Ross: I’m getting ahead of rising interest rates, and so should you

May 5, 2022, 7:29 AM
Federal Reserve Chairman Jerome Powell (Getty Images)...
Federal Reserve Chairman Jerome Powell (Getty Images)
(Getty Images)

The head of the fed – the fed-head – Federal Reserve Chairman Jerome Powell, a man famous for complex answers, spoke very clearly yesterday:

“Inflation is much too high,” Powell said.

And he explained that, among the causes, are wage increases that are also too high:

“Wages are running at the highest level in many decades. That’s because of an imbalance between supply and demand in the labor market,” Powell continued.

“So we think through our policies, higher rates, for example, of vacancy filling and things like that, and more people coming back, and we’d like to think that supply and demand will come back into balance. Therefore, wage inflation will moderate to still high levels of wage increases, but ones that are more consistent with 2% inflation.”

And when he says he hopes that wage increases will “moderate” – that can mean only two things: that more bosses have to say “no” when you ask for a raise, or you have to stop asking for raises – or at least stop asking for raises above 2% a year.

So, let’s think this through.

Mr. Powell is going to keep raising interest rates until those things happen, which means credit card and mortgage interest are going to go up and up.

So, if we want to get the Fed to stop these increases – which historically have touched off recessions – we have to change our behavior! ASAP!

Those of us who’ve gotten used to sitting at home have to go back to work, now–and stop expecting big raises. And unions have to compromise.

Dave, there you go again, beating up on the middle class. But I’m just telling you what has to happen if you want to prevent a Fed-induced recession.

I’m just laying out the choices.

However – there is another option – open up immigration. Let more labor flow in – that really controls wages and inflation.

And if you don’t like any of those ideas – then my advice is to get yourself on the other side of the interest equation. Start collecting interest instead of paying it.

U.S. Treasury I-Bonds now pay 9.62%. You can only buy $10,000 worth a year, but if you have a big family and they all happen to have 10,000 dollars – maybe because you were feeling generous with your nest egg – not a bad income stream.

The only thing you should not do…is nothing, because inflation is much too high, and Powell is clearly not backing down.

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Ross: I’m getting ahead of rising interest rates, and so should you