.adam_tooze on the inequities and instabilities of the existing financial system, the class politics of monetary policy, and why progressives should support new gas pipelines in the U.S. (for global justice’s sake). A conversation with EricLevitz
on each of the world’s last two financial crises. We spoke about the inequities and instabilities of the existing financial system, the class politics of monetary policy, and why progressives shouldWhat’s your nutshell summary of what’s been going wrong with the global economy in general, and global financial markets in particular?
Basically. And what the central bank was then forced to do in a hurry was to step back in and stabilize this system by buying up bonds. And that’s a problem. Because it’s contradictory.And raising rates, yes. But here it was taking action that did the opposite. It got caught between doing what was necessary to stabilize inflation and doing what was necessary to stabilize the financial system. In that moment, it could not do both.
If things do start to break, structural reform of the U.S. Treasury market should go way up the agenda, which is where it should have been really since at least the spring of 2020. It has actually been quite a while since we had a year in which thereanxiety about the Treasury market. Which is a problem, since the U.S. Treasury market is gigantic and, at least notionally, the platform of stability for all other private finance.
So if you have a crisis like this, if you have a shock — if you have a panic and interest rates surge — then the central bankstep in to prevent anyone going bankrupt in the private financial system. But in the meantime, interest rates have shot up and delivered a really painful shock to the housing market. And that’s when ordinary people begin to “feel the pain.”
If our system for managing financial stability is less-than-ideal, one might say the same of our system for managing inflation. To a layperson, the response of central banks to rising prices might seem paradoxical. On the one hand, the Fed argues that inflation is bad because it’s eroding the public’s living standards.
It seems to me that the whole left-right debate over inflation hinges on that claim. Progressives tend to oppose managing inflation by deliberately increasing unemployment as a matter of principle. They’re ideologically opposed to concentrating the burdens of economic adjustment on the most disempowered workers in our society — especially in a society with a safety net as threadbare as America’s. Conservatives and centrists generally disagree, but rarely in principle.
Right. And I think that political economy was destroyed when organized labor was disarmed in the 1980s and 1990s. That doesn’t mean that you can’t getwage pressure. But I don’t think you can really get a full blown wage-price spiral if you don’t have collective actors. My view is basically that a progressive politics requires nerves of steel. It requires making the wager that we can ride out the current surge in prices.
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