Guest columnist Jonathan Wright: An open letter to Federal Reserve Board Chairman Jerome Powell and President Joe Biden

Published: 10/13/2022 7:21:47 PM

Dear Chairman Powell and Mr. President:

Much has been said, and will be said, about inflation, its causes, and remedies. Among its substantial causes specifically in the current time are:

■The war in Ukraine and its dramatic effect on oil prices, natural gas prices, and food commodity pricing.

■OPEC’s recent cut in production of oil from the Middle East.

■Higher fuel prices, particularly diesel, which make transportation more expensive.

■Persistent Covid lockdowns and worker outages in China which have made many core consumer products, like cars, more expensive and unavailable.

■Item #4 has driven up the cost of new automobiles.

■Nationwide drought and storm damage that has shrunk the food supply.

■Years of static wages and lack of wage growth which has hit the breaking point for many families. Progressive employers are paying more to retain a good workforce. This is not new news but catch up.

■We, and most of the world, are still shadow boxing our way out of the pandemic, which itself keeps coming around for more bites.

■Rise in the cost of new housing and renovations, due primarily to rises in costs of materials. Much of this, on the lumber industry side, is greed.

■Rents are being raised 10-15% in a single bight without justification. This is not primarily related to cost but is based in greed.

The fundamental problems with continuing steep hikes in interest rates are, first, they are long lead actions, and should probably have been started three to six months earlier, and cannot be expected to have leverage in 60 days.

Second, looking at the list above, can you tell me which of these will be reduced, or positively altered, by interest rate hikes? None, I would suggest.

Rate hikes are a very heavy and blunt instrument which falls hardest on working people.

Higher interest rates shift the housing burden via higher mortgages, higher rents, even further onto working family, and puts home ownership further out of reach. Higher rates discourage investment in industries which can replace some of those jobs shipped overseas in the last two decades. The result is that we further fuel our dependence on cheap goods, and vast international debt, from the Far East.

Please do not raise the rates again. The Inflation Reduction Act has many tools which will take six months or more to reach ground level. Let it work. I cannot see any value in putting Americans out of work, and placing tremendous burdens on a struggling economy and workforce.

Jonathan Wright is the founder and senior advisor at Wright Builders Inc. in Northampton.

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