Reply to Wages, Inflation, the Fed, and my sad takeaway

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[quote=Anonymous][quote=Anonymous]For years American workers saw no wage increases. Finally that trend turned around and workers started to see wage growth but then inflation kicked in due to Covid, the pandemic backlog of shipping containers, the war in Ukraine, and stimulus packages. The Fed then increases rates to tap down inflation, which causes businesses to start having layoffs. The Fed can’t have inflation and solves to by having businesses lay off workers. The Fed can’t have everyone working because of inflation. There must be unemployed or underemployed people. Wage growth can’t happen too much or else inflation happens. My takeaway is there has to be a underclass in order for our system to work. [/quote]

This is old macroeconomic theory called NAIRU non accelerating inflation rate of unemployment or something like that.
This was debunked by the reality of what was happening in the late 90s where we had low inflation and unemployment below the assumed NAIRU level of 6%.
Eventually this turned into deflation for a bit, when the Fed was not putting enough money supply to keep pace with the growing economy.[/quote]

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