Sean Fieler had an op-ed in the Journal editorial page today feigning concern over the tough plight of America's middle class. First of all, if WSJ cared a wit about the middle class, it wouldn't be supporting Mitt Romney with his regressive tax cut and the Ryan budget.
Of course, there is nothing that excites them more than the Ryan budget.
Fieler is the president of Equinox Partners, L.P., a New York-based hedge fund, is chairman of the American Principles Project, a Washington advocacy group. How much Mr. Master of the Universe is concerned about the little guy you can only imagine.
To be sure, it's preferable for him than voicing his real concerns: pity the billionaire. Fieler starts:
"With the Republican Party committed to a gold commission and the Federal Reserve committed to easy money, a substantive debate about the principles underpinning our monetary system is finally in the offing. For sound money to carry the day, Republicans will need to do more than point out the still-hypothetical risks of easy money. The GOP will have to detail the harm that the middle class has already suffered as a result of a policy of low but persistent levels of inflation."
http://online.wsj.com/article/SB10000872396390444180004578016200287341688.html?mod=googlenews_wsj
The GOP: party of pain-for you. Their level of sadism knows no bounds. You can be sure that if the GOP supports it, it's against the interests of the middle class. I look forward to this "serious discussion" in favor of gold buggism. As Paul Ryan supports not just a return to the gold standard, but the gold coins standard-ie, a return not to the 1800s but the 1700s-maybe he'll start the conversation by treating us to one of his famous powerpoint sessions.
"A little inflation appears to be a free lunch, lubricating the economy and gradually erasing past financial mistakes. But the nature of the free lunch is that its costs aren't absent—they're just distributed broadly. And in the case of low but steady inflation, the broadly distributed costs are borne by the middle class. Over time, rising prices have eroded American workers' standard of living. And, over time, the Federal Reserve's persistent easy money hurts the very person it is presumably intended to help, the American worker."
We know how much the GOP hates a free lunch, unless it's for them and their rich friends. What's clear is that no matter how much the middle class loses, it will never be enough for the GOP loving Journal. The passion for austerity and Robert Samuelon's "settling for less" is bottomless.
Fieler now gives us a history lesson that shows us-you guessed it-the problems all started with Keynes who weaned us onto the idea that a little inflation can be salutary.
"The notion that modest inflation is helpful to labor dates to John Maynard Keynes's "General Theory of Employment, Interest and Money." Keynes pointed out that the supply of labor is not a function of real wages alone. Rather, the instance in which the supply of labor is determined solely by real wages is a special case that fits into his broader "General Theory," which showed the strong influence that observed wages have over the supply of labor."
"He noted workers' strong preference for a 2% wage increase in a 4% inflation environment to a 2% decrease in wages during a period of constant prices. But he also drew from this preference the obvious policy conclusion: A constantly rising price level can be used to make actual declines in wages more palatable, thereby reducing conflict with labor and leading to higher short-run employment."
"The Federal Reserve doesn't just understand workers' tendency to use observed prices as a proxy for real prices; under Chairman Ben Bernanke's leadership, the Fed has become increasingly bold in the exploitation of this tendency. With inflationary expectations not yet unsettled by the Federal Reserve's $2 trillion balance-sheet expansion, Mr. Bernanke has committed the Fed to an open-ended round of quantitative easing in hopes of trading a little extra inflation for a little short-term employment."
"The problem with Keynes's theory and the Federal Reserve's action—a problem that both Keynes and Mr. Bernanke long ago recognized—is that easy money only boosts employment in the short run. And, as Mr. Bernanke must now recognize, contrary to Keynes's assertion, we're not all dead in the long run."
So Fieler believes even a little inflation is calamitous. No surprise that he got in a dig over Keynes' "the long run." Nothing offends the Right wing austerity loving position more than that off the cuff comment of Keynes. Yet, there's surely truth in it. There are Austrians, including in his lifetime, Hayek himself, who absurdly claim that we should make policy decisions with the view to how it might even effect the economy in 30 years.
It ought to be obvious that this is impossible. Fieler goes on to cry his crocodile tears for the American worker:
"The more than five-fold increase in the median income of the American household since 1971, to $50,000 from $9,000, certainly provides the clear appearance of progress. But after the dollar's 82% loss of purchasing power over the same period is factored in, the median household income rose just 12%. This much more modest increase is largely the result of the growing prevalence of two-income households."
"The median real income for working men over the same 40-year period rose just 8%. And that improvement only accrued to the ever-shrinking percentage of men fortunate enough to still have full-time jobs—just 67%, according to the latest data from the Bureau of Labor Statistics, within a percentage point of the lowest level on record since the figure was first recorded in 1948."
I find the period he chooses somewhat misleading. Why not look at the last 30 years, rather than the last 40? It was in the last 30 years that we've seen median income totally stagnant. Ronald Reagan asked us in 1980 if we were better off than we were 4 years ago.
Mr. Reagan, Americans aren't better off today than they were 30 years ago. And what's interesting is that what started this downward trajectory is the opposite of what Fieler blames. It was actually Volcker's disinflation that was the seminal event in this.
Contrary to Fieler, the story of the last 30 years is not inflation but disinflation. As to how workers fare we can compare the pre-Volcker era and the post-Volcker era. By this gauge it's not even close.
"Having successfully protected the American worker from the sharp message of the market, the Federal Reserve is powerless to protect the American worker from the forces of technology and globalization reshaping the world economy. Recognizing the failure of so many American workers to adjust to the demands of the global market place, Mr. Bernanke has spoken passionately about the importance of education. But, the chairman's speeches aside, the only real support the Federal Reserve is offering the middle class is help in financing ever-growing levels of public assistance."
"The alternative to this unhealthy status quo is clear. The Federal Reserve needs to stop infantilizing American workers and start providing them with the clear message that only long-run stable prices can provide. To retrain, to adjust, to compete, the American worker needs the market's unvarnished truth. This truth will in turn break the cycle in which American workers mistake the appearance of price stability for actual price stability, a mistake for which they receive the appearance of progress without its substance."
"The recognition that persistent, low-level inflation leads to lower, not higher, long-term employment will also clarify the organizing principle of our monetary system. The Federal Reserve was not created to address an employment problem. The Fed was set up to ensure bank solvency, a prime directive from which it has not wavered."
"With the Federal Reserve's underlying mandate clear, we can weigh sound money that benefits the American worker against easy money that benefits the banks and leveraged financial institutions. Framed properly, gold money that holds its value over time will be clearly recognized as the best system for the American worker—if not the overleveraged banker."
Actually, a failure of bank solvency was a major economic problem.
It takes someone out of touch to the extent of a Mitt Romney to believe that workers have been protected from "the sharp message of the market." For 30 years we've had that message preached-that we must submit to it's sharp message. I think it's time for a change of pace, a less sharp message.
We have had low inflation-we've just come out of the Great Moderation. What we saw was more job insecurity but greater benefits for the Romneys and Fielers of the world. That workers did so much better prior to Volcker's disinflation and Fieler's sharp message makes it clear where we need to go.
Romney who as much as one man can, represents these last 30 years is being soundly rejected. America is speaking. The GOP's usual message of more pain for less gain has lost its seductive appeal.
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