The volte-face in this post by Robert Reich is a real howler.
When the Fed decides to fight inflation by raising interest rates and
cooling the economy, it’s the poor who are the first to be drafted into
the inflation fight because their jobs are the most tenuous, and
they’re the first to lose them. When the Fed decides to ease up and
reduce rates, it’s the poor who are among the first to get the new jobs
because employers who are most likely to hire at the start are small
service businesses offering jobs at the bottom rungs of the wage scale.
I might not put it that way but nothing crazy so far. He continues:
But the Fed affects the poor in another way, too. It determines their
access to credit. And here as well, the Fed’s decisions can either be a
great boon to poorer Americans or a huge curse, depending on how
responsibly the Fed manages the credit markets.
I agree. So where do you think the argument is going from here? He’s going to make the point that when the Fed reduces rates that helps the poor to get credit and a too quick tightening could increase unemployment and create a credit crunch, right? Nope.
In this respect, it’s done a lousy job in recent years. In the early
2000s, rates were so low that banks didn’t know what to do with all the
extra money they had on hand. But instead of keeping an eye on bank
lending standards, the Fed looked the other way. The result: Credit
standards were disregarded in a tidal wave of sub-prime lending to the
poor home buyers…
Ouch, that one gave me whiplash. The Fed has done the poor a disservice by looking the other way while the poor got loans at really low rates of interest. Thus, high interest rates are bad for the poor because they can’t get jobs and low interest rates are bad for the poor because they borrow too much money.
Reich argues this way, of course, because he thinks that the poor can’t handle their money. I’ll add Reich to the list of credit snobs.
H/T to Steven Bass at Trivial Reasons.
P.S. Person 1, Dave 0.