[lamontcg]

Yeah that is exactly what I think needs to happen in a perfect world.

Allow a wage-price spiral of about 6% a year, which would raise long rates, allow short rates to increase eventually without a recession and that would cut off the cheap money supply. Asset prices would fall in real terms because of persistently higher rates across the yield curve. In nominal terms they would be able to maintain more of their price while wages would inflate to the point where people would be able to buy houses and be able to pay back debts (particularly college loans).

Instead the Fed jacking up short rates right now is going to cause a recession, create high unemployment and cap wage growth and break unionization. This will be combined as usual by massive tax cuts for the rich as a bailout package, which will be the only thing possible to get past the Republican House. And the Fed will have to then sharply cut short rates and the cycle will continue. I doubt we'll be able to maintain rates at 0% for another ten years, but they're firmly opposed to trying to wage-inflate our way out of this, so we'll probably see shorter cycles between boom and bust as inflation starts to come back faster. There are no signs that they're going to start to give up on the way they've been running the economy though, I don't think there has been a massive fundamental shift in the economy -- other than no more 10 years of 0% with no CPI inflation.

[dh2022]

"Allow a wage-price spiral of about 6% a year, " - Fed cannot create this wage-spiral. Fed only controls interest rates. From 2009-2016 interest rates were below 0.2% - and wages did not move.

Only employers can create this type of wage spiral - and I do not think they will do this. Employers are now looking into automation as much as possible to replace labor (supermarket checkouts, at fast foods order kiosks, online ordering, robots for cleaning hotel rooms, etc...)

[lamontcg]

> From 2009-2016 interest rates were below 0.2% - and wages did not move.

From 2009-2016 the unemployment rate fell from 10% to 4.7%, it is now at 3.5%

> Only employers can create this type of wage spiral

They don't create a wage spiral, they would naturally want to pay people less, they don't wake up one morning and give people raises without a reason.

And the reason is the jobs overhang. When you have twice as many jobs per job seeker then employers are FORCED to pay more just by supply and demand laws.

That only happens though when unemployment is near its lower bound (which we seem to have empirically determined is around 3.5% at least for our economy right now).