Ratcheting You Down

August 12th, 2013 by Rick Drain


Have you ever wondered why conventional macroeconomic dogma says that if the economy gets overheated and inflationary, the cure is to (raise interest rates to) cause a recession, so people will be laid off, so wages will be held down?

Or that a little inflation (say, up to two or three percent) is okay because it lowers the real (after-inflation) cost of labor, unless labor can demand pay raises to keep up?

Is it really necessary that economic stability be built on keeping the working people down?

Labor, by the way, doesn’t refer just to unloading boxcars, but to any wage or salaried work by people. If you get a W-2 or a 1099 to report your annual earnings, you’re labor.

The answer is “no”, it is not necessary to throw workers under the bus to keep the economy properly lubricated. That’s just one of the ways that the system is stacked– by human law, not natural law– against workers.

Nobel Laureate economist Paul Krugman discussed this and more in a recent (August 8, 2013) New York Times Op-Ed:

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