12

    Sean, You said:

    “It’s stupid to hold yourself accountable for not predicting Putin would invade.”

    Yes, this particular invasion. But I hold people accountable for not knowing that this was a major risk, especially after his previous invasion of Georgia, his illegal seizure of Crimea, his aid to rebels in Eastern Ukraine, and his constant drumbeat of threats over the years. He’s always been a very dangerous demagogue.

    “I believe people should have pride in their nation and culture.”

    So let’s see, I gather you define “pride” as lying to Russians about the fact that Stalin killed millions of Russians. Or that Russia helped start WWII by invading Poland in 1939. Does the fact that the Germans teach the truth about the Nazis to their schoolchildren mean they don’t have “pride” in their country?

    Should we drop slavery from our history lessons?

    Should the Russian people be “proud” of the fact that the Russian Orthodox Church has endorsed the invasion? Pride in Tolstoy, Dostoevsky, Sputnik, etc., is fine, but God help us if Russians have pride in Russia’s political history.

    “If he made more of a Chinese pivot of focusing on economic growth he could have been a good leader.”

    Yeah, and if he also didn’t invade other countries and murder his political rivals and institute extremely repressive domestic policies and steal billions of dollars and lie about almost everything.

    Christian, You said:

    “Your TDS in great honor, but I can’t recall a single situation where Zelenskyy said anything negative about Trump and his administration.

    LOL, do you know anything about the past 5 years? You think he was happy when Trump withheld military aid until Zelensky agreed to dig up dirt on Biden?

  6. Gravatar of ssumner ssumner
    17. March 2022 at 19:13

    Michael, If productivity growth is about 1%, then 3% wage growth is consistent with 2% inflation.

  7. Gravatar of MIchael Sandifer MIchael Sandifer
    17. March 2022 at 20:47

    Ah, yes, you assume that the pre-pandemic mean productivity growth rate since 2012 will persist, as opposed to the 2.1% rate for 2019.

  8. Gravatar of msgkings msgkings
    17. March 2022 at 21:34

    @ssumner and Michael S:

    I’m fascinated by what we may see in the new post-Covid world of remote working. We are definitely not going back to the pre 2019 of most non tech companies requiring 5 days a week.

    Now that everyone has learned how to make it work, and the employees don’t want to go back, we’re going to have some productivity boosts from the more varied and personalized work experiences.

    I think this may even be a mini-internet level productivity boost…

    Perhaps a tad too optimistic but it’ll be fascinating to watch

  9. Gravatar of Effem Effem
    18. March 2022 at 05:25

    Powell was so “tough” that inflation expectations shot straight up after the meeting. It’s amateur hour over there.

  10. Gravatar of MIchael Sandifer MIchael Sandifer
    18. March 2022 at 09:58

    msgkings,

    Yes, in my lay view, there’s more uncertainty about future productivity than at any time since the beginning of the industrial revolution. I think that, long-term, the productivity revolutions to come will make the industrial revolution seem mild. That is, I think it’s possible to eventually get to a point in which productivity is increasing at an increasing rate, more or less permanently.

    That said, when that begins, I have no idea. It may not begin in my lifetime, and I’m 46. I suspect it’s already beginning, and that we’re on a relatively very flat portion of a rising exponential curve, pre-accelerating at an increasing rate.

    The industrial revolution(along with those in agriculture) obviously represented a permanent break from the past in terms of productivity growth, as suchgrowth had barely existed prior. Those who assume the industrial revolution is the best humanity can do will be very surprised.

    Concerning work-from-home, in particular, I’ve been doing it for years and can’t imagine doing anything else. It will ultimately save money, obviously, where productivity doesn’t suffer too much. It’s not only efficient for me, in terms of productivity, but also it obviously saves carbon emmissions and deprives Russia of just a bit of demand for its oil.

    One area that needs huge reforms in terms of productivity is the management of large corporations. I’ve been thinking that corporate structure should become much flatter, adopting an internal cartel structure in which every specialized department is largely autonomous and must earn profits from its dealings with both internal and external customers.

    This would presumably greatly reduce the power and pay of top managers, while making corporations more efficient, despite the profit margins of specialized departments.

    I obviously think the large coporations today are much too top-down, with poor information flow from top-to-bottom, and decisions that are not based on internal market dynamics.

  11. Gravatar of Sarah Sarah
    18. March 2022 at 10:12

    “Yes, this particular invasion. But I hold people accountable for not knowing that this was a major risk, especially after his previous invasion of Georgia, his illegal seizure of Crimea, his aid to rebels in Eastern Ukraine, and his constant drumbeat of threats over the years. He’s always been a very dangerous demagogue.”

    — Precisely, who do you hold accountable? Do you hold Bush accountable for his invasion of Iraq and Afghanistan (violations of international law). Do you hold Obama accountable for his dark money operations in Syria and Libya? Do you hold Clinton accountable for airstrikes on Bosnia? Do you hold administrations accountable for setting up Biolabs in Ukraine, almost certainly as a way to get around U.S. laws? Do you hold Biden accountable for his petty corruption (son on board of burisma, and Chinese hedge fund), and for his bombing of Somalia?

    When you say Crimea was “illegal”, are you certain it was? How do you know? Because CNN says so? The people in Crimea say they voted to be part of Russia. Are they teling the truth? If not, how do you know? Furthermore, our country is not in a position to hold anyone morally accountable. We are not more virtuous then anyone else. In fact, it’s somewhat embarrassing to be American today. I don’t even want to show my passport anymore, because someone might think I’ll bomb them, or sieze their bank accounts because they don’t agree with me.

    The world is not “united” against Russia. The truth is that the U.S. is isolating itself. India, Brazil, China, etc don’t agree with this type of bullying. There are two sides to every story. Certainly the people in Donbass have a very different story than the administration in Kiev. Who is correct? Who is story is accurate? Is it possible that both sides might be embellishing and that both sides might be telling the truth?

    And who named you the moral arbiter of a Ukranian civil war?

  12. Gravatar of MIchael Sandifer MIchael Sandifer
    18. March 2022 at 11:02

    Sarah,

    At the risk of completely wasting my time and keystrokes, if you’re going to criticize Obama, at least avoid the conspiracy theories. Obama’s big mistake in Syria was drawing a red line over the use of chemical weapons and being shown to have been bluffing. Obama was weak and undermined US credibility.

    And saying our country is in no position to hold anyone morally accountable, I profoundly disagree. Even with all of our mistakes, and yes, unfair treatment toward Russia, we are a republic and Russia is controlled by a dictator. We are morally, and otherwise superior, for that reason alone.

  13. Gravatar of Jeff Jeff
    18. March 2022 at 14:07

    Sarah is correct that if you go to Crimea, walk up an down the street, and ask people how they feel about Russia, then nine out of ten crimeans will vote in favor of Russia.

    However, I think your analysis Sarah is a bit too idealistic. If “woke” Oregon wanted to be a part of the CCP, and voted to do so, that would be a bit of a problem don’t you think? I also believe in self determination, but there are limits to what is viable. You cannot just hold a vote and annex a country. Where does that end? And what would it lead to? If permissible, you could a imagine a scenerio where countries start holding sham elections to annex others. Or where every country in the world votes to be part of Singapore or Luxembourg, where their high real incomes increase purchasing power.

    Obviously, the situation in Donbass is similar to Crimea. Nine out of ten would rather be with Russia. But instead of annexation, a better solution would have been the Minsk agreement. Why that agreement was violated, and what role Kiev is playing in the bombings is hard to say.

    You are correct about western isolation. The sanctions don’t do anything but make life more difficult for people living in the West. India will just settle in Ruble/Ringit. And the CCP will increase their wealth through the growing popularity of CISP.

    And South America could care less. They will follow Brazil. And Brazil doesn’t give a shit about what U.S. sanctions.

  14. Gravatar of msgkings msgkings
    19. March 2022 at 05:29

    @Michael S:

    I’m a bit skeptical of the singularity/accelerating flywheel of productivity line of thought. It’s too much of a Deus ex machina….all humanity’s problems will be solved by tech, so everyone can just relax. It’s too pat. Life’s not like that.

  15. Gravatar of Sarah Sarah
    19. March 2022 at 05:58

    Jeff, your point on Crimea is noted. I somewhat agree.

    However, the contradictions remain. We consistently violate internatioanl law, yet we are the first to condemn others with violent threats and sanctions when they do so. Ultimately, this is why international institutions are a catalyst for war, not a security against war. NATO, while good in theory, only leads to one bloc bullying another bloc. It leads to a bipolar world which, inevitably, will result in war. This is because the centralization of power in any form leads to the abuse of power. NATO is not mother Teresa.

    There is a great scene in the movie Thirteen Hours where diplomate Adlai Stevenson presents evidence at the security council showing proof of missiles in Cuba. When the RU ambassador is presented with this evidence, Adlai Stevenson says: “we are waiting for your answer, and we will wait until hell freezes over”. In that moment, our citizens were proud to be Americans.

    But compare that evidence, fact based reporting, to what we witnessed just a few days ago. Brazil, China and Kenya requested that the United States present evidence to refute RU’s claims about biolabs. Our diplomats responded with 30 seconds of crickets, followed by ad hominem attacks. But are we surprised? These are the same ad hominem attacks that we have become used too. In fact, they have become the norm of the democrat party. Ask them to discuss the influx of immigrants, the deleterious affects on the border towns, and whether such a rapid influx has negative affects upon wages and culture, and conservatives and libertarians are called “racists”. Ask them to discuss the merits of locking down the economy, and they say libertarians and conservatives “want to “kill people”. Ask them whether men in woman’ sports is the right approach, and they are called “sexists”. There is never any substance. It’s just bizzarre hate-filled rhetoric. I’m sorry, but it reminds me of the old Soviet Union.

    And lastly, have we cried wolf too many times?

    In 2002, Bush told the international community there were “weapons of mass destruction”. False!
    In 2011 we told the international community that we had no involvment in Syria or Libya. False.
    In 2014, we told the international community that we had no involvment in the Ukranian protests. (others contradict these claims).
    In 2016, we told the international community that Russia secretly violated the MINSK agreement. We told them this conflict was a “false flag”. We continue to say this, but haven’t provided any evidence.
    In early 2022, we told the international community we did not have any labs in Ukraine. Then two weeks later, with our backs against the wall, we told the international community we have labs but just for mundane research purposes.

    Now the international community wonders whether the United States can be trusted. The similarity between our diplomats today, and the Russian diplomat response in 1962, is striking.

  16. Gravatar of anon/portly anon/portly
    19. March 2022 at 08:33

    Sean:

    “I have no problem saying I’ve liked aspects of Putin. …. If he made more of a Chinese pivot of focusing on economic growth he could have been a good leader.”

    Esteemed host:

    “Yeah, and if he also didn’t invade other countries and murder his political rivals and institute extremely repressive domestic policies and steal billions of dollars and lie about almost everything.”

    Not a bad answer, but the fundamental problem with Putin isn’t that he’s a Bad Dictator, it’s that he’s a Dictator. The Putin fanboys make exactly the same mistake the Castro Fanboys make.

    He could never have been a “good” leader under any circumstances, just a less bad one.

  17. Gravatar of Michael Sandifer Michael Sandifer
    19. March 2022 at 09:03

    anon/portly,

    You replied:

    “Not a bad answer, but the fundamental problem with Putin isn’t that he’s a Bad Dictator, it’s that he’s a Dictator. The Putin fanboys make exactly the same mistake the Castro Fanboys make.

    He could never have been a “good” leader under any circumstances, just a less bad one.”

    This is exactly right. The Trump supporters and Putin apoogists are exactly like the extreme leftests who supported Castro and Chavez. They assume nothing, but good intentions on the part of the personality cult leader, completely fail to see that they are the extremists, while wanting changes in the US that would amount to an overthrow of the government.

    There is no such thing as a good dictatorship, and no such thing as a benign dictator. Dictators have to do evil to become dictators and to remain so.

    Also, of course, corruption is always worse in dictatorships, even though many dictators claim they need extraordinary powers to fight corruption. Dictators typically deliver the opposite of the promised results, with results getting worse over time.

    Look at Putin. He claimed he’d fight corruption and make Russia militarily strong again, when he is perhaps the world’s biggest thief and gangster and due to corruption and incompetence, the Russian military has been exposed as being completely unable to conduct a proper war just outside its borders.

    Thanks to the hollowing out of Russia’s military, its lack of economic development, and Putin’s catastrophic blunder in being unable to recognize Russia’s weakness, Putin has ruined Russia by way overplaying his hand.

    This is why we have checks and balances in rich countries.

  18. Gravatar of TGGP TGGP
    19. March 2022 at 16:04

    Sumner’s link text: “idolize him”
    The contents of the link itself: […] Mr Trump said that Mr Putin “wants to make his country larger or he wants to put it back the way it was,” even though “it actually didn’t work very well” […] Mr Putin’s “big ego” would drive him to become “more and more ruthless” as the conflict continues […]

    I know you’re not dumb, Scott, so did you not bother to read your own link? That’s the kind of approach I’d expect from Trump himself.

  19. Gravatar of MIchael Sandifer MIchael Sandifer
    20. March 2022 at 07:20

    msgkings,

    I think AI will design future AI, eventually, and that’s when something like the singularity begins to happen.

  20. Gravatar of ssumner ssumner
    20. March 2022 at 11:43

    anon/portly, I didn’t use the term “dictator”, I merely described the characteristics of a dictator.

    TGGP, Over the years, Trump’s made lots of statements with gushing praise for Putin. I guess I just assumed my readers had kept up with the news. Mea culpa.

  21. Gravatar of TGGP TGGP
    20. March 2022 at 13:57

    Rather than assume, just link to something consistent with your description of the link. And since Trump is an inconsistent person who will say the opposite of something he said previously (which appears to be the case with that link now that the sanctions can’t be as easily scoffed at), it shouldn’t be too hard to find one.

  22. Gravatar of anon/portly anon/portly
    22. March 2022 at 08:46

    “anon/portly, I didn’t use the term “dictator”, I merely described the characteristics of a dictator.”

    Okay, touche, true enough, but you left it as an exercise for the reader, once again over-rating our (okay, my) ability to make obvious inferences.

Leave a Reply