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A gas station attendant pumps gas on August 15, 2020 in Somers Point, New Jersey.
(Photo: Alexi Rosenfeld via Getty Images)
Higher Interest Rates Only Brought More Pain
In the name of taming inflation, central banks have deliberately set themselves on a path to cause a recession--or to worsen it if it comes anyway.
https://www.project-syndicate.org/commentary/fed-interest-rate-increases-counte…
Dec 09, 2022
Central banks' unwavering determination to increase interest rates is truly remarkable. In the name of taming inflation, they have deliberately set themselves on a path to cause a recession--or to worsen it if it comes anyway. Moreover, they openly acknowledge the pain their policies will cause, even if they don't emphasize that it is the poor and marginalized, not their friends on Wall Street, who will bear the brunt of it. And in the United States, this pain will disproportionately befall people of color.
As a new Roosevelt Institute report that I co-authored shows, any benefits from the extra interest-rate-driven reduction in inflation will be minimal, compared to what would have happened anyway. Inflation already appears to be easing. It may be moderating more slowly than optimists hoped a year ago--before Russia's war in Ukraine--but it is moderating nonetheless, and for the same reasons that optimists had outlined. For example, high auto prices, caused by a shortage of computer chips, would come down as the bottlenecks were resolved. That has been happening, and car inventories have indeed been rising.
Optimists also expected oil prices to decrease, rather than continuing to increase; that, too, is precisely what has happened. In fact, the declining cost of renewables implies that the long-run price of oil will fall even lower than today's price. It is a shame that we didn't move to renewables earlier. We would have been much better insulated from the vagaries of fossil-fuel prices, and far less vulnerable to the whims of petrostate dictators like Russian President Vladimir Putin and Saudi Arabia's own war-mongering, journalist-murdering leader, Crown Prince Mohammed bin Salman (widely known as MBS). We should be thankful that both men failed in their apparent attempt to influence the US 2022 midterm election by sharply cutting oil production in early October.
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Joseph Stiglitz
Joseph E. Stiglitz is a Nobel laureate economist at Columbia University. His most recent book is "Measuring What Counts: The Global Movement for Well-Being" (2019). Among his many other books, he is the author of "The Price of Inequality: How Today's Divided Society Endangers Our Future" (2013), "Globalization and Its Discontents" (2003), "Free Fall: America, Free Markets, and the Sinking of the World Economy" (2010), and (with co-author Linda Bilmes) "The Three Trillion Dollar War: The True Costs of the Iraq Conflict" (2008). He received the Nobel Prize in Economics in 2001 for research on the economics of information.
Central banks' unwavering determination to increase interest rates is truly remarkable. In the name of taming inflation, they have deliberately set themselves on a path to cause a recession--or to worsen it if it comes anyway. Moreover, they openly acknowledge the pain their policies will cause, even if they don't emphasize that it is the poor and marginalized, not their friends on Wall Street, who will bear the brunt of it. And in the United States, this pain will disproportionately befall people of color.
As a new Roosevelt Institute report that I co-authored shows, any benefits from the extra interest-rate-driven reduction in inflation will be minimal, compared to what would have happened anyway. Inflation already appears to be easing. It may be moderating more slowly than optimists hoped a year ago--before Russia's war in Ukraine--but it is moderating nonetheless, and for the same reasons that optimists had outlined. For example, high auto prices, caused by a shortage of computer chips, would come down as the bottlenecks were resolved. That has been happening, and car inventories have indeed been rising.
Optimists also expected oil prices to decrease, rather than continuing to increase; that, too, is precisely what has happened. In fact, the declining cost of renewables implies that the long-run price of oil will fall even lower than today's price. It is a shame that we didn't move to renewables earlier. We would have been much better insulated from the vagaries of fossil-fuel prices, and far less vulnerable to the whims of petrostate dictators like Russian President Vladimir Putin and Saudi Arabia's own war-mongering, journalist-murdering leader, Crown Prince Mohammed bin Salman (widely known as MBS). We should be thankful that both men failed in their apparent attempt to influence the US 2022 midterm election by sharply cutting oil production in early October.
Joseph Stiglitz
Joseph E. Stiglitz is a Nobel laureate economist at Columbia University. His most recent book is "Measuring What Counts: The Global Movement for Well-Being" (2019). Among his many other books, he is the author of "The Price of Inequality: How Today's Divided Society Endangers Our Future" (2013), "Globalization and Its Discontents" (2003), "Free Fall: America, Free Markets, and the Sinking of the World Economy" (2010), and (with co-author Linda Bilmes) "The Three Trillion Dollar War: The True Costs of the Iraq Conflict" (2008). He received the Nobel Prize in Economics in 2001 for research on the economics of information.
Central banks' unwavering determination to increase interest rates is truly remarkable. In the name of taming inflation, they have deliberately set themselves on a path to cause a recession--or to worsen it if it comes anyway. Moreover, they openly acknowledge the pain their policies will cause, even if they don't emphasize that it is the poor and marginalized, not their friends on Wall Street, who will bear the brunt of it. And in the United States, this pain will disproportionately befall people of color.
As a new Roosevelt Institute report that I co-authored shows, any benefits from the extra interest-rate-driven reduction in inflation will be minimal, compared to what would have happened anyway. Inflation already appears to be easing. It may be moderating more slowly than optimists hoped a year ago--before Russia's war in Ukraine--but it is moderating nonetheless, and for the same reasons that optimists had outlined. For example, high auto prices, caused by a shortage of computer chips, would come down as the bottlenecks were resolved. That has been happening, and car inventories have indeed been rising.
Optimists also expected oil prices to decrease, rather than continuing to increase; that, too, is precisely what has happened. In fact, the declining cost of renewables implies that the long-run price of oil will fall even lower than today's price. It is a shame that we didn't move to renewables earlier. We would have been much better insulated from the vagaries of fossil-fuel prices, and far less vulnerable to the whims of petrostate dictators like Russian President Vladimir Putin and Saudi Arabia's own war-mongering, journalist-murdering leader, Crown Prince Mohammed bin Salman (widely known as MBS). We should be thankful that both men failed in their apparent attempt to influence the US 2022 midterm election by sharply cutting oil production in early October.
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