When UPS charged me a $684 tariff on $355 of vintage computer parts

Sociopaths. It breaks me to see the Fed use interest rates to cause unemployment as the lever against inflation. It all seems so cruel.

They use interest rates to protect against inflationary (and deflationary) spirals, which are known to be devastating. The effect on the unemployment rate is a known, and predictable, side effect. But formal unemployment is small compared to labour force dropout anyway, and the latter is not necessarily so sensitive to economic conditions anyway. Besides which, the unemployment rate can't really keep going down forever.

Zoom out; recent levels are actually quite impressive in the USA. Yes, they've climbed since 2023, but they're only just reaching the pre-GFC minimum (https://www.bls.gov/charts/employment-situation/civilian-une...).

Zoom out further: https://fred.stlouisfed.org/series/UNRATE/

Had it not been for COVID you'd be at more than 16 years without a(n NBER-determined) recession, long enough to suggest a fundamental shift vs. how things worked in the several decades before that.

Have you ever read about people burning piles of German currency because it was better than using it to buy firewood with? Not to say we would get there, but allowing inflation to run is not kinder.

I think these days folks typically use Zimbabwe or Argentina as examples.

Have you ever tried to start a fire with a bunch of paper? It doesn't work great, and what a mess.

Inflation like that doesn’t just happen. It can only be the outcome of explicit government policy. Like in post WW1 Germany they wanted to wipe the value of all domestic government debt they accumulated during the war.

Done it plenty of times.

Works great until you run out of paper.

Unemployement is a necessary part of the economy, what is cruel is making unemployment unlivable.

Those are more recent examples, but I think Germany is still a more visceral example for a lot of Western nations because Germany was a high tech, educated industrial nation that was hit with such massive problems from government policy. It's closer to home. Other countries are (wrongfully) easier to dismiss as being just too different from our wealthy and enlightened selves.

Yet the average household seems weaker now than 16 years ago. Perhaps policy guided by this metric could use rethinking.

It burns too quickly, and leaves a ton of ash behind that flies everywhere.

Of course it works in a pinch.

Your observation is about distributional characteristics of the economy which, in terms of policy, are addressed by fiscal policy and not monetary policy; the former remains in the hands of Congress and the President without delegation to the Federal Reserve, which has been given only a narrow set of tools adapted to and a mission related to broad aggregate performance.

The median household income is higher today in real terms than it was in 2008.

Eh my understanding was more that they had to cover fiscal deficits with printing, because they had heavy WW1 war reps (only payable in gold, so they couldn’t inflate it away).

There are times when it’s politically infeasible to defend the currency, even if they technically could. See the response in France to trying to raise the retirement age a bit, because their budget is in trouble.

Yes, and it was fine, but sure, I typically burn wood.

Also, Germany was a great power seriously challenging the greatest power of the time, the British Empire. They fell a lot further than those other examples.

People get confused the hyper inflation in Germany was right after the end of WWI when Germany's economy was collapsing. Turns out you can't fix that with monetary policy.

A point. Economists like people to believe that hyper inflation lead to Hitler. When it was austerity policies at the start of the great depression 10 years later that lead to the Nazi's winning in 33. Same austerity policies in the US lead to FDR and the Democrats winning.

Unfortunately we're looking more like Hogan's Heroes than Germany. Both Zimbabwe and Argentina (and, quite frankly, Venezuela) were well developed before they went down the road of disastrous policies.

Supposedly Germany was spending around 80% of its tax revenue on interest payments alone. They pretty much had to finance the war through domestic bonds.

So yes, pretty they didn’t have any money to spend on anything else. Of course bonds became worthless well before the peak in inflation.

Eesh thanks for that detail, didn’t realize it was so crushingly high.