The Fight Against Inflation Doesn’t Have To be Friendly To The Rich

Instead of hiking interest rates, we could be hiking tax rates on excess profits and wealth.

By Sam Pizzigati, Inequality.org

The world’s central bankers, almost without exception, are now busy swinging sledgehammers. Only whopping interest-rate hikes, they’re preaching, can pound down inflation’s rising prices.

In the United States, the Federal Reserve has so far this year raised the nation’s benchmark interest rate by three points, something that hasn’t happened since the 1980s, and still more rate hikes, the Fed pledges, are coming.

These interest-rate boosts, the central banker reasoning goes, will slow the economy, deflate consumer demand, and get prices shrinking. The downside? Federal Reserve chair Jerome Powell is readily acknowledging the hardships rate hikes are provoking. The slower growth and softer labor market rising rates make inevitable, Powell conceded this past August, “will also bring some pain to households and businesses.”

What our central bankers never acknowledge: that the real pain they’re causing falls only on working people. The Fed’s rate hikes, analysts at Bankrate point out, have “stark” implications for all consumers of modest means. Average households are facing far higher costs, for instance, on auto and home loans. Sinking demand from average consumers eventually translates into fewer jobs and fewer hours for those still working.