What’s behind the Fed’s interest rate hike? A desire to keep workers insecure and wages depressed.

[marmar]

from Jacobin magazine:


The Fed Doesn’t Work For You
What’s behind the Fed’s recent interest rate hike? A desire to keep workers insecure and wages depressed.

by J. W. Mason


To the surprise of no one, the Federal Reserve recently raised the federal funds rate — the interest rate under its direct control — from 0–0.25 percent to 0.25–0.5 percent, ending seven years of a federal funds rate of zero.

But while widely anticipated, the decision still clashes with the Fed’s supposed mandate to maintain full employment and price stability. Inflation remains well shy of the Fed’s 2 percent benchmark (its interpretation of its legal mandate to promote “price stability”) — 1.4 percent in 2015, according to the Fed’s preferred personal consumption expenditure measure, and a mere 0.4 percent using the consumer price index — and shows no sign of rising.

US GDP remains roughly 10 percent below the pre-2008 trend, so it’s hard to argue that the economy is approaching any kind of supply constraints. And setting aside the incoherent notion of “price stability” (let alone of a single metric to measure it), according to the Fed’s professed rulebook, the case for a rate increase is no stronger today than a year or two ago. Even the business press, for the most part, fails to see the logic for raising rates now.

Yet from another perspective, the decision to raise the federal funds rate makes perfect sense. While the consensus view considers the main job of central banks to be maintaining price stability by adjusting the short-term interest rate, this has never been the whole story. (Lower interest rates are supposed to raise private spending when inflation falls short of the central bank’s target, and higher interest rates are supposed to restrain spending when inflation rises above the target.)

More importantly, the central bank helps paper over the gap between ideals and reality — the distance between the ideological vision of the economy as a system of market exchanges of real goods, and the concrete reality of production in pursuit of money profits. ....................(more)

https://www.jacobinmag.com/2016/01/federal-reserve-interest-rate-increase-janet-yellen-inflation-unemployment/

[Proserpina]

1. The Fed Reserve has this thought-process

They have to have a positive interest rate, so they can lower it when the economy needs a "helping hand". This is what they have done since the beginning, their very reason for existing.

Well, they lowered it to zero...and it didn't help. Consternation ensued!

After brooding about the failure of all their efforts: Quantitative Easing, ZIRP, jawboning, tapering, the Fed decided to try to get a handle on the situation by jacking the interest rate back up, so they could in the future lower it again.

As Max Keiser points out, "You can't taper a Ponzi scheme!"

and there we are...on the brink of a major, global, economic collapse.

The fact that workers are still being screwed is a feature, not a bug. But the main goal was control....and the Feds don't have it. And they are scared. Because they know Congress is ignoring everything about the economy to play their little pissing games as directed by the Koch bros.

And the Ponzi scheme is about to collapse.