Let’s connect some dots. There is an unprecedented shortage of labor in the United States. In some cities, such as Lincoln (NE), Huntsville (AL), and Omaha-Council Bluffs (NE-IA), the number of job openings is three times the number of unemployed workers, according to this measure by Brookings’ Workforce of the Future.
Among other factors (such as supply chain disruptions or demand outpacing supply in the economy), this labor shortage and the subsequent rise in wages are likely a partial explanation for the rise in inflation. It is important to note that this is a two-way street, of course, because wages also go up in response to inflation, which is the dangerous, vicious inflationary cycle that we better avoid.
At the same time, 2021 resulted in the highest recorded numbers of migrants entering or attempting to enter through the southern border to the United States. There is no reason to think this won’t continue in 2022. These migrants, mostly from the Northern Triangle countries (Guatemala, Honduras, and El Salvador), are desperate to join the U.S. labor force, as they flee poor economic conditions—particularly after the economic slowdown caused by the global COVID-19 pandemic—as well as violence and instability in general. In response to this flow, the Biden-Harris administration has focused on significantly increasing investment toward Central America, including Mexico, while at the same time telling immigrants in Guatemala “do not come.”
The irony is clear; if there was any time in the modern history of the United States to promote a flexibilization of its migration policies, it is now. It is the most efficient and easiest way to offer a smart solution to the unprecedented tightness in U.S. labor markets. It is a no-brainer for several reasons.
First, many of the occupations that are particularly experiencing shortages are occupations where immigrants can start jobs quickly. For instance, part of what exacerbates the supply chain problems is the need for tens of thousands of port workers and truck drivers. Other industries where there are important shortages, such as restaurants and construction, which traditionally have been partly fulfilled by immigrants, could also find new employees if these immigrants are allowed to find legal pathways to live and work in the United States.
Second, these workers will not “substitute” American workers, evidenced clearly by the worker shortages. In addition to this, decades of research by economists shows us that immigrants do not worsen labor outcomes of natives. In fact, immigrants are likely complements to American workers, which would come in handy, especially now.
The Fed Is Playing with Fire
By now, it is passé to warn that the US Federal Reserve is “behind the curve” in fighting inflation. In fact, the Fed is so far behind that it can’t even see the curve and may have to slam on the policy brakes to regain control before it is too late.
The US Federal Reserve has turned on a dime, an uncharacteristic about-face for an institution long noted for slow and deliberate shifts in monetary policy. While the Fed’s recent messaging (it hasn’t really done anything yet) is not as creative as I had hoped, at least it has recognized that it has a serious problem.
That problem, of course, is inflation. Like the Fed I worked at in the early 1970s under Arthur Burns, today’s policymakers once again misdiagnosed the initial outbreak. The current upsurge in inflation is not transitory or to be dismissed as an outgrowth of idiosyncratic COVID-19-related developments. It is widespread, persistent, and reinforced by wage pressures stemming from an unprecedentedly sharp tightening of the US labor market. Under these circumstances, the Fed’s continued refusal to change course would have been an epic policy blunder.
But recognizing the problem is only the first step toward solving it. And solving it will not be easy.
Consider the math: The inflation rate as measured by the Consumer Price Index reached 7% in December 2021. With the nominal federal funds rate effectively at zero, that translates into a real funds rate (the preferred metric for assessing the efficacy of monetary policy) of -7%.
That is a record low.
Only twice before in modern history, in early 1975 and again in mid-1980, did the Fed allow the real funds rate to plunge to -5%. Those two instances bookended the Great Inflation, when, over a five-year-plus period, the CPI rose at an 8.6% average annual rate.
Of course, no one thinks we are facing a sequel. I have been worried about inflation for longer than most, but even I don’t entertain that possibility. Most forecasters expect inflation to moderate over the course of this year. As supply-chain bottlenecks ease and markets become more balanced, that is a reasonable presumption.
But only to a point. The forward-looking Fed still faces a critical tactical question: What federal funds rate should it target to address the most likely inflation rate 12-18 months from now?
No one has a clue, including the Fed and the financial markets. But one thing is certain: With a -7% real federal funds rate putting the Fed in a deep hole, even a swift deceleration in inflation does not rule out an aggressive monetary tightening to re-position the real funds rate such that it is well-aligned with the Fed’s price-stability mandate.
To figure this out, the Fed must hazard an estimate of when the inflation rate will peak and head lower. It is always tough to guess the date – and even harder to figure out what “lower” really means. But the US economy is still running hot, and the labor market, at least as measured by the plunging unemployment rate, is tighter than at any point since January 1970 (on, gulp, the brink of the Great Inflation). Under these circumstances, I would argue that a responsible policymaker would want to err on the side of caution and not bet on a quick, miraculous roundtrip of inflation back to its sub-2% pre-COVID-19 trend.
Again, consider the math: Let’s say the Fed’s projected policy path, as conveyed through its latest “dot plot,” is correct and the central bank takes the nominal federal funds rate from zero to around 1% by the end of 2022. Couple that with a judicious assessment of the disinflation trajectory – not too slow, not too fast – that foresees year-end CPI inflation moving back into the 3-4% zone. That would still leave the real federal funds rate in negative territory at -2% to -3% at the end of this year.
That’s the catch in all this. In the current easing cycle, the Fed first pushed the real federal funds rate below zero in November 2019. That means a likely -2% to -3% rate in December 2022 would mark a 38-month period of extraordinary monetary accommodation, during which the real federal funds rate averaged -3.1%.
Historical perspective is important here. There have been three earlier periods of extraordinary monetary accommodation worth noting: In the aftermath of the dot-com bubble a generation ago, the Fed under Alan Greenspan ran a negative real funds rate averaging -1.1% for 31 consecutive months. Following the 2008 global financial crisis, Ben Bernanke and Janet Yellen teamed up to sustain a -1.9% average real funds rate for a whopping 62 months. And then, as post-crisis sluggishness persisted, Yellen partnered with Jerome Powell for 37 straight months to hold the real funds rate at -0.9%.Make your inbox smarter.SELECT NEWSLETTERS
Today’s Fed is playing with fire. The -3.1% real federal funds rate of the current über-accommodation is more than double the -1.4% average of those three earlier periods. And yet today’s inflation problem is far more serious, with CPI increases likely to average 5% from March 2021 through December 2022, compared with the 2.1% average that prevailed under the earlier regimes of negative real funds rates.
All this underscores what could well be the riskiest policy bet the Fed has ever made. It has injected record stimulus into the economy during a period when inflation is running at well over twice the pace it did during its three previous experiments with negative real funds rates. I deliberately left out a fourth comparison: the -1.7% real federal funds rate under Burns in the early 1970s. We know how that ended. And I also left out any mention of the Fed’s equally aggressive balance-sheet expansion.
By now, it is passé to warn that the Fed is “behind the curve.” In fact, the Fed is so far behind that it can’t even see the curve. Its dot plots, not only for this year but also for 2023 and 2024, don’t do justice to the extent of monetary tightening that most likely will be required as the Fed scrambles to bring inflation back under control. In the meantime, financial markets are in for a very rude awakening.
The Right-Wing Politics in United States & The Capitol Hill Mayhem
The radicalized right-wing politics during the Trump Administration is responsible for creating severe unrest in the US, and subsequently, in the global community. There is a dire need to change the political structure in the US to safeguard the true spirit of democracy.
The US witnessed one of the tumultuous transitions of power as the republicans shook the very roots of a model democracy in the US after the Capitol Hill mayhem.
Trump administration during the four-year Presidential Term has been worst on all fronts -be it Internal Policy, Health Policy, unemployment, Governance, Foreign Policy, security and Trade policy.
Trump, being afraid of defeat resorted to inciting voters, supporters and workers to attack Capitol Hill, and his racial tirade and overtures drowned him in last year’s most trumpeted Presidential Elections when the country appeared divided between the rightist and leftists.
Trump and his attack on democracy
The elections witnessed the bloodshed, torture, violence and sheer violation of legislative laws that warranted immediate legal action. From his election to the Presidential slot, Trump behaved like an amateur.
He ran the political affairs as a personal business rather than a statesman. He, being an actor, took the job as a mere role but the presidency demands prudence and sensible decisions to avoid any worst repercussions.
The leftists or change agents wanted a people-friendly government where the rights of people should be protected regardless of their political affiliation or association, caste, colour, creed, religion, ethnicity.
For the years, US democracy has been a model for many developing countries owing to its non-radicalized and people-friendly Governments.
All the democratic forces were stunned over the unfortunate incident of Capitol Hill mayhem and were shocked that even developed nations like America can be enthralled, enticed and incited to the level that will shake the very roots of Democracy i.e Capitol Hill.
The world responded with regrets that it was unfortunate that Trumpism radicalized supporters to the extent that they were instigated and incited to influence the Presidential Elections results so that Biden’s Victory may not be validated.
America in disgrace
The world might have moved to tears when Trump supporters and workers ransacked Capitol Hill and brought disgrace for America around the world.
All experts, analysts and pro-democracy leaders condemned such act since it was against the norms of civilized nations of the world.
All the mayhem that stormed the US was orchestrated and masterminded by a Business Tycoon, Actor turned Politician Donald Trump who already lost his credibility for his election to the office of President since he was facing rigging and horse-trading charges in his first term that led to his impeachment Trial but luckily he was set free twice from impeachment during his presidency.
Furthermore, his complete failure to tackle the issue of pandemic also contributed to his humiliating defeat since he ridiculed the pandemic by terming it China Virus owing to trade war with China.
Later, when the pandemic went out of control, he took initiative but it was too late to restrict the covid-19 infections since the US had the highest ratio of infections in the world.
Diplomatic relations ruined by Trumpism
Trump escalated the situation with Iran by killing General Qassem Suleimani in Iraq. Later, Iran attacked American Military bases in Iraq but there were no causalities reported for the incident. Iran also shot down a passenger plane by mistake and all passengers were killed.
Trump’s diplomatic relations with China worsened due to the Trade war. American relations with North Korea did not improve though both Trump and KIM met in Singapore to reach a possible peace agreement.
His amnesty or pardon for his friends also came under heavy criticism since he was afraid that they might be prosecuted as his term ended.
His blunders contributed a lot to his worst defeat though, being stubborn did not accept defeat but later, Supreme Court rejected his claims of any rigging in elections.
Republicans being a right-wing party radicalized the political workers and community to that extent that people violated law without any fear as they enjoyed the support from the white house.
The right-wing politics of Donald trump sowed the seeds of hatred and hostility that will have serious repercussions in the long run as long as the Trumpism pandemic exists among the people.
His failure to implement a deal of the century plan in the Middle East that was aimed merely on supporting Israel by giving a greater share of settlements. The deal came to a logical end as it was heavily criticized and Palestinians called it to suicide if accepted.
Despite signing the deal with the Afghan Taliban with the help of Pakistan to end 20 years longest war on terror and paving the way for US troops’ withdrawal, the law and order situation has not improved so far as the peace dialogue between the Afghan Taliban and Government yet to take place.
Biden as a saviour
Right-wing politicians led by Trumps have serious implications that will ultimately create problems for Biden to cope with during his presidency.
Biden has to overhaul the whole system to restore the Trust and reputation in the world and strengthen the US through unity by abolishing the discriminatory approach.
The Selection of an Afro-American lady as Vice President has already laid the foundation to put the country on right track and building the trust of all the communities whether voted for him or not as he called himself the president of all Americans rather than of those who voted and supported him during his victory speech.
The Vote is the great tool of people to bring in the choice of leadership as it is the constitutional right of every American and can be exercised on free will without any pressure
The Afro-American community still recalls the cold-blooded murder of George Floyd by Police, supported Joe Biden after he chose Kamala Harris as Vice President candidate.
On the other hand, though Trump was given clean chit in impeachment since he was charged with inciting the supporters to attack Capitol Hill that will be marked as a black day in American history, yet he has sown the seeds of intolerance, political victimization and radicalizing the peaceful Americans.
This aspect of populist or right-wing politics always plagues the peaceful and vibrant societies in a developed nation like the US, UK, France and Germany.
Trump promoted racism through his flowery speech that incited and enthralled mob violence to exert pressure through street power as practised in Asian states such as India, Pakistan, Bangladesh, China and Japan.
How will Biden make America ‘great’ again?
Political analysts term Trump as an existential threat for Biden as he still enjoys the second largest votes in key states and may create problems especially the legislation for key issues.
Biden will have to fix diplomatic relations with all nations of the world especially Tehran and Beijing as Former President Donald Trump escalated the diplomatic relations with these countries with his insensible and aggressive attitude.
He will have to take immediate steps to clear the mess that was stalled by Trump’s radicalized and extremist approach to right-wing Politics whose price is being paid by citizens through isolation and hatred.
Biden and Kamala Harris will have to chalk out such policies that deal with communities with equality and justice and especially deal with the pandemic situation through vaccination drive to minimize the covid-19 infections. The causalities have surpassed thousands whereas long lockdowns have created unemployment and an economic crisis impacting many industries.
They need to sit with health experts and Economists to get the country out of the crisis. It will be better to take help from the nations that managed to defeat this pandemic with SOPs and measures.
Beyond ego, the US may seek help from Russia, China, Singapore and the UK to win against the pandemic situation, though the ratio of the infections dropped worldwide as the cold winter departs.
Joe Biden will have to support Kashmiris against the unilateral move of India as he had promised in the election campaign.
He should play his role for the Middle East peace plan of the two-state solution so that Palestinians may have a state as per their wishes and the map they have in mind.
It was the sensible decision from him that troops’ withdrawal option was postponed, given the critical situation in Afghanistan. Rather, he should not jeopardize or sabotage the peace deal with the Taliban.
Biden should engage person like Zalmay Khalilzad to strengthen the dialogue process between the Afghan Taliban and other stakeholders including the existing Government of Ashraf Ghani so that peace could be restored as it will benefit all the countries and play a pivotal role in regional stability and prosperity.
The pandemic has united the world as human conscience has roused again.
Republicans and Democrats
Finally, Democrats have always saved America and promoted justice, equality and opened doors for the world for immigration but Trump wreaked havoc with all the social norms and promoted intolerance, racism and inequality that shook the very roots of the country and gave birth to happenings of Capitol Hill and distrust on the electoral system.
Biden Administration is expected and mandated by the masses to clear that mess and pave the way for his second term if he succeeds to bring change to the country.
Right-wing politics has its pros and cons but the version introduced by Republicans radicalized the whole system and divided the country even in times of emergency.
Populist leaders all around the world have impacted various governments, especially in the Asian States as they are elected on popular vote.
The version introduced by Trump may give birth to the dissent voices as left-wing whose critique may be beyond rectification whereas the ethnic divide, will promote separatism as happened in the UK, Spain, Russia and the Subcontinent when people’s rights were compromised and the freedom of expression was annulled.
The US cannot afford further isolation and division of communities on the basis of ethnicity, colour or radical thoughts since it has already paid the price during the Trump regime.
US warns of ‘consequences’ if China abandons trade deal
US Treasury Secretary Steven Mnuchin said on Monday he expects China to uphold a trade deal reached with Washington this year, and warned of “consequences” if the country did not.
The comments come amid a sharp drop in global trade caused by the coronavirus pandemic as well as a dispute between the two powers over fault for the spread of the virus, which first broke out in Wuhan, China.
The US and China in January signed an agreement to end a nearly two year-long trade war, that included a commitment by Beijing to buy an additional $200 billion in American goods over the next two years.
“I’m expecting them to meet their obligations,” Mnuchin said on Fox Business Network.
“I have every reason to expect that they honour this agreement and if they don’t, there would be very significant consequences in the relationship and in the global economy as to how people would do business with them.”
However, relations between Washington and Beijing have soured in recent weeks, with US President Donald Trump blaming China for the pandemic, and threatening tariffs.
The US has been hit with tens of millions of layoffs as the virus has spread, significantly weakening the previously solid economy, which Trump was counting on to win re-election in November.
The trade agreement signed in January includes $77.7 billion in additional purchases from the manufacturing sector, $52.4 billion from the energy sector and $32 billion in agricultural products.
The US currently runs a trade deficit with China, and the objective is to realign the trade balance between the two countries.
Male-owned businesses get seven times more funding than those owned by women
Does a woman need a man to succeed? Exclusive data from Startups reveals that when it comes to funding, the...
i2c vows to hire 500 people in Pakistan as part of its exponential Growth Statistics
i2c has recently hired Jon-Paul Ales-Barnicoat to lead its human resources development as the organization plans to massively scale and hire 500...
11 Startup Blogs That Are Killing the Game
startups are typically strapped for resources, neck-deep in product specs, laser-focused on customer acquisition, and dreaming of hacking massive growth....
Best Business Ideas for 2022: Healthtech
Healthtech is one of the key drivers of the UK startup scene, and is only expected to get bigger in...
Lithops App Brings History to Life With the Power of AI and Rich Storytelling ….Amazing Experience
The app, Lithops, is a history-telling mobile app that unveils the significance of the world’s statues by digitizing them with...
TikTok begins testing support for paid subscriptions
TikTok is testing support for paid subscriptions, the company confirmed to TechCrunch on Thursday. As first reported by The Information, the...
13 Pro Startups in Pakistan that rocked the Cyber World
Startups in Pakistan have witnessed a mushrooming growth and each passing day Youth come with innovative ideas to launch their...
Find the perfect name for your business with the Business Name Generator by Looka
Looka’s Business Name Generator comes up with tons of business name ideas in seconds, allowing you to then check the...
Karachi-based digital bookkeeping startup, CreditBook raises $1.5 million in seed funding
The Karachi-based digital bookkeeping startup CreditBook, which is trying to ensure that tracking of transactions goes digital, has announced that...
TIKTOK’s global growth and expansion : a bubble or reality ?
Social media has offered amazing tools and apps that have revolutionized the lifestyle of people. Social networks always keep you...
Digital1 year ago
Social Media and polarization of society
Digital1 year ago
Pakistan Moves Closer to Train One Million Youth with Digital Skills
Digital1 year ago
Karachi-based digital bookkeeping startup, CreditBook raises $1.5 million in seed funding
News1 year ago
Dr . Arif Alvi visits the National Museum of Pakistan, Karachi
Digital2 years ago
WHATSAPP Privacy Concerns Affecting Public Data -MOIT&T Pakistan
Kashmir1 year ago
Pakistan Mission Islamabad Celebrates “KASHMIRI SOLIDARITY DAY “
Business5 months ago
Are You Ready to Start Your Own Business? 7 Tips and Decision-Making Tools
China1 year ago
TIKTOK’s global growth and expansion : a bubble or reality ?