Fed official says low unemployment is dangerous

Richard Fisher, president of the Federal Reserve Bank of Dallas, said it may be necessary to raise interest rates if the unemployment rate falls below 6.1 percent because low unemployment could lead to higher wages.

Crowded Michigan Unemployment OfficeFisher pointed out that in Texas, wages are rising faster than the rate of inflation.

To me, that is a good thing, not a bad thing.  Why interfere with the law of supply and demand?  The only reason that I can think of is that it might decrease the market value of financial assets.

I am reminded of Karl Marx’s claim that “a reserve army of the unemployed” is necessary to the functioning of capitalism.

I believe in the value of self-discipline, education and the willingness to work.  But anybody who preaches these values ought to be able to show that there is a payoff, and that the payoff is available to everyone, not just the exceptionally talented and the exceptionally lucky.

If the economic system is set up so that at least 6.1 percent of the work force is unemployed at all times, then there is no way to rise out of that 6.1 percent without knocking somebody else down into it.

LINKS

Fed’s Fisher: wages rise when joblessness falls below 6.1 percent by Reuters (via Tom the Dancing Bug).

‘Poor people don’t plan long term.  We’ll just get our hearts broken’ by Linda Tirado for The Guardian.  Somewhat long, but well worth reading.

Obama’s Long Battle to Cut Social Security Benefits by Eric Zuesse for Washington’s Blog (via Mike the Mad Biologist).  The President’s goals are not what his supporters think they are.

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2 Responses to “Fed official says low unemployment is dangerous”

  1. Chico Says:

    That seems to point to a perceived vulnerability in the system – that being, wages rising at a faster than predictable rate. I wonder if there is a historical reference to a time where wages rose at a fast pace, and what was the effect on corporate profits.

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  2. philebersole Says:

    The last American era of high wages and low unemployment was 1945 to 1975.

    Wages grew faster than the rate of inflation, which was only natural, because the economy as a whole grew faster than the rate of inflation.

    The economy is still growing faster than the inflation rate (although not as fast as in 1945 to 1975), but wages are not. I think this is a bad thing, not a good thing.

    http://preview.msn.com/en-us/money/markets/the-fed-would-be-crazy-to-worry-about-runaway-wages/ar-BB5UlrF

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