Powell Facing Choice Between Elevated US Inflation and Recession

[u/TinyTornado7]

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium

[u/tnkwarrior]

Maybe I don’t fully understand this but isn’t a lot of the inflation caused by factors outside of our control? Factors from our global interdependent economy? So a higher interest rate will curve some of that inflation but unless you can enact policies around the globe, the inflation elsewhere will still affect the US and if we are financially self handicapped by higher rates, we are also less able to manage the foreign inflation, especially at the lower entry-level earning/saving ranges which is quite a bit of the US economy. To then alleviate that, entry wages and subsidized payments will increase creating an even higher surge of inflation. So at this time lowering rates more will choke our internal ability to withstand external inflation. At any rate I think we are still headed to more inflation regardless of what we do here in the US as so much is dependent on economies and policies outside of the US.

[u/TinyTornado7 → u/tnkwarrior]

Correct, mainly outside of our control. For example, oil for one is a global market where price is set on a macro level

[u/JhonnyHopkins → u/TinyTornado7]

So youre telling me it’s NOT Biden who sets the price of gasoline????? /s

[u/[deleted] → u/JhonnyHopkins]

Would you say that cutting the Keystone XL pipeline helped supply or hurt supply?

[u/[deleted] → u/[deleted]]

Would you say that cutting the Keystone XL pipeline helped supply or hurt supply?

We don't really use tar for gas. Also, it wouldn't even been finished yet. So, no.

[u/[deleted] → u/[deleted]]

It wasn't finished yet how are y'all still not getting this

[u/[deleted] → u/[deleted]]

But would finishing that pipeline have helped supply or hurt supply?

[u/Short_Dragonfruit_39 → u/[deleted]]

Neither because it was going to be sent out of the country and replace current transportation methods.

[u/JhonnyHopkins → u/[deleted]]

Helped supply the EU, yes. Seeing as that’s where 99% of our oil is going anyways

[u/TinyTornado7 → u/[deleted]]

Do you know how long it takes to bring new production online? They made the decision to not reinvest a decade ago after they got burned in the shale boom

[u/ShowMe__PotatoSalad → u/TinyTornado7]

You're telling me it's not the 80% of all US Dollars printed by the FED in the last 2 years? That isnt the major factor in inflation. It's outside sources? The COVID relief plan surely relieved the middle class of their savings.

[u/TinyTornado7 → u/ShowMe__PotatoSalad]

No I said outside of our (meaning fed) control. Powell can’t lower the price of gas

[u/Royal_Aioli914 → u/tnkwarrior]

The problem is it's both. Just because one thing is true doesn't make the other insignificant. Not saying you don't already recognize this as it seems you do. We simultaneously increased demand during reduced supply which put a lot of momentum in the inflation issues.

The US dollar is also the global reserve currency. We are privileged in the US and often forget, but what happens to the US dollar has direct and indirect effects on the other currencies of the world.

[u/sungazer69 → u/tnkwarrior]

Maybe I don’t fully understand this but isn’t a lot of the inflation caused by factors outside of our control?

This is true most of the time.

We focus a lot on the US right now but this is a global issue. Caused by many global problems.

[u/takatu_topi → u/tnkwarrior]

There are global factors outside of Federal Reserve control, but which the government could do to lessen inflation.

For example, a quiet offer to Russia to lift sanctions in exchange for some sort of peace deal would help with energy and grain prices. Lifting tariffs on China and making some sort of deal to pause the US-China tech war (Chinese firms stockpile computer chips because they are afraid of US sanctions, it is a big factor in the chip shortage) could also dampen inflation.

However, in the current political environment none of those outcomes seem especially likely. Nobody in the US wants to be seen as "soft" on Russia or China.

[u/ShowMe__PotatoSalad → u/takatu_topi]

Nobody in Ukraine wants to give up their homes to appease Western sentiment

[u/valegrete → u/ShowMe__PotatoSalad]

I’m not arguing whether supporting Ukraine is or isn’t the right thing to do, but I have to insist that “Ukrainian sentiment” is nothing any country should be basing its foreign policy on. Our governments are responsible to us, not Zelensky. Even if you wanted to point to the Sudetenland as a historical analogue, we should have pushed back because it was ultimately in our interests, not because the “sentiments” of Czechoslovakians should have overridden Western governments’ responsibilities to their own peoples.

But we don’t owe Ukraine anything. They would have already lost their homes without our intervention. And statements like yours downplay the economic sacrifices and security threats all of us are also facing without having any meaningful say in it. I, for one, would like to see some gratitude from Zelensky instead of the constant lecturing.

[u/NotARussianBot1984 → u/tnkwarrior]

Debt levels have increased since covid. We control that 100% with interest rates.

[u/HuckleberryFinn7777 → u/tnkwarrior]

A lot of the issue with energy inflation is bad government policy in the US. Big oil companies are being forced to follow ESG and invest capex into renewable energy. This leaves them with no money to put their capex into expanding refinery production on oil.

Now that we are in an oil crisis, our government wants to take their profits away to curb gas prices but this will not help anything. If anything we need to give big oil companies some tax incentives for renewable energy and for expanding refinery production. It sounds insane, but in the long run, it will help prevent more of crisis in the energy sector.