Wages and Panic Buttons (http://www.nytimes.com/yr/mo/day/oped/03tyso.html) (fwd)

Max Sawicky sawicky at epinet.org
Tue Aug 3 15:27:21 PDT 1999

>From the Tyson article:
Higher prices in turn mean higher interest rates, as lenders insist on higher returns to protect against future inflation and as the Federal Reserve acts to quell inflation by raising short-term interest rates. And higher interest rates mean lower prices for financial assets like stocks and bonds. The implication of this chain of simple economic logic is clear: inflation is a common threat to Americans as workers and as investors.

Boolshit. I didn't notice this in the piece. Inflation is associated with employment and wage growth. At most points in post-war U.S. history, some such growth was possible. Slack was the rule rather than the exception. Tyson gives the impression that wage-fed inflation has been an ever-present threat.

The threat to workers is the Fed and its elite apologists, not inflation.

It is true that an increase in interest rates reduces the value of bonds. I.E., whatever rate of return you got yesterday, you could do better today, so yesterday's bond has to fall in price to match that of today's. The stock part is hinky; I'll leave that to Henwood.


------------- I noticed this when I read it on paper at lunch and forgot mention it. She says higher interest rates mean lower prices for sticks and bonds. I thought the price of bonds went up when interest rates went up. Am I missing a 'not' operator in my thinking somewhere?


Joseph Noonan jfn1 at msc.com

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