December 2, 2022

The Painful Path – The New York Times

4 min read

Americans’ household finances are heading for some sort of patch.

Consumer prices are rising at the fastest pace since 1981, and given the scale of today’s rapid inflation – which is reflected in varied costs such as air fares and apartment rents – complete on its own. Not likely to end. Efforts by the government to control it will be painful for most working families.

The main source of the country’s fight against inflation is the Federal Reserve policy. The Fed is trying to bring inflation back under control by raising interest rates, triggering a chain reaction that has cooled the economy. Higher interest rates increase the cost of mortgages and company borrowing, which slows down business growth and translates into lower employment. As the job market weakens, wage growth slows, further reducing purchases. Low purchases provide an opportunity to capture supply.

Of Challenges for many working families That is, their wages may fall before prices rise. Fed officials predicted last week that unemployment would begin to rise by the end of the year, but inflation Stay up 5.2%.

This means that after several months in which wages have risen, consumer purchasing power is likely to wane. Already failed To keep up with rising prices. At the same time, rising rates have destabilized markets and signaled a fall in stock prices, leading to lower domestic egg prices. Higher mortgage costs are slowing the housing market and lowering the value of the home, which can further reduce wealth – because for many families Real estate plays a big part Of net worth.

As income and household balance sheets hit, many Americans may wonder: Is there no better way to deal with inflation? Today I will explain why policy makers are choosing this painful path.

Prices usually rise when consumers and businesses demand more goods and services than companies are able to provide, or consent to. To use a recent example, the demand for cars Bounced Last year, however, car companies were unable to increase production rapidly to meet this increase due to a shortage of spare parts. As buyers competed for a limited supply of sedans and pickup trucks, Prices skyrocketed..

Fed policy works towards the demand for this equation. When fewer people buy cars, because auto loans are more expensive and the job market feels less secure, a small supply of cars can be enough to get around without causing price increases.

But the crushing demand is somewhere between unpleasant and painful. When the Fed raised interest rates Up to double digit level In the early 1980’s, in an effort to reduce inflation sharply, it launched a back-to-back recession that pushed the unemployment rate down. About 11%. (Right now, the rate is at a historically low of 3.6%.)

This grim historical example has led some labor-focused groups to call. More comprehensive answer Today’s rise in prices is the result of both strong demand and disruption of supply.

The White House and Congress can help boost productivity in key parts of the economy, offering relief on the supply side of inflation.

The problem is partly timing. While the government can try – and is trying – to help build More affordable housingFor example, it takes time for these policies to take effect. As long as they help, consumers and businesses will be expecting faster inflation. And with prices, expectations can be met on their own: workers who expect hefty rent and grocery bills may demand higher wages to cover those costs, leading their employers to pay higher wages. It may be tempting to raise prices and start a period of inflation to meet the costs.

That’s one of the reasons the Fed is stepping up with its painful, but fast, tool.

The Fed raised interest rates last week, the biggest increase since 1994, while indicating that it expects to Increase them further this year. Compared to the entire economic expansion from 2009 to 2020.

Even if it doesn’t cause a full recession, the Fed’s outlook is expected to suffer, and it already Tanking stock. But officials say it would be worse to allow inflation to get out of hand, in part because it would. Creates uncertainty and hurts low-income people. With a limited wiggle room in your budget.

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For the past two years, PS 11, an elementary school in Brooklyn, has been struggling to move its music program online, just as epidemics have disrupted important years for children’s musical development.

Emerging musicians practiced in their living rooms, in their grandparents’ basements, to avoid fire. Those who left their devices at school watched from the sidelines as their peers tried to spend time together on Google Mate.

Now, the music is back in PS11. In a recent rehearsal, almost every student was smiling, despite the sounds of chants and occasional bullying saxophones, Sarah reports in the Diamond Times. “It’s not about trying to make a small Mozart,” said Roshan Reddy, the band’s director. “It’s about the students that they are looking for their strength.”

Watch the PS 11 band in action, and listen to the students.. – Natasha Frost, a briefing writer

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