The Fed has it backwards

Robert Reich: “Wage increases have not caused prices to rise. Price increases have caused real wages (what wages can actually purchase) to fall. Prices are increasing at the rate of 6.8% annually but wages are growing only between 3-4%.

“The most important cause of inflation is corporate power to raise prices.

“Yes, supply bottlenecks have caused the costs of some components and materials to rise. But large corporations have been using these rising costs to justify increasing their own prices when there’s no reason for them to do so.

“Corporate profits are at a record high. If corporations faced tough competition, they would not pass those wage increases on to customers in the form of higher prices. They’d absorb them and cut their profits.”

The Fed wants to raise interest rates and coronavirus support programs are ending. Millions of families stand to suffer

Joe Biden’s impotence on inflation

“Inflation has a unique power to kneecap a presidency. Incumbent presidents and their parties do not do well at all when inflation (and attempts to cure it) are on voters’ minds come election time. The gas pump, the supermarket check-out counter, the heating bill, the sticker on the windshield, provide — or seem to provide — powerful indictments against the party in charge.

“If that’s not enough to unsettle the White House and its allies, consider this: Presidents have almost no power to ease the pain of inflation, and the voting public cuts presidents no slack at all because of that impotence. Look into the toolbox of our country’s chief executive and you’ll find it empty of effective tools, filled instead with devices now obsolete or laughable or meaningless or politically destructive.”

Presidents have little power to bring down rising prices. History shows the public doesn?t care.

Supply chain crunch hitting farmers

The NYT: “The same congestion at U.S. ports and shortage of truck drivers that have brought the flow of some goods to a halt have also left farmers struggling to get their cargo abroad and fulfill contracts before food supplies go bad. Ships now take weeks, rather than days, to unload at the ports, and backed-up shippers are so desperate to return to Asia to pick up more goods that they often leave the United States with empty containers rather than wait for American farmers to fill them up.”

Has Just In Time’s time come?

From the New York Times: “Just In Time has amounted to no less than a revolution in the business world. By keeping inventories thin, major retailers have been able to use more of their space to display a wider array of goods. Just In Time has enabled manufacturers to customize their wares. And lean production has significantly cut costs while allowing companies to pivot quickly to new products.

“These virtues have added value to companies, spurred innovation and promoted trade, ensuring that Just In Time will retain its force long after the current crisis abates. The approach has also enriched shareholders by generating savings that companies have distributed in the form of dividends and share buybacks.

“Still, the shortages raise questions about whether some companies have been too aggressive in harvesting savings by slashing inventory, leaving them unprepared for whatever trouble inevitably emerges. …

“And many businesses have combined a dedication to Just In Time with a reliance on suppliers in low-wage countries like China and India, making any disruption to global shipping an immediate problem. That has amplified the damage when something goes awry — as when an enormous vessel lodged in the Suez Canal this year, closing the primary channel linking Europe and Asia.”

Is the confusion a feature or a bug?

That probably depends on where you stand. All I know is that you should only read those sections of the Internal Revenue Code that deal with international taxes if you have no regard for your own sanity. The wounds on my brain from taking International Tax at law school over thirty years ago have not healed.

Most members of Congress don?t understand the first thing about the international corporate tax system and won?t have the bandwidth to figure it out.