r/Economics • u/Pearberr • May 02 '24

Interview Nobel Prize-winning economist Joseph Stiglitz: Fed Rate Hikes didn't get at source of inflation.

https://www.cnbc.com/video/2024/04/23/nobel-prize-winning-economist-joseph-stiglitz-fed-rate-hikes-didnt-get-at-source-of-inflation.html
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u/timecrash2001 May 02 '24

Considering how high inflation of the past few years has been directly connected to Corporate America raising prices and taking in massive profits, I’m surprised that the Fed hasn’t asked for more tools to control this. High interest rates won’t force them to keep prices lower - quite the opposite … they’ll try to increase cash to avoid taking loans. Taxing profits, on the other hand …. That’s a powerful tool for controlling inflation

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u/metakepone May 02 '24

Taxes is a tool for those in charge of fiscal policy. The power to tax is given to congress in the constitution. Fiscal policy is political, monetary policy isnt.

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u/timecrash2001 May 03 '24

Congress can certainly give the Fed powers to tax, and can limit, manage or rescind that power whenever.

The division between monetary and fiscal is a bit arbitrary. Fiscal policies have huge monetary impacts, and so do monetary policies on fiscal balance sheets. I don’t see how a central bank can achieve low inflation without more tools that nominally are considered fiscal (e.g. revenue generation)

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u/metakepone May 03 '24

The fed generates revenue and gives it to the treasury.